What is debt? Instructions on how to manage debt optimally

What is accounts receivable ? Accounts receivable is a familiar term in the field of accounting, helping managers effectively evaluate the solvency and financial situation of the enterprise. However, not everyone clearly understands what accounts receivable is and the main tasks of an accounts receivable accountant. So, how to manage accounts receivable optimally and effectively? Let's find out with 1C Vietnam in the article below!

1. What is debt?

Debt is simply understood as the amount of money that arises when an individual or business purchases goods/services or during a payment period with another individual or business but has not yet paid back at that time and must be transferred to the next period.

For example: Company A signs a contract to buy household appliances with company B for 50 million VND. According to the contract, party A agrees to pay the full amount to party B within 30 days after receiving the product.

However, when the payment deadline comes, Party A cannot pay the entire amount to Party B and can only pay 25 million VND. Thus, the amount that Company A currently owes Company B is 25 million VND, also known as the debt that Party A is responsible for paying to Party B is 25 million VND.

2. What is accounts receivable accounting?

Accounts receivable accounting is responsible for the business's accounts receivable, including payables and receivables. Transactions in the production and business process can be paid immediately or only partially paid, leading to the arising of accounts receivable. Thereby, the accounts receivable department plays an important role in financial management and ensuring the stability of the business.

Currently, accounts receivable accounting is divided into two main types: Accounts payable accounting and Accounts receivable accounting. Each type will have its own distinct characteristics as follows:

• Accounts payable: Are payables (value of goods, raw materials, supplies, equipment in production and business...) that the business has not paid to suppliers or has only paid a part of.
• Accounts receivable: Are amounts due from customers for products/services that they have not paid or have only paid in part. Accounts receivable accountants need to monitor and reference to classify customer groups, thereby making control more effective.

3. How to effectively manage debt for businesses

Debt management has a strong impact on business operations. However, many businesses are still not aware of the importance and methods of debt management to control their financial situation well. Below are some useful measures to help businesses manage debt effectively:

• Establish a debt policy: Businesses need to define a debt policy and apply it consistently to all customers, and clearly communicate it to them. Debt policies may include payment terms and conditions, credit terms, late fees, or debt collection policies.
• Customer review and evaluation: Businesses should check the payment history, financial situation and credit of customers to make accurate decisions about establishing debt for customers. Businesses can use tools such as credit scores and information from credit information service companies to conduct the evaluation.
• Improve debt management skills for employees: If the company has a department specializing in debt management, training employees in debt management knowledge and skills is extremely important. Accordingly, employees need to understand the company's debt policies, know how to handle debt issues and communicate with customers.
• Tracking debts: Businesses need to create a tight debt management process to ensure debt collection is completed on time. Regularly send payment notices and invoices or contact customers directly to remind them of debts, thereby setting up measures such as discounts or incentives to encourage customers to pay early. In particular, businesses need to integrate tools or processes to handle cases of customers not paying on time.
• Use debt management tools: Help businesses automate management processes, increase accuracy and minimize errors. These tools can create automatic payment notifications, track and manage payment history, and provide reports on customer debt.

4. The importance of accounts receivable accounting

Accounts receivable plays a vital role in tracking and ensuring that cash flows smoothly and efficiently. Here are some of the detailed roles of accounts receivable:

• Contribute to proposing directions to the board of directors through monitoring, analyzing and evaluating the current financial situation of the enterprise.
• Record all payment transactions fully, accurately and promptly, and check and pay debts on time to avoid capital misappropriation.
• Check and make a list of debtors with frequent trading activities and large debt balances.
• Is the basis for managers to determine the appropriate direction for the business.
• Create a healthy financial situation for the business, minimize bad debts.

5. Causes of debt

In businesses, debt can arise from the following main causes:

• Temporarily unable to pay suppliers when the business does not have enough money to transact for the purpose of making a profit.
• The seller still wants to increase the quantity of goods sold so there is no need to pay immediately, the customer can still take the goods.
• The customer has purchased and received the goods but is unable to pay, so the customer will owe and commit to pay that amount to the business within a certain period of time.
• For products/services that require the completion of commercial activities, the buyer will make payment. Therefore, this is the direct cause leading to the arising of debt payable to the buyer.

6. Current work of accounts receivable accountant

In an organization, the work of an accounts receivable accountant will involve recording, monitoring and managing accounts receivable and payable. So what is the main job of an accounts receivable accountant? Let's find out with 1C Vietnam right below:

6.1 Accounts receivable accounting

The work of an accounts receivable accountant will include:

• Check sales contracts such as customer information, terms, payment methods...
• Monitor, manage and record the increase and decrease in receivables by day, month, quarter and year.
• Set up, add partner code and customer code to relevant system or books if customer is new member.
• Reconcile debts with customers, close data through debt reconciliation minutes.
• Coordinate with the sales department to collect debt.
• Accounting for customer debt deductions through contracts and company policies.
• Create a summary report of receivables as required by management.
• Create a debt collection plan when due and recommend to the company's management measures to recover bad debts.

