Accounts receivable (A/R) is one of a series of accounting transactions dealing with the billing of customers who owe money to a person, company or organization for goods and services that have been provided to the customer. In most business entities this is typically done by generating an invoice and mailing or electronically delivering it to the customer, who in turn must pay it within an established timeframe called credit or payment terms.
An example of a common payment term is Net 30, which means payment is due in the amount of the invoice 30 days from the date of invoice. Other common payment terms include Net 45 and Net 60 but could in reality be for any time period agreed upon by the vendor and the customer.
While booking a receivable is accomplished by a simple accounting transaction, the process of maintaining and collecting payments on the accounts receivable subsidiary account balances can be a full time proposition. Depending on the industry in practice, accounts receivable payments can be received up to 10 – 15 days after the due date has been reached. These types of payment practices are sometimes developed by industry standards, corporate policy, or because of the financial condition of the client.
On a company’s balance sheet, accounts receivable is the money owed to that company by entities outside of the company. The receivables owed by the company’s customers are called trade receivables. Account receivables are classified as current assets assuming that they are due within one year. To record a journal entry for a sale on account, one must debit a receivable and credit a revenue account. When the customer pays off their accounts, one debits cash and credits the receivable in the journal entry. The ending balance on the trial balance sheet for accounts receivable is always debit.
... customers every month, you should reconcile your accounts receivable ledgers with the accounts receivable control account. The control account is the total accounts receivable balance ... from your general ledger. The beginning accounts receivable total, plus charge sales for the month, minus payments ...
Business organizations which have become too large to perform such tasks by hand (or small ones that could but prefer not to do them by hand) will generally use accounting software on a computer to perform this task.
Associated accounting issues include recognizing accounts receivable, valuing accounts receivable, and disposing of accounts receivable.
Accounts receivable departments use the sales ledger. Accounts receivable is more commonly known as Credit Control in the UK, where most companies have a credit control department.
Other types of accounting transactions include accounts payable, payroll, and trial balance.
Since not all customer debts will be collected, businesses typically record an allowance for bad debts which is subtracted from total accounts receivable. When accounts receivable are not paid, some companies turn them over to third party collection agencies or collection attorneys who will attempt to recover the debt via negotiating payment plans, settlement offers or legal action. Outstanding advances are part of accounts receivables if a company gets an order from its customers with payment terms agreed in advance. Since no billing is being done to claim the advances several times this area of collectible is not reflected in accounts receivables. Ideally, since advance payment is mutually agreed term, it is the responsibility of the accounts department to take out periodically the statement showing advance collectible and should be provided to sales & marketing for collection of advances. The payment of accounts receivable can be protected either by a letter of credit or by Trade Credit Insurance.
Companies can use their accounts receivable as collateral when obtaining a loan (asset-based lending) or sell them through factoring. Pools or portfolios of accounts receivable can be sold in the capital markets through a securitization.
Bookkeeping for Accounts Receivable
Companies have two methods available to them for measuring the net value of account receivables, which is computed by subtracting the balance of an allowance account from the accounts receivable account.
On March 23rd, 2010, President Barack Obama signed into legislation the “Patient Protection and Affordable Care Act.” Since then, the new bill, nicknamed “ObamaCare,” has sparked heated controversy all across the country between Democrats and Republicans, each side fiercely tearing at each other with facts and statistics. I was curious as to what all the hoopla was about, so I decided to look into ...
The first method is the allowance method, which establishes a liability account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable. The amount of the bad debt provision can be computed in two ways – either by reviewing each individual debt and deciding whether it is doubtful (a specific provision) or by providing for a fixed percentage, say 2%, of total debtors (a general provision).
The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement.
The second method, known as the direct write-off method, is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective account receivable in the sales ledger.
The two methods are not mutually exclusive, and some businesses will have a provision for doubtful debts and will also write off specific debts that they know to be bad (for example, if the debtor has gone into liquidation.)
For tax reporting purposes, a general provision for bad debts is not an allowable deduction from profit – a business can only get relief for specific debtors that have gone bad. However, for financial reporting purposes, companies may choose to have a general provision against bad debts in line with their past experience of customer payments in order to avoid over stating debtors in the balance sheet.
