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Accounts Receivable – Office Products Depot

The interview with Colin Smith, from Office Products Depot, meant I was able to identify the accounts receivable subsystem they used and their accounts receivable management. I focussed on their policies for the offering and checking of credit, managing credit levels, charging the credit customers, receiving payment from credit customers and the general management of credit customers. I will be using the information from the interview with Colin as well as information from fictitious accounts receivable to explain their policies.

When Office Products Depot decides to potentially offer credit to a customer, they check credit ratings and follow policies to help them decide if they should …show more content…

Credit limits are set to manage the spending of their customers, this way Office Products Depot can ensure that customers aren’t purchasing too many goods. This means that if the customer is unable to pay their account Office Products Depot loses say $2000 (a company’s credit limit) rather than $10000. To set these credit limits, Office Products Depot estimates the amount of money they estimate the customer will spend over a two month period. This number is then rounded to the nearest $500 to make recording credit limits easier. Customer payment of money owed is managed by the same salesperson that the customer first dealt with, as they receive commission based on money received by their particular customers. The salesperson is often in direct contact with the customer to make sure the credit is being paid off. However, sometimes the credit limit of a particular customer can be increased, if they have paid well in the past. An example of this is Jones Stationery, who is $300 over their credit limit. When Office Products Depot sends invoices to their customers, they send a separate tax invoice for each provided service. This makes the customer more aware of the each individual charge. Monthly statements are also sent out aswell. Refunds and reductions are also given occasionally to customers, to maintain a good relationship, and fix incorrectly recorded charges. An example of this Office Products Depot

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