6.2 Accounts payable accounting

The main job of accounts payable accountant is:

• Check the contract regarding supplier information, type, payment terms, terms and preferential policies…
• Create and add supplier code to the system (applies to new members).
• Accounting for debt deductions that the business is entitled to based on the contract and business policies of the seller.
• Based on the accounting data of other accounting departments, the accounts payable accountant will have to check the accuracy of the transaction of receiving goods, paying the seller and recording the developments of the accounts payable.
• Generate accounts payable summary reports based on management requirements.
• Make plans to pay off debts with suppliers when payment is due.
• Reconcile debts with suppliers, close debt figures based on periodic reconciliation records.

7. Criteria to become a professional accounts receivable accountant

To become a professional accounts receivable accountant and contribute to supporting businesses in effectively managing accounts receivable, candidates need to meet the following 5 specific criteria:

• Master professional knowledge

A solid foundation in accounting will help candidates manage their business's debts quickly, accurately and reliably.

In addition, candidates also need to improve their knowledge to master professional skills. From there, they can easily identify, analyze and monitor debts according to each customer group, and know how to classify debts in an optimal way.

• Proficient in accounting software

A professional accounts receivable accountant needs to be proficient in computers and accounting software to perform accounts receivable management tasks effectively, quickly and accurately such as invoicing, debt management, creating accounts receivable reports, etc.

• Ability to analyze and provide solutions

Accounts receivable accountants must have the ability to analyze to propose appropriate debt management solutions. At the same time, they act as consultants for other departments in the business and advise the board of directors to make accurate decisions related to debt.

• Communication and situation handling skills

Accounts receivable accountants should have excellent communication skills and know how to explain information related to accounts receivable to build good relationships with colleagues. At the same time, situation handling skills also help accounts receivable accountants quickly handle overdue debts or debt disputes.

• Ensure accuracy

Ensuring the accuracy and reliability of debt information helps businesses manage debt effectively and helps superiors make accurate decisions. Specifically, debt accountants need to enter and store data completely and accurately for easy retrieval and future reuse.

8. Effectively manage corporate debt with 1C:ERP solution

1C:ERP software is an enterprise resource planning solution developed for diverse businesses, ready to be applied to business operating models.

So, why should businesses choose 1C:ERP?

• Ensuring stable production process: The production process requires a stable amount of raw materials and is continuously monitored when new orders are placed. The purchasing management subsystem in 1C:ERP will help businesses ensure the stability of the production process through smart tools and timely procurement.
• Purchasing management with lowest material standard: When the material reaches the lowest level, the software will remind the user to place an order with the quantity equal to the largest material standard. At the same time, the software will suggest the user to create a new order based on the purchase history.
• Replenish raw materials based on standard purchasing rate: 1C:ERP has a built-in feature to remind users to create new orders according to standard purchasing rate, the remaining raw materials will be enough until the supplier replenishes the new order.
• Providing professional cost management system: 1C:ERP develops management system with powerful methods and functions, reducing costs by businesses using available reserves.
• Collect accurate information: 1C:ERP software helps businesses collect complete information on costs based on activities (Resource consumption rate, characteristics of completed work…) and some attributes based on the value of business processes.
• Optimize business workflow: 1C:ERP supports management and connection of departments and businesses within the corporation, as well as eliminating duplicate work and manual operations.
• Real-time reporting system available: Administrators can easily create management reports on demand at any time. At the same time, the reporting system is ready to consolidate companies, departments and change reporting options without needing to understand programming knowledge.
• Improve product and service quality: The software helps businesses synchronize data, quickly check inventory levels, shipping policies and customer reviews. From there, businesses will optimize services and detect emerging risks early.
• Enhanced security: With the ability to encrypt data and tightly decentralize, 1C:ERP helps businesses easily manage information, while recording data changes for each user, ensuring information and operation history are transparent and clear.
• Optimizing investment value: 1C:ERP helps increase operating cost efficiency, control operational goals and evaluate work performance so that businesses quickly achieve financial goals.

Within the framework of the above article, 1C Vietnam has helped individuals and businesses answer the question of what is debt as well as the criteria to become a professional debt accountant. If you have any further questions on this topic, please contact the hotline 0247.106.6667 for quick advice on 1C:ERP business management solutions!