Accounts Payable, Receivable, and Billings
BY GORDON L. MURRAY SYSTEMS MANAGER, CHICAGO OFFICE
Presented at a Forum on "Business Management and Administrative Techniques," Held at McGill University, Montreal — February, 1955
The accounts payable, receivable, and billing functions do not currently enjoy the attention in accounting literature, discussion groups, and professional meetings as is being given to profit planning, direct costing, budgetary control and similar matters. However, the necessity to bill our customers, collect our accounts, and pay our indebtedness have been basis functions in commerce since the beginning of time.
It is very easy to lose sight of the importance of these operations and forego a continuous re-examination aimed at improving our effectiveness
in these areas.
The advent of automation, electronics, and other startling developments
in business methods does not indicate that any of these three functions are to be eliminated. On the contrary, these new tools will require re-focusing attention on these, as well as other, somewhat prosaic accounting operations.
WHY SHOULD WE RE-EXAMINE THESE FUNCTIONS?
To More Effectively Manage Our Funds
A basic responsibility, if not the prime responsibility, of every management of a business enterprise, is the proper and profitable utilization of the funds entrusted to it by the owners of that business. This implies that management is expected to do an effective job of "funds management" as well as turn in a creditable performance in engineering,
sales, production and the other areas of management.
An effective "funds management" performance results from rotating available working capital through the cycle from raw material through inventories, receivables and back into the bank account at a rate which produces a maximum return on the capital employed. In performing this job we run into any number of problems. We make errors in our sales forecasts and wind up with inventories we can't sell. We extend credit to the wrong people or on the wrong terms and cannot collect our money within reasonable periods. We overexpand