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Terms and their definitions or explanations, related to accounts receiavables, credit control and debt recovyer. This glossary is meant to help you understand technical or specialized vocabulary and terminology.
The analysis of a debtor’s account based on the debtor’s account activation information. In debt collection, this scoring is used to determine the collectability of the debt.
Your accounts receivable represents any outstanding money owed by the customer to you in return for the sale of goods or services.
It can also refer to the department in your organization that deals with invoicing, customer credit, and monies owed, and the records of such transactions.
ARM refers to the systems and processes that companies use to track and record payments made for goods and services, outstanding payments, and lines of customer credit.
Not all companies have the ability, or desire, to have their accounts receivable controlled in-house. ARO allows companies to outsource the management of their accounts receivable to a professional credit control company, like Chaser.
The benefits of doing so include paying less than hiring full-time staff, saving time on managing your accounts receivable, and getting paid faster and more often.
An accounts receivable automation system takes away human error risk such as typing mistakes and misplacement of documents.
As we know, the concept of automated accounting systems is not a new one, but until recently, even some of the computerised side of these systems required manual input. In recent years, however, accounting systems have taken great strides toward being more automated and user-friendly.
A calculation that will show you how effective your business is at lending out and then collecting your money in simple terms.
Both reports detail the amount owed to you by each of your customers and can normally be sorted by the issue dates of the invoices in question or their due dates.
The process by which your accounts receivable are evaluated with the aim of highlighting any irregularities.
The means used by two or more parties involved in the process of attempting to settle a legal dispute outside of court.
An annual return is a document that must be filed by businesses in the UK, which must include details of the company’s shares and capital along with any shareholder or director changes. This is often one of the first documents to be studied by a collector prior to commencing debt collection action.
Arrears is a legal term that refers to any outstanding debt.
Anything owned that has a monetary value. It is normally expressed as fixed or current.
The process through which businesses review and assess various facets of their operations, usually focussing on their financial accounts.
A third party employed by a creditor to collect an unpaid account from a debtor.
A company’s debt collection policy is a set of regulations that govern how you trade on credit terms.
Specialists in disputed debt recovery cases.
A person or business who owes money to another party, usually called the creditor.
Becoming default or defaulting is the failure of an entity to make prompt payment when a payment is due.
Income is less than your expenditure.
Delinquent refers to any entity that has failed to perform an obligation, such as making a payment, when they are obligated to do so.
A process where a bank or other financial institution is instructed to pay a third party a certain amount of money each month or on another specified time scale.
A disclosure statement refers to any document that outlines the terms and conditions of a loan.
Common inclusions on a disclosure statement include the interest rate, any fees, the amount borrowed, if the loan comes with any insurance, and the specific responsibilities of the borrower.
A charge, also called an early settlement fee, payable to a lender, if the debt is settled before the agreement has ended.
Money spent from incomes received.
A financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party at a discount.
A court notice that shows when a bankruptcy is over and the bankrupt individual is now debt free.
This refers to automating core processes such as bookkeeping, accounts payable, invoicing and accounts receivable, tax compliance, payroll, and expense management.
Fintech refers to the integration of technology into offerings by financial services companies in order to improve their use and delivery to consumers.
Tangible or intangible long term assets not normally intended for resale.
A goods and services tax, or GST, refers to any tax that is levied during the sale of goods and services. It is in many ways similar to a sales tax.
This is an intangible fixed asset.
Net sales after deduction direct sales costs.
A written promise by one party to meet a contractual commitment of another party in the event of a default.
The highest balance a borrower has owed on an account.
This is when an entity conducts its own debt collection using its own staff.
An insurance cover which provides a regular monthly income if unable to work due to an accident or illness.
An income statement refers to any document that shows how net revenue is converted into net incomes. This document is also commonly referred to as a profit and loss statement.
A means-tested benefit for people on low income.
A guarantee against default, loss, expense or wrong doing incurred.
A legally binding agreement between debtors and their creditors whereby an agreed payment of the debts is made over a set period of time.
An inability to repay debts in a reasonable amount of time as and when they fall due and where the value of assets is less than the liabilities.
Also known as the ICC, the International Chamber of Commerce is a vast organization with a huge number of members, ranging into the tens of thousands, from over 130 countries and covering nearly all business sectors.
Sometimes referred to as Incoterms, these are trade terms that are published by the ICC and that often form the basis of both domestic and international pro forma contracts.
An invoice is a commercial document issued by a supplier to a purchaser relating to a sale or transaction, outlining products, quantities, prices and payment terms.
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Here are tips on how to chase late payments without the awkwardness: https://www.chaserhq.com/blog/how-to-deal-with-late-payments-without-the-cringe-factor
To be added
Invoice factoring is a financial transaction and a form of debtor financing in which businesses sell their accounts receivable to a third party at a discount. Companies will sometimes factor receivables to meet their imminent cash needs.
The tracking of due invoices including due dates, days overdue, and late fees.
To send an invoice when billing a customer.
While most forms of bankruptcy are initiated by the debtor, courts of law can impose bankruptcy on an individual or business at the request of their creditors. In which case, it is referred to as ‘involuntary bankruptcy’.
A payment that is made after it’s due date.
This law allows creditors to claim compensation, interest and third party recovery costs in relation to unpaid commercial invoices. It effectively allows debt recovery companies to offer free to the creditor debt collection services.
An email, letter, phone call, SMS or other means of communications used to remind a customer that a payment owed is overdue.
The inability of a company to service its debts may result in the winding up of the company if it is declared insolvent by a creditor, leading to liquidation. Many debt collection agencies will seek to wind up a company should Court action not result in the recovery of a debt.
