Credit Information and Accounts Receivable Systems

Nearly every company agreed, back in the mid-eighties, that the aged mainframe based system environment they had been operating under for the last decade had to go. First implemented in the early seventies, their systems had become more of a hindrance than an asset. While these platforms could handle exceptional amounts of data, and perform extensive iterations, the ability to “get your hands on the information” was cumbersome at best, and frequently unrealizable. The question was, what would they replace them with?

Mainframes, the largest and most powerful general-purpose systems, are designed to meet the computing needs of a large organization by serving hundreds of computer terminals (dumb terminals, having no independent computing ability) at the same time. Minicomputers, though somewhat smaller, also are multi-user computers, intended to meet the needs of a small company by serving up to a hundred terminals. Microcomputers, computers powered by a microprocessor, are subdivided into personal computers and workstations (clients), the latter typically incorporating RISC processors (servers). Although microcomputers were originally single user computers, the distinction between them and minicomputers has blurred, as microprocessors have become more powerful. Linking multiple microcomputers together through a local area network or by joining multiple microprocessors together in a parallel-processing system has enabled smaller systems to perform tasks once reserved for mainframes.

As computers and their operating systems became more “friendly”, smaller and less cumbersome, there arose the need for new software applications to perform likewise. After considering redeveloping the same technology and taking a spin on the late ’80’s custom-development-using-different-architecture bandwagon, companies finally decided that the future lay in client-server solutions. In many cases, years after recognizing the need, companies’ — much to the delight of software developers — are now buying, not building software. Many companies today are spending huge amounts of money on enterprise, knowledge-based systems such as SAP®, Oracle® and PeopleSoft®. These integrated systems, for example, automatically update all the accounting records affected by a transaction. For example, when you record a credit sale to a customer, the system increases the amount the customer owes you, reduces the inventory for the item purchased, and records the sale so that it appears in your income statement. This requires updating the databases for accounts receivable, inventory, and the general ledger. In a non-integrated system you would have to enter the transaction three times, once in each database–a lot of extra work, and a good opportunity for error.

These systems, sold in modules, have caught the attention of CEO’s based on the assurance of integrating the companies heretofore-unrelated operations. By promising to provide the benefits of better strategic planning, product development, materials purchasing and utilization, manufacturing, inventory management, distribution, customer service, and financial reporting, there comes the (inevitable) additional “benefit” of downsizing. Generally taking one to two years to implement, these client-server applications are catching on rapidly. Today, many software companies who produced very productive solutions over the last decade are now scurrying to re-write their applications on a user-friendly, graphically intense, Windows® based platform.

Which system is right for your business? There are no easy answers here because there are no perfect systems; each system has some strengths and some weaknesses. Selecting a package inevitably involves compromises.

The Accounts Receivable module of a company’s business system allows the application and tracking of receivables and collections. Using this module should allow for important information to be stored for an unlimited number of customers and transactions; and should accommodate efficient processing of customer payments and adjustments.

Exhibit 1

The following list is an abstract overview that you would most likely require of your credit and accounts receivable system. This information can be helpful to you in dealing with your Information Services counterparts to help them understand your requirements.

At a minimum, the system should have these features and abilities:

