Accounts receivable is an accounting activity that involves the receipt of invoices and payment of bills. Accounts receivable software applications are automated tools that allow a company to use computer technology in order to remove some manual actions from this process. Different types of applications include electronic invoice receipt, multiple invoice packages for numerous vendors, and electronic checks and payment posting for finalizing vendor accounts. In most cases, accounts receivable software applications are all inclusive, meaning one software package handles all these tasks. Modular software packages allow companies to add just an accounts receivable module to existing software to complete these functions.
Invoices are usually one document that validates a transaction, such as the purchase of goods or services. Rather than receiving paper invoices through the mail, accounts receivable software applications may allow for the electronic transfer and receipt of such documents. For example, downloading a file from a vendor’s website directly into the accounts receivable software allows for individuals to review documents and balance accounts through the software package. Electronic statements may also work in a similar manner, that is, downloadable from a website. This saves paper and prevents the loss of crucial accounting documents.
Few businesses have just a few vendors or suppliers from whom they purchase goods and services. Therefore, accounts receivable software applications have features that allow for multiple vendor account numbers and accounts. Multiple receivables accounts may also be necessary to group vendors by type or goods or services offered. Accounts receivable software applications can offer large breakdowns of options for classifying and managing vendors and other items. Many types of software packages allow for customization of the system used to manage receivables.
Another purpose of electronic accounting is the use of computers and software to eliminate certain manual tasks, such as check writing and the balancing of accounts. For example, once a company finalizes its accounts receivable for a period, checks are needed to send out for payment, and accounts must be cleared to recognize the payments. Accounts receivable software packages typically allow for printing checks using the computer; once printed, the system also posts the check payments electronically and finalizes payments. At this point, accountants are simply needed to review the accounts, make sure they balance as necessary, and ensure no errors exist. That leads to another benefit for this software: electronic reports to help balance the accounts receivable accounts in the general ledger.