Often confusingly shortened to MOM, this is another form of payment term which instructs the debtor to make payment by the middle of the calendar month.
A businesses’ net income refers to the total of all revenues and expenses that have been completely accounted for.
Shows a company’s financial position including capital reserves, issued capital, share premiums, general reserves, grants and profits and losses. Net worth is a good indication of the funds that might be available should the company be wound up during debt recovery action.
Notes receivable are funds in the form of a written promise or promissory note. This states that the customer owes the company an amount and is a written promise to pay an amount by a set date. Notes due in a year or more are long-term assets; those under a year are still considered current assets.
A businesses’ net revenue refers to the total of funds received from the sale of goods and services before any expenses are taken into account.
An outside collection agency or OCA refers to any company to which debt collection is outsourced. Chaser’s debt collections services are an example of an OCA.
An open account is the simplest form of credit extended by a business to its customers.
Because of its unsecured and informal nature, this type of account is normally reserved for trusted customers with a proven track record of prompt payment and a good relationship with the lender.
Outsourced credit control refers to contracting your receivables and invoice chasing work out to other companies in order to save on costs or to cover a gap in skills, equipment or capacity.
Chaser’s outsourced credit control is an excellent example of outsourcing as it allows our customers to save money and time while still being paid faster and more often.
Outsourcing refers to contracting certain work out to other companies in order to save on costs or to cover a gap in skills, equipment or capacity.
When an invoice remains unpaid past the agreed due date.
Past due refers to any outstanding payment that has not been paid within a stated due date.
A Payment Portal is a unique part of the Chaser credit control platform that allows our customers to offer their clients the widest and easiest range of payment options.
Every invoice and invoice reminder sent out by our credit control software includes a link to a unique Payment Portal that contains all of the relevant payment details as well as a record of the customer’s total outstanding invoices to facilitate timely payment.
Our Payment Portal supports a wide range of payment options alongside the normal credit and debit card options, to give your customers the greatest chance to make a prompt payment.
The process and service that automates payment transactions between shoppers and merchants.
Always document your payment terms in writing and make sure all terms are agreed to and understood. Make sure each phone call, text, or email is documented, so there is no confusion. Some businesses offer incentives for prompt payments, a smart move if you can manage it.
Per annum is a Latin finance term that translates to “per year”.
Pro forma refers to any document that is provided as a courtesy, is simply a formality, or only satisfies the minimum requirements. The translation of the Latin words literally means "for the sake of form".
This is an invoice issued to the buyer prior to the release of goods or service. It is not shown in the accounts until it has been paid.
Always send a professional and itemised invoice. Make sure payment terms and banking details are visible to avoid any back and forth.
The income remaining after deduction of expenses. In the case of loss, the remaining expenses once income has been exhausted.
An organisation's financial statement listing net income, revenue and expenses over a specific period.
The original Prompt Payment Code, which around 3000 large companies signed up to, obliged businesses to pay any company with less than 50 employees within 60-days of receiving an invoice.
Despite these measures, the government estimates that around £23.4 billion worth of late invoices have not been paid to SMEs in the UK. This vast sum of money significantly impacts both the cash flow and, ultimately, causes the closure of around 50,000 businesses every year.
To rectify this situation, the government has put more power in the hands of SME owners to charge interest on late payments.
When a creditor is unable to attend a meeting of the creditors, a third party will be assigned a proxy to attend and vote on their behalf.
Used during international trade, purchasing power parity is a macroeconomic metric that is used to estimate the correct exchange rate needed to create equal purchasing power in different currencies, based on a "basket of goods" approach.
This is what the company expects to receive in the form of monetary obligations owed. These include any outstanding debts or incomplete transactions and are entered into the company’s balance sheet.
In finance terms, a red flag often refers to potential issues with, or events that have an impact on, a company’s or individual’s credit resting.
Often shortened to ROE, a return on equity is a finance term that refers to the amount of net income that is returned as a percentage of the equity belonging to the shareholders.
A return on investment, or ROI, is a comparison of the potential return or loss of an investment in comparison to the amount of money invested.
In financial terms, risk specifically refers to the chance that an investment’s actual return will differ from its expected return.
The Society for Worldwide Interbank Financial Telecommunications, more commonly known as SWIFT, is a cooperative financial service that supplies secure messaging services and payment interface software to a huge range of financial institutions around the world.
Or a statement as it often is called, is a document that includes all sales and financial transactions between a buyer and seller within a given period of time. Such statements are often used as a tool to remind clients of their outstanding balance.
By using Chaser’s accounts receivable software to manage your credit control, you can easily set up automatic statements to be sent to your clients once a month.
Chaser’s Payment Portal makes use of SWIFT to offer the largest number of potential payment options, giving our clients the best possible chance of being paid promptly.
This is the contractual agreement a buyer enters into when purchasing goods or services.
Collectors working for a collection agency that collects debt on behalf of a creditor.
More colloquially known as bad debt, uncollectible accounts refers to loans, outstanding invoices, and other debts that are judged to have little or no chance of being paid.
These debts might become unrecoverable for a number of reasons, including the debtor going bankrupt or the creditor not being able to find the debtor.
This is a creditor who is owed money but has no security for the debt. Also known as a trade creditor.
An acronym for value-added tax, VAT is a form of sales tax, meaning that it is levied at the point where goods or services are being paid for.
A creditor may waive late payment fees in order to agree an amicable settlement for an outstanding debt.
A promise or covenant offered by a seller to the purchaser guaranteeing the goods or services are as described and the remedies available in the event of default.
A webinar refers to an online-only seminar. Chaser hosts a range of webinars on a regular basis to help our users understand and overcome common problems associated with accounts receivable, credit controls, and debt collections.