Accounts Receivable Accounting

At its core lies receivables management. Receivables must not only be recorded accurately, but also actively monitored and systematically assessed.

What Does “Debtor” Mean?

A debtor is a customer who has received goods or services but has not yet paid. In accounting, the term refers to individuals or companies from whom receivables are due.

What Does Accounts Receivable Accounting Do?

Accounts receivable focuses on customers with outstanding receivables.

Typical tasks include:

• Recording and monitoring outgoing invoices
• Maintaining debtor accounts
• Reconciling incoming payments
• Initiating dunning procedures in case of payment delays

Example:
A company sells machinery to business clients on account. The accounts receivable department ensures that each invoice is properly recorded, payments are tracked – and if payment is delayed, the dunning process starts automatically.

In short:
Accounts receivable accounting ensures clarity, structure, and security in managing outstanding receivables.

Receivables Management – The Operational Core

Receivables management is the operational heart of accounts receivable accounting. It controls all processes related to customer receivables – from invoice to payment.

Why is this so important?
Because unpaid invoices are not just annoying – they directly threaten a company’s liquidity. Professional receivables management ensures that:

• Invoices are issued correctly and promptly
• Payment deadlines are monitored and met
• Payments are systematically recorded and reconciled
• Delays are addressed early

It’s not just about efficiency – it’s also about communication.
Friendly reminders instead of immediate warnings help maintain customer relationships.

Example:
A software provider sends an invoice for an annual subscription. Receivables management checks whether payment is received on time. If not, an automated reminder is sent – before the dunning process begins.

In short:
Receivables management combines risk control, liquidity monitoring, and customer care.

Dunning Process – When Payments Are Late

The dunning process kicks in when an invoice isn’t paid on time. It’s a core task of accounts receivable and ensures that outstanding receivables aren’t forgotten – and ideally still get paid.

But how does dunning actually work?

Structured Process Instead of Chaos

A professional dunning process follows a clear structure. Typically, it consists of several stages:

1. Payment reminder: polite and factual, often via email or letter
2. First dunning notice: with reference to the overdue payment and a new deadline
3. Second dunning notice: firmer tone, possibly with late fees
4. Final notice: prior to handing over to collections or legal department

Each stage is documented and traceable – this protects the company legally and creates transparency for the customer.

Communication Is Key

A good dunning process isn’t just legally sound – it’s also smart in terms of communication.
Not every late payment is intentional. Sometimes it’s due to internal processes, misunderstandings, or simple oversight.

Accounts receivable plays a mediating role here:

• Clarifies questions
• Offers payment arrangements
• Keeps communication open

Practical Example

ebtor scoring is a method for evaluating customer payment behavior and creditworthiness.
The goal: identify risks early and tailor payment terms accordingly.

But what exactly gets “scored” – and how does it help accounts receivable?

This keeps the process fair, transparent, and legally secure.

Debtor Scoring – Assessing Risk Early

Debitoren-Scoring ist ein Verfahren zur Bewertung des Zahlungsverhaltens und der Bonität von Kunden. Ziel ist es, Risiken frühzeitig zu erkennen und Zahlungsbedingungen gezielt zu steuern.

Doch was wird dabei eigentlich „gescort“ und wie hilft es der Debitorenbuchhaltung?

What Goes Into the Score?

Scoring is based on multiple criteria:

• Historical payment data – how reliably has the customer paid in the past?
• Industry insights – are there typical risks in certain sectors?
• External credit reports – data from agencies like Creditreform or Schufa
• Internal assessments – input from sales and customer service

The result is a risk classification – often in the form of score values or traffic light models. These help accounts receivable make decisions:

• Which customers get longer payment terms?
• Where are down payments or securities advisable?
• When is caution needed?

Example: Risk-Based Payment Terms

A new customer places a large order on account. The scoring shows medium risk. The accounting team decides to start with shorter payment terms and monitor behavior. Debtor scoring is a key tool in receivables management – combining data analysis with business foresight.

Conclusion

Accounts receivable accounting is more than a bookkeeping routine.
It manages the entire process around customer receivables – from invoice to final dunning notice.

With structured receivables management, a professional dunning process, and data-driven scoring, it plays a vital role in:

• Financial stability
• Risk control
• Customer retention