Monthly MIS must never neglect trade receivables. Further increasing amount of overdue receipts puts you in a spot of bother.
The stated amount of receivables in the books raises multiple concerns, such as:
Whether the amount of receivables stated in the books depict the actual amount of money to be received..?
Is the other party making uninformed deductions..?
Are pending payments waiting for adjustment..?
Were there any accounting errors distorting the financials..?
Obtaining direct confirmations from the parties would be the ideal solution for all these concerns.
Ironically confirmations are not termed as a fruitful activity due to the various complications that overshadow the gains achievable in the process. Thanks to these complications that entities are either skeptical of exercising the conventional process of balance confirmations or they exercise the process only for the sake of compliance.
What are the actual benefits of confirmations?
Increases Financial Credibility:
Confirming balances directly from verified third parties, henceforth boosts the financial statement’s credibility.
Timely Reconciliation of Accounts
Obtaining confirmations also ensures timely book reconciliation with minimal room for otherwise onerous and unrewarding discrepancies.
Increases Legal Validity
A contract is complete only when the receiver accepts and acknowledges the invoice raised. Authorized personnel confirming balances legally binds the opposite party to make the payment
Frequent follow ups for periodic confirmations straight from the accounts departments would be instrumental in placing your name at the top in the list of payments.
Fulfills Statutory Audit Requirements.
These obtained confirmations can also fulfill Auditing Standards’ mandatory requirements when shared with auditors.
Despite the aforementioned advantages, this process is often unheeded due to the fact that financial decisions are taken on the basis of ROIs and not the benefits. However, assessing the flip side, it’s clear that significant financial and human resources are necessary.
And that’s where FIRMWAY plays a role by making confirmations a reality at absolutely nominal cost.
FIRMWAY is India’s premier online platform for third party confirmations. firmway.in to know more.