Accounts receivable is a term used to describe the quantity of cash, goods, or services owed to a business by its clients and customers. The manner in which the collection of outstanding bills is handled, especially in a small business, can be a pivotal factor in determining a company’s profitability. Getting the sale is the first step of the cash flow process, but all the sales in the world are of little use if monetary compensation is not forthcoming. Moreover, when a business has trouble collecting what it is owed, it also often has trouble paying off the bills (accounts payable) it owes to others.
With the growing number of corporations taking over small businesses, and the belief that becoming a proprietor is associated with being wealthy, one must decide which type of business to become involved with. There are several differences between these two types of business. A corporation is a business organization having a continuous existence independent of its members (owners) and power and ...
By extending credit to a client—selling on payment terms other than cash up front—you are, in essence, lending them money. Collecting this money is of critical importance to the health of a company. Nonetheless, many small business owners depend primarily on the good will of their clients as a collection policy. They simply send out an invoice and them wait, and wait. A collection policy designed to minimize payment delays is a good idea for companies of any size.
In an ideal world, a company’s accounts receivable collections would coincide with the firm’s accounts payable schedule. In the real world, there are many outside factors working against timely payments some of which are well beyond the control of even the most vigilant manager. Seasonal demands, vendor shortages, stock market fluctuations, and other economic factors can all contribute to a client’s inability to pay bills in a timely fashion. Recognizing those factors and incorporating them into the cash flow contingency plan can make a big difference in establishing a solid accounts receivable system for your business.
By looking at receipts from past billing cycles, it is often possible to detect recurring cash flow problems with some clients, and to plan accordingly. Small business owners need to examine clients on a case-by-case basis, of course. In some instances, the debtor company may simply have an inattentive sales force or accounts payable department that needs repeated prodding to make its payment obligations. But in other cases, the debtor company may simply need a little more time to make good on its financial obligations. In many instances, it is in the best interests of the creditor company to cut such establishments a little slack. After all, a business that is owed money by a company that files for bankruptcy protection is likely to see very little of what it is owed. However, a business that has determined that its late paying customer is well managed may decide by giving that customer a little more time and by doing so, perhaps a chance to grow and prosper becoming a valued long-term client.
... The way PPL allocate distribution payments is based on relevant data being collected from the record company, performer and user, which ... and legislation.BMR wanted to introduce new, world wide business models for collection societies and publishers. Publishers via the MPA however ... world of entertainment and to endeavour to ensure these take account of social and economic changes'; . (web 2003). Being ...
Methods of Collecting
A good way to improve cash flow is to make the entire company aware of the importance of accounts receivable, and to make collections a top priority. Invoice statements for each outstanding account should be reviewed on a regular basis, and a weekly schedule of collection goals should be established. Other tips in the realm of accounts receivable collection include:
* Get credit references for new clients, and check them out thoroughly before agreeing to extend the client credit
* Do not delay in making follow-up calls, especially with clients who have a history of paying late
* Curb late payment excuses by including a prepaid payment envelope with each invoice
* Know when to let go of a bad account; if a debt has been on the books for so long that the cost of pursuing payment is proving exorbitant, it may be time to consider giving up and moving on (the wisdom of this depends a lot on the amount owed, of course)
* Collection agencies should only be used as a last resort
The longer it takes to collect on an invoice, the less likely collection of the money becomes. As a rule of thumb, according to Dr. Cornwall, Director of the Belmont University, Center for Entrepreneurship, “never let any one customer represent a larger percentage of your total sales than your average profit margin. That way if you need to fire a customer, you can still pay your bills.”
ACCOUNTS RECEIVABLE FINANCING
Accounts receivable financing provides cash funding on the strength of a company’s outstanding invoices. Instead of buying accounts, lenders use invoices as collateral against which they extend short-term loans. Besides benefiting a business in debt, accounts receivable financiers can assume greater risks than traditional lenders, and will also lend to new and vibrant businesses that demonstrate real potential. An accounts receivable lender will also handle other aspects of the account, including collections and deposits, freeing the company to focus on other areas of productivity. However, risks are involved in this sort of undertaking and agreements are typically lengthy and steeped in legal lingo. Before considering this type of financing it is recommended that an expert assessment of the specific collection situation be sought.
