During the difficult epidemic period, customers often encounter uncollected receivables. During recent conversations with customers, many have mentioned during these times they rather do less than doing more and risk nonpayment. So this time, I want to share with you about uncollected payments.
According to accounting standards, receivables are counted as current assets. As the name suggests, current assets are assets with relatively high liquidity (because generally receivables are expected to be recovered within one year) and each industry has different credit terms. For example, in the retail industry the usual term is within 30 days. For wholesale and trade, it can go up from 60-90 days. If it's engineering or design related industries, the payback period can be longer than half a year.
In our accounting, we especially consider some receivables that exceed the specified collection period and to check the status of these funds. During auditing, the auditor will issue a confirmation letter to the other party to confirm the amount of money. If the sum is large, the auditor will ask what actions the company have taken to recover the amount. If legal actions must be taken, the auditor may seek the help of professionals such as lawyers to enact legal proceedings to recover the unpaid amount.
If confirmed that the receivable is irrecoverable, it will not be listed as receivables as it is regarded as a company loss and reflected accordingly in the accounts.
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