Get to know the vital terms of Logistics and Supply Chain Management.
Accounts Receivable (A/R) refers to the total amount of money owing to a business by its customers for goods sold or services rendered but not yet paid for. It stands for completed transactions that were made on credit with the expectation of payment at a later time.
Outstanding Payments: A/R consists of invoices sent to customers for completed deliveries or services rendered that are awaiting payment.
Credit Sales: Many logistics companies extend credit to their clients, allowing them to pay for services like transportation or warehousing after the services have been provided.
Contingency for Bad Debts: A/R accounts often include a reserve for bad debts, which accounts for the possibility that some customers may not pay their invoices.
Cash Flow Management: Efficient management of A/R ensures a proper cash flow, which is important for maintaining daily operations in the logistics industry.
Customer Relationships: A/R reflects the financial relationship between a logistics provider and its clients. Timely payment from customers ensures smooth ongoing business transactions.
Financial Health: A company’s accounts receivable balance is an indicator of its financial health. Higher levels of unpaid invoices may signal cash flow problems if not managed carefully.
In summary, Accounts Receivable is a crucial part of logistics financial management, helping companies keep track of outstanding payments and ensuring a healthy cash flow to support their operations.