In 1994 the UK had a Balance of Payments current account deficit. Explain the possible effects that this deficit might have upon the economy Discuss what, if anything the UK Government could have done to reduce or eliminate this current account deficit. The balance of payments is a record of one country's trade dealings with the rest of the world. Any transaction involving UK and foreign citizens ...
Bannister, Anthony Bookkeeping and Accounts for Small Business. Straightforward Company Ltd, April 1, 2004.
Bragg, Steven M. Accounting Best Practices. John Wiley, 1999.
“Collecting Yourself.” Inc. March 2000.
Cornwall, Dr. Jeffrey R., David Vang, and Jean Hartman. Entrepreneurial Financial Management. Prentice Hall, May 13, 2003.
Flecker, Cody. Collect Your Money: A Guide to Collecting Outstanding Accounts Receivable. Cobra, 1998.
Longenecker, Justin G., Carlos W. Moore, J. William Petty, and Leslie E. Palich. Small Business Management. Thomson South-Western, January 1, 2005.
Schechter, Karen S. “Compare Costs, Benefits of Billing Service Vs. In-house.” American Medical News. July 24, 2000.
Schmidt, David. “Agents of Change.” Business Credit. October 2000.
debt collection is a deliberate attempt by a business to collect an obligation that has become past due. In normal transactions between two businesses, an invoice is rendered and payment is due within 30 days—unless, by special arrangement, a more generous schedule of payments has been agreed upon. Retail customers usually pay cash at time of purchase or, common in medical practices, are billed for portions not covered by insurance; payment is due some reasonable time after billing, e.g., five days or a week. After these time periods have passed, the payment is past due. In normal accounting practice, overdue payables are classified as 30-, 60-, and 90-day past due, and the accounting department routinely sends out “past-due” notices. Once an account is more than 90 days overdue, it becomes problematical and requires special action. In effect the buyer is now using the seller’s money without compensation.
Debt collection, in another sense, may be the main business of a small enterprise; it may have been formed to collect money owed to others for a percentage of the debt owed. The small business, in yet another sense, may be the subject of debt collection activity, either because the business has been careless in paying bills or because the owner refuses to pay for a cause: perhaps the product shipped was deficient, etc.
1. If you use your car as _collateral___ (property used to secure a loan), and you do not pay the loan back, the creditor has the right to repossess your car. 2. When a bank extends you _credit___, it allows you to borrow money and pay it back later with interest. 3. The _truth in lending laws___ require lenders to disclose the monthly interest rates and the method they use to calculate finance ...
INHERENT CONFLICTS OF INTEREST
A business expends considerable resources contacting, courting, pleasing, and servicing its clientele. Under normal circumstances, the overwhelming majority of customers pay reasonably promptly so that the payment pattern will have the shape of a bell curve: a few prepay or pay early, the majority pay on time, a few persistently pay late. The very few who fall beyond this pattern may do so because of unusual circumstances. Real “deadbeats” are difficult initially to identify. For this reason most businesses, small or large, treat persistent late-payers with much more courtesy than they deserve. Collecting receivables and paying payables are inherently in conflict. In many business-to-business situations, the customer may have a policy of paying late in order to show a better return on assets to its parent: it will be energetic in collecting, a laggard in paying. Debt collection, for this reason, is a difficult area of management for any business. The business, after all, also benefits from early collections and late payments. But if it is too aggressive collecting outstanding obligations, it may damage its standing with a valued customer.
ELEMENT OF A GOOD COLLECTION SYSTEM
Whatever its size, a business should pursue collections using a consciously formulated policy with well-defined triggering milestones for actions and an intelligent review process to protect the company’s overall posture. Even in a business where the owner is simultaneously chief administrator, salesperson, and accountant, the collection policy should be capable of being written down under a few bullets. Long before collection begins, the company, of course, should have done its homework and established the customer’s credit-worthiness. Effective collection systems 1) emphasize and highlight payment conditions in proposals and contracts, 2) kick in promptly, 3) have built-in flexibility and management review, 4) follow a systematic sequence of escalation, 5) are characterized by consistency and persistence, 6) match debtor’s behavior to seller’s behavior rationally, and 7) work toward definite closure within a preset timeframe.
