What is Collections?

Collections is a term used by a business when referring to money owed to that business by a customer. When a customer does not pay the business within the terms specified, the amount of the bill becomes past due and is sometimes submitted to a collection agency. When a business sells a product or service to a customer, payment is expected either at the time of the transaction or within a defined period of time such as 30 days. Unfortunately, some customers do not pay the business within those set terms and, at this point, the account can be considered in collections.

Software with Collections

PRODUCT NAME	SW SCORE (OUT OF 100)	AGGREGATED RATINGS (OUT OF 5)
Quickbooks	98	4.3
Xero	98	4.2
Freshbooks	97	4.3
Wave	96	3.5
Zoho Books	94	4.6
FreeAgent	94	4.4
MYOB	93	4.4
Qonto	92	4.5
Sage Accounting (Sage One)	92	4.4
Accounting Seed	91	4.5

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Accounts Receivable

Accounts receivable refers to the outstanding invoices a company has or the money clients owe the company. The phrase refers to accounts a business has the right to receive because it has delivered a product or service. Accounts receivable, or receivables represent a line of credit extended by a company and normally have terms that require payments due within a relatively short time period. It typically ranges from a few days to a fiscal or calendar year. Companies record accounts receivable as assets on their balance sheets since there is a legal obligation for the customer to pay the debt. Furthermore, accounts receivable are current assets, meaning the account balance is due from the debtor in one year or less.

Accounts Payable

Accounts payable include all of the company's short-term debts or obligations. For example, if a restaurant owes money to a food or beverage company, those items are part of the inventory, and thus part of its trade payables.

Bank Reconciliation

A bank reconciliation statement is a summary of banking and business activity that reconciles an entity’s bank account with its financial records. The statement outlines the deposits, withdrawals, and other activities affecting a bank account for a specific period. A bank reconciliation statement is a useful financial internal control tool used to thwart fraud.

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