Debtor and Creditor Basics in South Africa
Our team at i-Check Data Solutions have put this article together to explain debtor and creditor basics in South Africa.
Lets look at a definition of what is a Creditor and Debtor?
Creditors are people or companies to whom we owe money for goods and services supplied by them to us on credit.
A debtor is a person or entity that owes an amount of money to you for services or good given on credit.
What is the difference between accounts payable and accounts receivable?
Accounts receivable is the money due from all customers for goods or services delivered on credit. This total figure would be shown on the balance sheet as an asset.
If you or your company plan to sell goods or services on account, you will need a solid method of tracking who owes you how much and when it’s due. Below are some key components of how a good accounts receivable system should work:
- Verify accounts receivable balances. Use source documents such as invoices to keep balances accurate. Know exactly what is due and when is key to managing and safeguarding your cash flow situation. Solid cash flow practices can be the difference between a successful company and a failed one.
- Send accurate and timely invoices. You won’t get paid until you send an accurate invoice. Make sure you are on top of this, as mistakes in invoicing cost time and can be a valid excuse for a debtor not to settle on time. You don’t want to give the debtor excuses, make sure each invoice is raised and correct first time round.
- Generate accounts receivable reports. This will help determine which customers are past due and help you track credit limits. This is also key to minimizing your losses, knowing when a client is a slow payer and restricting their ability to take more services and goods on credit is just smart business.
- Post the paid invoices. It’s important to track who pays you when. Keeping on top of this is also key to managing your debtors book and keeping track of your cash flow.
- Match your records. Your customer records totals must match your general ledger and sub ledgers.
i-Check Data Solutions has a number of powerful solutions designed to make your job easier in first vetting new suppliers and tracing debtors. If you would like to know more about our powerful and affordable solutions please do not hesitate to contact one of our friendly sales consultants today.
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