Emphasis on Payment
Where at all possible, the business should strive to highlight payment term in its proposals and contracts in such a manner that the buyer is aware of the seller’s policies—and its emphasis on being paid promptly. Michelle Dunn, an expert and popular writer on the subject, for instance, advocates that businesses should strive for written payment agreements. Even if a business cannot prevail in getting a particular contract clause, trying to do so may be remembered and may be helpful later.
Experts in the field agree that acting promptly on overdue obligations is of primary importance. Michael Giusti, writing for New Orleans CityBusiness, gave this issue a memorable formulation: “Debt collectors tell clients [that] overdue bills are not like fine wine—they only worsen with age.” Citing Dave Duggins of the Duggins Law Firm in New Orleans, Giusti points out that “after an overdue account becomes 1 year old, the chances of collecting have all but evaporated.” In a well-designed system, every overdue account will receive attention on a predefined trigger date; the action taken, however, may be governmened by additional considerations.
A sensible collection policy will recognize up front that knowledge of the customer is all-important both in selling and collecting. Therefore collection activity should be organized to pool information about a late- or non-paying client to discover early what the situation “over there” may be like. Action, including the initial action, should have inputs from all those involved with the debtor. This process may uncover problems which, once fixed, will cause prompt payment and thus avoid unnecessary spinning of wheels.
Reviewing the problem in some detail and then, if indicated, working with the delinquent client may provide the business unexpected opportunities. The client may be going through a temporary problem in which the company can help, perhaps merely through patience. The contact involved in working with the client may create new bonds that, later, will benefit the company. Such effort may also yield partial payments as the customer shows his or her good faith. Flexibility is thus very useful, all things equal. If the situation is hopeless, time can be saved. A rigid policy is never indicated unless the debt is too small to merit the effort required to turn corporate cartwheels in its resolution.
As already indicated, most debtors will have received past-due billings before collection activity even begins, and even such billings, highlighting the amount of time a bill is overdue, have a built-in feature of escalation. Similarly, collection effort should proceed in stages that give the debtor a certain benefit of the doubt initially. These stages may involve letters, then calls, and finally visits or—given other circumstances—precisely the reverse of this sequence. Which style of escalation is best will be well-known to the company.
A mature and businesslike approach is, of course, understood. Large outstanding obligations, especially those that significantly affect the seller, produce emotional situations in which, in unguarded moments, the management is inclined to threaten the deadbeat. If an action is threatened, it should have been considered carefully in advance. And management should be committed actually to follow through. If such commitment is lacking, silence is better.
Consistency and Persistence
Throughout the collection process, the debtor should clearly understand, at every stage in the process, that the business intends to get paid in full and now. For this to be credible, the seller, of course, must promptly take whatever steps are necessary to deal with the legitimate problems of the debtor and then immediately press for payment. As Michelle Dunn puts it in the title of her most recent book, Become the Squeaky Wheel.
Matching the Debtor’s Behavior
The business intent on collecting its debt must be disciplined and consistent enough to match its own behavior to that of the reluctant client. In many situations of unequal power (large debtor, small company) the business, for instance, will continue work on a contract (a study, a landscaping job) even though a partial payment is long overdue. In situations of this sort, the business must stop working until it has been paid. This is often very painful to do. Similarly, the debtor should be refused any additional product until the matter of payment is settled. The conflict of interest between buyer and seller is here obvious and visible. All buyers would like to get something for nothing. The deep habit of pleasing the customer must sometimes be checked.
Sometimes a debt cannot be collected short of a lawsuit. And in many cases, the amount may not be large enough to merit litigation. A good collection policy will anticipate such situations and describe, in advance, how closure will be handled. Writing off the debt or turning the account over to a collection agency may be the options; having the debt hanging around maybe a third—but holds little promise of return while simply being there as a reminder of failure.
USING THIRD PARTIES
Outside collection agencies or the services of an attorney are the usual venues for collecting the money without doing it in house. Key considerations in following either of these routes are the amount of the debt and its age. Collection agencies and attorneys generally take a percentage (usually one-third of the total amount) of the debt collected as payment for their services. Even with professional help, however, some debts will inevitably be impossible to collect due to bankruptcy, customers who move without notice (“skip”), or the high expense required to collect them. For more information on securing a professional collection agency, contact the Association of Credit and Collection Professionals, P.O. Box 390106, Minneapolis, MN 55439, (952) 926-6547 or http://www.acainternational.org/.
