Collection audit: definition and steps to perform it

bitheerani319 · Post by **bitheerani319** » Mon Dec 23, 2024 6:31 am

Good management of a company's debt collections is a key factor for it to have the liquidity it needs to continue operating, but it is also important to have a clear vision of the business's finances. For this reason, auditing a company's debt collections is vital to know how well we are managing this aspect of our company.

In this post we will discuss what a debt collection audit is, what its objective is, and we will tell you how you can carry it out.

What will you find in this text?

What is a debt collection audit and what is its objective?

How are accounts receivable audited?

1. Define what your company understands by accounts receivable

2. Define the objectives of the debt collection audit

3. Classify your accounts receivable

4. Verify the legality of the documents receivable and their origin

5. Evaluate collection risks

6. Review your company's internal control system, associated with accounts receivable

7. Obtain the auxiliary report of your accounts receivable

8. Verify the accounts receivable balances buy uk mailing list the rest of the supporting documentation

9. Review collection policies to estimate uncollectible accounts

10. Analyze the effectiveness of your collection policies

11. Review your provisions for doubtful accounts

What is a debt collection audit and what is its objective?
A debt collection audit is a review process that helps ensure that the company is effectively and efficiently managing the money owed to it. Its main objective is to ensure that best practices are being followed to collect what is owed to the company and to minimize the risks of not being able to collect those debts. This involves:

Review how credit is granted to customers.
Evaluate how invoices are issued.
Control how payments are tracked and how overdue accounts are handled.
By performing this audit, areas for improvement in collection processes and credit policies can be identified , which can help speed up payments and reduce losses due to bad debts .