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Commercial Accounts Receivable

Commercial accounts receivable or commercial AR is a specialized area in credit management. Accounts receivable or AR is the financial nerve center of a company’s fiscal well-being. AAB manages small and large portfolios of commercial accounts receivable.

Commercial accounts receivable usually incorporates a 30/60/90 day aging process on a dry goods receivable. In the case of perishables the receivable aging is reduced to 7/14/21 days. Once credit customers hit 120 days (30 days for perishable goods) their file is reviewed and a 3rd party collection agency is considered. These formulas are used by the majority of companies who operate commercial accounts receivable.

Commercial Accounts Receivable increases sales

The main reason companies carry commercial accounts receivable is an incentive to supplement sales. Some companies with commercial AR can have as much as 70% of their sales supplemented with extended credit terms. In an ideal world, sales and the credit department work together to extend credit and increase sales, while reducing potential risk to their commercial accounts receivable.

In the real world of commercial accounts receivable there are often conflicts between the Sales and AR departments. The typical situation occurs when Sales wants to close a deal but the customer has a weak credit history. A creative credit manager looks for ways to make the deal while reducing the long term risk to their commercial accounts receivable.

Credit risk management is critical to the health and stability of commercial accounts receivable. The credit application-agreement or contract has the biggest influence on accounts receivable. A proper commercial agreement must clearly spell out the terms and conditions of being extended credit and the remedy terms should the customer default. A proper credit agreement is like a shield for your commercial accounts receivable.

Avoid the biggest pitfall of Commercial Accounts Receivable

While many companies use a credit agreement or other instrument to protect their commercial accounts receivable, they neglect to adjust their agreement to comply with the state laws of their customer’s state. This can be a very expensive mistake that can jeopardize the long term stability of your commercial accounts receivable.

A legal interest rate for commercial transactions and accounts in one state can be usury in another. There are also commercial laws in some states that govern or regulate commercial debt collection in their states. If you ignore these points be prepared to take some major hits on your commercial accounts receivable.

In some states if your agreement is deemed to have usurious rates then the entire agreement is illegal and the debtor walks away free and clear. Imagine the nightmare of having a block of commercial accounts in a state where your agreement is a landmine. Many companies don’t realize that their generic commercial agreements in some high volume states could potentially devastate their commercial accounts receivable.

AAB will improve your Commercial Accounts Receivable

AAB specializes in commercial debt and our services will improve your commercial accounts receivable. In the case of commercial credit agreements we offer custom contract solutions to protect your accounts receivable.

For a reasonable fee we provide customized state contracts designed to comply with the commercial laws in the state where your customer resides. Ask your AAB professional for details or request a free consultation on how we can improve your Commercial Accounts Receivable.
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