Whatever combination of collection methods a business eventually chooses, the owner needs to remain aware of the limitations that state and federal laws place on debt collection under the Fair Debt Collection and Practices Act—which governs collections from “natural persons,” meaning individuals. For example, it is illegal to make continual phone calls, to use profane or threatening language, to threaten repossession when in fact the article cannot be repossessed, or to threaten to damage a customer’s credit report or have their wages garnished. It is also illegal to discuss a customer’s collection problem in public. In addition, businesses have to desist with collection efforts if the target declares bankruptcy. Given the thicket of legal issues that surround many aspects of collection, small business owners should consult an attorney before initiating aggressive approaches to collect on delinquent accounts.
ELECTRONIC BILL PRESENTMENT AND PAYMENT
Business analysts expect that in coming years, electronic bill presentment and payment (EBPP) will revolutionize debt collection for large and small businesses alike. In the mid-2000s, electronic bill payment is still under slow development, in part because concerns over Internet security and privacy abound. But most experts believe that electronic bill collection systems will eventually become dominant. According to some EBPP vendors, conversion to such systems could reduce many business’s billing costs by 50 to 75 percent once electronic bill payment becomes the norm for companies and individual consumers.
EBPP methodologies are, however, already in use to bill customers. Some businesses post bills on their home page. Others outsource the billing process to a consolidator who maintains its own page for posting electronic billings. Yet others secure the services of vendors who use e-mail to send bills directly to your customers. This method is favored by many; it is characterized by immediacy and convenience for the customer absent in the former options.
see also Credit Evaluation and Approval
Burtka, Allison Torres. “Man May Sue Over Billing Mistake That Damaged His Credit.” Trial. August 2005.
Dunn, Michelle. Become the Squeaky Wheel. Never Dunn Publishing LLC, 1 June 2005.
Giusti, Michael. “Debt Collection Companies Advise Business Owners About Recovering Unpaid Accounts.” New Orleans CityBusiness. 17 May 2004.
Hermann, Hans. “Analysis—Credit and Finance—Debt collection: too important to neglect.” Computer Reseller News. 23 January 2006.
Lucas, Laurie A. and Alvin C. Harrell. “The Federal Fair Debt Collection Practices Act: 2004 review of appellate decisions.” Business Lawyer. February 2005.
Palmeri, Christopher. “Debt Collection Puts On a Suit.” Business Week. 14 November 2005.
Stern, Gary. “Digital Dunning.” CFO, the Magazine for Senior Financial Executives. 15 April 2000.
“Taking Stock—An Ode to Debt.” Accountancy Age. 30 June 2005.
The Fair Credit Reporting Act (FCRA) is legislation embodied in title VI of the consumer credit protection act (15 U.S.C.A. § 1681 et seq. ), which was enacted by Congress in 1970 to ensure that reporting activities relating to various consumer transactions are conducted in a manner that is fair to the affected individual, and to protect the consumer’s right to privacy against the informational demands of a credit reporting company.
FCRA represents the first federal regulation of the consumer reporting industry, covering all credit bureaus, investigative reporting companies, detective and collection agencies, lenders’ exchanges, and computerized information reporting companies.
The consumer is guaranteed several rights under the FCRA, including the right to a notice of reporting activities, the right of access to information contained in consumer reports, and the right to the correction of erroneous information that may have been the basis for a denial of credit, insurance, or employment. When a consumer is denied an extension of credit, insurance, or employment owing to information contained in a credit report, the consumer must be given the name and address of the credit bureau that furnished the credit report. Consumers are also entitled to see any report that led to a denial, but agencies are not required to disclose risk scores to them. Risk scores (or other numerical evaluation, however named) are assigned by consumer reporting agencies to help clients interpret the agency’s report. Credit agencies may not report adverse information older than seven years or bankruptcies older than ten years.
