How can CFOs gain confidence over its Receivables?
Monthly MIS must never neglect trade receivables. A further increase in overdue receipts puts you in a spot of bother. How can CFOs gain confidence in their receivables?
The stated amount of receivables in the books raises multiple concerns, such as:
- Whether the amount of receivables stated in the books depicts 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. Due to these complications, 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 bind the opposite party to make the payment
Improves Receivables’ Collection Cycle
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.
Additionally, these obtained confirmations can fulfill Auditing Standards’ mandatory requirements when shared with auditors.
Despite the previously mentioned advantages, this process is often unheeded due to the fact that financial decisions are based on ROIs rather than the benefits. However, on the flip side, it is clear that significant financial and human resources are required.
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.
