How to Reduce Accounts Receivable and Increase Accounts Payable
Accounting procedures provide a series of ledgers for recording financial information. Accounts receivable and accounts payable are two common ledgers in an accounting system. Accounts receivable includes all information on money owed to the company from account sales. Accounts payable details purchases on account made by the company. The former is a current asset while the latter is a current liability. Increasing and decreasing these ledgers in terms of dollar amounts will require the company to follow a few basic steps.
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Instructions
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Reducing Accounts Receivable
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Contact all customers that owe your company money. Request prompt payment within a specific time frame, such as 30 days.
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Send reminder statements listing balances owed by customers. Offer small discounts to encourage payments. For example, one percent off for invoices paid within 10 days is a common discount.
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Post all cash receipts in a timely manner. The basic journal entry to reduce accounts receivable is a debit to cash and a credit to accounts receivable.
Increasing Accounts Payable
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Purchase all goods and services on vendor accounts. This will increase your company's aggregate accounts payable total.
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Avoid making payments on open accounts-payable balances. The accounts will increase due to late fees and penalties associated with not paying these accounts.
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Use a credit line to pay for operational expenses. This increases accounts payable to external creditors as a credit line is another type of current liability.
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Tips & Warnings
Failure to pay accounts payables and other short-term loans can result in negative credit ratings for your company.
