What is the primary purpose of accounts receivable management?

The primary purpose of accounts receivable management is to ensure timely collection of money owed by customers. This function is critical because effective management of accounts receivable directly impacts a company's cash flow and liquidity. By focusing on prompt collections, organizations can maintain their operational efficiency, minimize the risk of bad debts, and ensure that they have sufficient funds to meet their obligations and invest in growth opportunities.

Timely collection processes often involve assessing the creditworthiness of customers, establishing clear payment terms, sending timely invoices, and following up on outstanding payments. This proactive approach helps to reduce days sales outstanding (DSO), contributing to a healthier financial position for the business.

While assessing customer satisfaction, calculating total revenue, and managing inventory levels are all important business functions, they do not specifically address the key objective of accounts receivable management, which is centered on cash flow and the collection of outstanding invoices.