The provisions of the FCRA apply to any report by an agency relating to a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. The FCRA covers information that is used or expected to be used in whole or part as a factor in establishing the consumer’s eligibility for one of four purposes:(1) employment; (2) credit or insurance for personal, family, or household use; (3) government benefits and licenses to operate particular businesses or practice a profession; and (4) other legitimate business needs. Under the FCRA, an agency may also furnish a report in response to a court order or a federal grand jury subpoena, to a written authorization from the consumer, or to a summons from the internal revenue service.
The FCRA creates civil liability for consumer reporting agencies and users of consumer reports that fail to comply with its requirements. For example, the Joneses, owners and operators of a real estate appraisal business, sued a consumer reporting agency under the FCRA. The Joneses claimed that the agency incorrectly reported a judgment against their business. The Supreme Court of Appeals upheld a jury’s award, which included compensatory and punitive damages (Jones v. Credit Bureau of Huntington, Inc., 184 W.Va. 112, 399 S.E.2d 694).
A consumer reporting agency includes any person or corporation that, for monetary fees, dues, or on a cooperative nonprofit basis, regularly assembles or evaluates credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports. A retail department store or another comparable business that furnishes information to consumer reporting agencies based on its experience with consumers is not considered a consumer reporting agency under the FCRA (DiGianni v. Stern’s, 26 F.3d 346 [2d Cir. 1994], cert. denied, 513 U.S. 897, 115 S. Ct. 252, 130 L. Ed. 2d 173).
Since its enactment, the FCRA has not undergone major reform. However, legislation has been proposed to address the issues that have arisen from a technological explosion created by a large increase in consumer debt and the information that it generates. In addition, states have enacted comparable statutes covering consumer’s rights.
American Marketplace Business Publishers. 1992. House Panel Approves Overhaul of Fair Credit….”
Askew, Kim J. 2001. “The Fair Credit Reporting Act: Congress Expands the Privacy Rights of Employees.” Corporate Counsel’s Quarterly 17 (April).
“Bank’s Reporting to a Local Credit Bureau of Its Own Credit Experience with a Delinquent Borrower Was Not Covered by the Fair Credit Reporting Act.” 1995. The Banking Law Journal.
Blair, Roger D., and Virginia G. Maurer. 1984. “Statute Law and Common Law: The Fair Credit Reporting Act.” Missouri Law Review 49 (spring).
Jacquez, Albert S., and Amy S. Friend. 1993.”The Fair Credit Reporting Act: Is It Fair for Consumers?” Loyola Consumer Law Reporter.
Porter, J. Isaac. 1994. “Protecting Against Disclosure of Consumer Data: A Complicated Issue.” Banking Policy Report.
Smith, Nancy. 1996. “The SEC Speaks.” Practising Law Institute. Corporate Law and Practice Course Handbook Series. 949:487.
Worsley, David E. 2002. “Fair Credit Reporting Cases Illustrate Risks for Credit Reporting Agencies, Creditors, and Lawyers.” Consumer Finance Law Quarterly Report 56 (winter).
Nature of the Work | [About this section] | Back to Top |
Bookkeeping, accounting, and auditing clerks are financial recordkeepers. They update and maintain accounting records, including those which calculate expenditures, receipts, accounts payable and receivable, and profit and loss. These workers have a wide range of skills from full-charge bookkeepers who can maintain an entire company’s books to accounting clerks who handle specific tasks. All of these clerks make numerous computations each day and increasingly must be comfortable using computers to calculate and record data.
In small businesses, bookkeepers and bookkeeping clerks often have responsibility for some or all of the accounts, known as the general ledger. They record all transactions and post debits (costs) and credits (income).
They also produce financial statements and prepare reports and summaries for supervisors and managers. Bookkeepers also prepare bank deposits by compiling data from cashiers, verifying and balancing receipts, and sending cash, checks, or other forms of payment to the bank. They also may handle payroll, make purchases, prepare invoices, and keep track of overdue accounts.
In large-companies’ accounting departments, accounting clerks have more specialized tasks. Their titles, such as accounts payable clerk or accounts receivable clerk, often reflect the type of accounting they do. In addition, their responsibilities vary by level of experience. Entry-level accounting clerks post details of transactions, total accounts, and compute interest charges. They also may monitor loans and accounts to ensure that payments are up to date. More advanced accounting clerks may total, balance, and reconcile billing vouchers; ensure the completeness and accuracy of data on accounts; and code documents according to company procedures.
