In a business, there is such a thing as a revenue cycle, which is a cycle that explains how a company earns revenue from its business. The revenue cycle consists of:
– Ordering goods
– Delivery of goods
– Accounts receivable collection
– Cash billing
Well, the fourth cycle is cash collection, aka cash collection. So the understanding of cash collection in simple terms is the final stage of a business income cycle that serves to collect cash obtained from billing to consumers.
If we compare it with the simplest example, for example we have a shop, then a buyer comes to the shop, for example buying candy. When the buyer says he wants to buy candy, there is an order of goods (first income cycle), then when we as shop owners take the candy and hand it to the buyer, the goods are delivered (second income cycle), then when we mention the price of the candy and ask for it the money, that’s called accounts receivable collection (third income cycle), and when the buyer pays for the candy, we receive the money, that’s cash collection, aka cash collection, and is the last cycle of the revenue cycle.
The example above is the simplest example with illustrations of everyday events. But in a large, organized company, the revenue cycle process is not that simple. Usually, each revenue cycle will be worked on by a different person or division. In a company, usually cash collection or cash collection is carried out by the marketing, accounting, or even a special division to collect and receive cash from consumers. In retail companies such as supermarkets, the cashier is part of the cash collection. Meanwhile, at the bank, one of the cash collections is the teller.
But usually, the party who does the cash collection is the party who does not have access to the documents related to the transaction, and their job usually only focuses on receiving the money and handing it over to the company. The problem is that if the party has access to the transaction documents, it will be vulnerable to the possibility of embezzlement. Furthermore, there is usually another division (usually accounting) that will match the amount of incoming money with the transactions that occur.
In a company, cash collection is a difficult position. The job is easy, because they only receive money, confirm the amount of money, and deposit the money to the company. But you could say it’s difficult because someone in a cash collection position must be honest and have integrity. In addition, sometimes there are company policies that incriminate cash collectors, for example in banks, as far as I know, if a teller makes a miscalculation, he usually has to pay a number or pay compensation. A supermarket cashier will also be suspected if the amount of money that comes in is not the same as the record of the number of goods that come out.
How Cash Collection Works in Companies
Cash collection at the company is certainly different from cash collection in the style of supermarket cashiers and shop keepers. The process is more complex and the payment methods used are varied.
Likewise with the sales process, unlike buying soap in a shop. Take the goods and pay. The process of selling products by the company is based on the four stages of the revenue cycle mentioned above.
Purchase of products begins with the ordering stage. After that the company will send the product that the consumer wants and issue an invoice or invoice. Finally, consumers make payments based on invoices issued by the company.
Payment Method Cash Collection
Cash collections in companies are generally handled by a separate work division. There are several methods that are usually used by companies to facilitate the payment process by consumers while securing the money received from them.
Companies that sell their products to overseas consumers usually use the lockbox method. Lockbox is the postal address that customers use to send payments. This method is carried out by the company in collaboration with a bank where the company opens an account specifically to receive payments from consumers.
The money paid by the consumer is directly deposited into the company’s account. As proof of payment, the bank will send information about the customer’s account number and the amount of money sent.
For domestic consumers, the payment method generally used is transfer between bank accounts (electronic funds transfer). This payment method is now integrated with the exchange of remittance of funds known as Financial Electronic Data Interchange (FEDI). That way, customers can send funds transfer instructions to the bank and send payment data to the company at the same time, making it more efficient.
Cash collection in business refers to the act of collecting invoices made by the company to its customers for invoices that will and have been due. One of the components in a trade invoice is the agreement of both parties about when the payment will be made, and this is what is known as the payment due date. There is a term of payment within 30 days, 45 days, or even 60 days. Unpaid invoices that have passed the payment deadline are declared as overdue invoices, and this is one of the functions of cash collection, namely to collect all money for all invoices that will be billed before the due date and to manage all debt payments to avoid status debt goes bad. The sooner customers pay off their debts, of course, this will be better for the company’s cash, so that existing cash can be used or replayed in the business.
Generally in a company, the task of cash collection is carried out by a separate division and is not combined with the finance division, because the task of cash collection is only to collect according to the existing invoice, after payment is received it is directly submitted to the finance department of the company. They are not allowed or permitted to open more access to the company’s finances and all related transactions. The person in charge of the cash collection is called a collector, and this job is not an easy job, because they have to deal directly with various customers with different nature and treatment and of course the more debts that must be billed, the more time it takes. Those assigned as collectors must meet special qualifications, be firm, honest, and loyal to the company, able to put the company’s interests above personal feelings. But not infrequently the billing task is handed over to a third party, in addition to saving budget costs, the company also does not need to exercise control over additional divisions whose function is actually only on billing when invoices are approaching or before maturity.