  • Maintain complete customer information, including alternate ship-to addresses, month- and year-to-date totals, 24 month sales history, current balance, highest balance, open credits, deposits and last payment
  • Track customers’ open credits and deposits
  • Model customer enables fast creation of new customer records
  • Allow global changes to more than one customer record at the same time
  • Customer categories permit classification of customers for reports and operations on selected customer groups
  • Customers can be placed on credit hold
  • Provide on-line inquiry of customer status
  • Allow a separate cash customer for cash sales
  • Allow quick location of customers, standard items and General Ledger accounts with a Search File feature
  • Support multiple Accounts Receivable cash accounts
  • Maintain an unlimited number of sales tax jurisdictions, tracking taxable sales, sales tax, etc., by month, quarter and year
  • Allow flexible payment terms including number of days, day of month, end of month and end of next month
  • Track invoice discount dates and amounts, and due dates
  • Track sales by customer, sales representative and sales account
  • Provide a list of standard items for commonly billed invoice items and services
  • New customers can be added on the fly during invoice and transaction entry
  • Alerts the user when a customer exceeds credit limit and when you try to delete a customer who has an open quote or order
  • Transactions can be kept on file for up to 24 months
  • Transactions can be posted to the current month, any of the previous 12 months or up to one month into the future
  • Handle multi-line descriptions for standard items
  • Recurring invoices can be posted on a monthly, bimonthly, quarterly, semiannual and annual basis
  • Optionally provides warning of duplicate invoice numbers for each customer
  • Allow comments, miscellaneous charges and labor charges on invoices
  • Allow discounts and sales tax application on a line-by-line basis
  • Allow calculated tax amounts to be overridden during invoice entry
  • Early payment discount calculation can optionally exclude tax and/or freight amounts
  • Reprint invoices, credit memos, debit memos and statements on plain paper or preprinted forms
  • Print preprinted forms on a laser printer
  • Optionally print shipping labels for a customer when an invoice has been entered
  • Offer the ability to print and later reprint credit memos and debit memos
  • Quick invoice option simplifies invoice entry when printed invoices are not required
  • Invoice description and terms can be easily modified at any time
  • Offer on-line inquiry of all transactions affecting an invoice
  • Open credits and deposits can be applied to invoices, finance charges or as cash refunds
  • Individual payments can be grouped into bank deposits
  • Accept payments, deposit applications and open credit applications at time of invoicing
  • Allow the write off of small customer balances during cash posting
  • Allow previously entered cash posting to be voided
  • Cash receipts and adjustments include reference fields to handle larger check numbers
  • Calculate finance charges and allows recalculation later in the same month
  • Allow finance charge rates to be assigned on a customer by customer basis or allows you to use system defaults
  • Print a Finance Charge Report
  • Provide both balance forward and open item statement formats on a customer by customer basis with optional aging information
  • Customer statements can be previewed on the screen
  • User-defined aging periods
  • Print the Aging Report by invoice date or due date
  • Allow the Aging and Open Invoice Reports to be run with an as of date
  • Payment Analysis Report shows current and six month history of average days to pay
  • Sales Analysis (Commission) Report can be based on paid invoices
  • Reports can be sorted by customer ID, name or sales representative
  • Provides cash flow projections based on customers’ payment history
  • Customer information can be imported from a text file
  • Customer invoices can be imported and exported using text files
  • Import standard items with pricing information
  • Accounts Receivable information can be exported in several formats (XLS for Excel, WKS for Lotus 1- 2-3, DBF for dBASE III and text files, etc.)
  • Automatically posts to General Ledger and Job Cost modules


  • Customer List
  • Customer Worksheet
  • Customer Name List
  • Customer History Report
  • List of Recurring Invoices
  • Finance Charge Report
  • Detail Report
  • Open Invoice Report
  • Aging Report
  • Summary Aging Report
  • Cash Flow Report
  • Sales Analysis Report by Customer
  • Sales Analysis Report by Sales Account
  • Sales Analysis Report by Sales Representative
  • Delinquent Accounts Report
  • Payment Analysis Report
  • Open Credit Report
  • Deposits Report
  • Credit Limit Report
  • Invoice Register
  • Cash Receipts Register
  • Adjustments Register
  • Sales Tax Detail Report
  • Sales Tax List
  • Sales Representative List
  • Sales Account List
  • Standard Items List
  • Flash Report (summary of Accounts Receivable activity)

Exhibit 2

Exhibit 2 is a Check Sheet for your use in evaluating new Credit and A/R Systems. It lists very specific items which most companies can use as a guideline in evaluating software packages for credit and A/R.

Vendor Software Criteria Worksheet

Download this document (pdf format, 13k)

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