Accounting clerks post transactions in journals and on computer files and update the files when needed. Senior clerks also review computer printouts against regularly maintained journals and make necessary corrections. They may review invoices and statements to ensure that all the information appearing on them is accurate and complete, and they may reconcile computer reports with operating reports.
Auditing clerks verify records of transactions posted by other workers. They check figures, postings, and documents to ensure that they are correct, mathematically accurate, and properly coded. They also correct or note errors for accountants or other workers to fix.
As organizations continue to computerize their financial records, many bookkeeping, accounting, and auditing clerks use specialized accounting software, spreadsheets, and databases. Most clerks now enter information from receipts or bills into computers, and the information is then stored either electronically or as computer printouts, or both. The widespread use of computers also has enabled bookkeeping, accounting, and auditing clerks to take on additional responsibilities, such as payroll, procurement, and billing. Many of these functions require these clerks to write letters and make phone calls to customers or clients.
Work environment. Bookkeeping, accounting, and auditing clerks work in an office environment. They may experience eye and muscle strain, backaches, headaches, and repetitive motion injuries from using computers on a daily basis. Clerks may have to sit for extended periods while reviewing detailed data.
Many bookkeeping, accounting, and auditing clerks work regular business hours and a standard 40-hour week, although some may work occasional evenings and weekends. About 24 percent of these clerks worked part time in 2006.
Bookkeeping, accounting, and auditing clerks may work longer hours to meet deadlines at the end of the fiscal year, during tax time, or when monthly or yearly accounting audits are performed. Additionally, those who work in hotels, restaurants, and stores may put in overtime during peak holiday and vacation seasons.
Training, Other Qualifications, and Advancement | [About this section] | Back to Top |
Employers usually prefer bookkeeping, accounting, and auditing clerks to have at least a high school diploma and some accounting coursework or relevant work experience. Clerks should also have good communication skills, be detail-oriented, and trustworthy.
Education and training. Most bookkeeping, accounting, and auditing clerks are required to have a high school degree at a minimum. However, having some college is increasingly important and an associate degree in business or accounting is required for some positions. Although a bachelor’s degree is rarely required, graduates may accept bookkeeping, accounting, and auditing clerk positions to get into a particular company or to enter the accounting or finance field with the hope of eventually being promoted.
Once hired, bookkeeping, accounting, and auditing clerks usually receive on-the-job training. Under the guidance of a supervisor or another more experienced employee, new clerks learn company procedures. Some formal classroom training also may be necessary, such as training in specialized computer software.
Other qualifications. Experience in a related job and working in an office environment also is recommended. Employers prefer workers who can use computers; knowledge of word processing and spreadsheet software is especially valuable.
Bookkeeping, accounting, and auditing clerks must be careful, orderly, and detail-oriented in order to avoid making errors and to recognize errors made by others. These workers also should be discreet and trustworthy because they frequently come in contact with confidential material. They should also have good communication skills because they increasingly work with customers. In addition, all bookkeeping, accounting, and auditing clerks should have a strong aptitude for numbers.
Certification and advancement. Bookkeeping, accounting, and auditing clerks, particularly those who handle all the recordkeeping for a company, may find it beneficial to become certified. The Certified Bookkeeper (CB) designation, awarded by the American Institute of Professional Bookkeepers, demonstrates that individuals have the skills and knowledge needed to carry out all bookkeeping functions, including overseeing payroll and balancing accounts according to accepted accounting procedures. For certification, candidates must have at least 2 years of bookkeeping experience, pass a four-part examination, and adhere to a code of ethics. Several colleges and universities offer a preparatory course for certification; some offer courses online.
Bookkeeping, accounting, and auditing clerks usually advance by taking on more duties for higher pay or by transferring to a closely related occupation. Most companies fill office and administrative support supervisory and managerial positions by promoting individuals from within their organizations, so clerks who acquire additional skills, experience, and training improve their advancement opportunities. With appropriate experience and education, some bookkeeping, accounting, and auditing clerks may become accountants or auditors.
