The creation of a valid claim constitutes a signal to record a receivable. The purpose of accounts receivable procedures is to record and maintain accounts of claims against others for the future receipt of money. Accounts receivable are required to be recorded in the accounting system for all budgeted and unbudgeted revenues which are susceptible to accrual. Agencies record accounts receivable when they are billed. The available amount must be adjusted for uncollectibles or bad debts based upon either past experience or management judgement.
Control is a key factor in handling accounts receivable.
Control of accounts receivable consists of determining amounts due from others, billing them, seeing to it that the bills are recorded and collecting the amounts billed. Failure to properly control receivables, by the omission of any of the above, can cause financial problems for an agency. In addition, the state suffers a loss of interest on money that should be in the Treasury. Also, the longer a receivable is allowed to remain unpaid, the harder it becomes to collect. The reasons for emphasizing timeliness should be obvious.