Employment | [About this section] | Back to Top |
Bookkeeping, accounting, and auditing clerks held more than 2.1 million jobs in 2006. They work in all industries and at all levels of government. Local government and the accounting, tax preparation, bookkeeping, and payroll services industry are among the individual industries employing the largest numbers of these clerks.
Job Outlook | [About this section] | Back to Top |
Job growth is projected to be average through 2016, and job prospects should be good as a large number of bookkeeping, accounting, and auditing clerks are expected to retire or transfer to other occupations.
Employment change. Employment of bookkeeping, accounting, and auditing clerks is projected to grow by 12 percent during the 2006-16 decade, which is as fast as the average for all occupations. Due its size, this occupation will have among the largest numbers of new jobs arise, about 264,000 over the projections decade.
A growing economy will result in more financial transactions and other activities that require recordkeeping by these workers. Additionally, the Sarbanes-Oxley Act of 2002 calls for more accuracy and transparency in the reporting of financial data for public companies, which will increase the demand for these workers. Moreover, companies will continue to outsource their bookkeeping and accounting departments to independent accounting, tax preparation, bookkeeping, and payroll services firms. However, at the same time, the increasing use of tax preparation software in place of the services of tax professionals will hinder growth somewhat.
Clerks who can carry out a wider range of bookkeeping and accounting activities will be in greater demand than specialized clerks. Demand for full-charge bookkeepers is expected to increase, for example, because they do much of the work of accountants and perform a wider variety of financial transactions, from payroll to billing. Technological advances will continue to change the way these workers perform their daily tasks, such as using computer software programs to maintain records, but will not decrease the demand for these workers, especially in smaller establishments.
Job prospects. Some job openings are expected to result from job growth, but even more openings will stem from the need to replace existing workers who leave. Each year, numerous jobs will become available as clerks transfer to other occupations or leave the labor force. The large size of this occupation ensures plentiful job openings, including many opportunities for temporary and part-time work. Certified Bookkeepers (CBs) and those with several years of accounting or bookkeeping experience will have the best job prospects.
Projections Data | [About this section] | Back to Top |
Projections data from the National Employment Matrix |
Occupational title | SOC Code | Employment, 2006 | Projected
2016 | Change, 2006-16 | Detailed statistics |
| | | | Number | Percent | |
Bookkeeping, accounting, and auditing clerks | 43-3031 | 2,114,000 | 2,377,000 | 264,000 | 12 | PDF | zipped XLS |
NOTE: Data in this table are rounded. See the discussion of the employment projections table in the Handbook introductory chapter on Occupational Information Included in the Handbook. |
Earnings | [About this section] | Back to Top |
In May 2006, the median wage and salary earnings of bookkeeping, accounting, and auditing clerks were $30,560. The middle half of the occupation earned between $24,540 and $37,780. The top 10 percent of bookkeeping, accounting, and auditing clerks more than $46,020, and the bottom 10 percent earned less than $19,760.
Benefits offered by employers may vary by the type and size of establishment, but health insurance and paid leave are common.
For the latest wage information:
The above wage data are from the Occupational Employment Statistics (OES) survey program, unless otherwise noted. For the latest National, State, and local earnings data, visit the following pages: |
Bookkeeping, accounting, and auditing clerks |
Related Occupations | [About this section] | Back to Top |
Bookkeeping, accounting, and auditing clerks work with financial records. Other workers who perform similar duties include accountants and auditors; bill and account collectors; billing and posting clerks and machine operators; brokerage clerks; credit authorizers, checkers, and clerks; payroll and timekeeping clerks; procurement clerks; and tellers.
Sources of Additional Information | [About this section] | Back to Top |
Links to non-BLS Internet sites are provided for your convenience and do not constitute an endorsement. |
For information on the Certified Bookkeeper designation, contact:
* American Institute of Professional Bookkeepers, 6001 Montrose Rd., Suite 500, Rockville, MD 20852. Internet: http://www.aipb.org
OOH ONET Codes | [About this section] | Back to Top |
Suggested citation: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2008-09 Edition, Bookkeeping, Accounting, and Auditing Clerks, on the Internet at http://www.bls.gov/oco/ocos144.htm (visited December 13, 2009).
Last Modified Date: December 18, 2007