Accounts Receivable Accountant: Controlling Customer Settlements

Rules that govern this area

• a bad debt that is to be written off is grounds for the seller to adjust VAT (Article 257 of the Tax Code);
• for IFRS reporters — an allowance under the expected credit loss model (IFRS 9);
• the auditor is entitled to obtain written confirmations from debtors (Article 28 of Law ZRU-677 "On Auditing Activity"), so reconciliation statements are part of the annual work.

What the role covers

Recording settlements with customers, monitoring payment terms, regular reconciliations, preparing reconciliation statements and reporting overdue amounts to management.

This is also where data is prepared for decisions on allowances and on writing off bad debts.

• accounting for customer settlements
• monitoring payment terms
• reconciliation statements with counterparties
• analysis of overdue receivables
• preparing data for debt write-offs

Why receivables become a problem

Because people remember them at year-end. By then some counterparties are no longer reachable, and the documents supporting the debt turn out to be incomplete.

Regular reconciliation resolves most of these situations before they become disputes.

How it affects the financial statements

Bad debts that remain on the books as assets overstate the balance sheet and mislead users of the financial statements.

The rules for recognising and writing off debts are set by accounting rules and tax legislation — it is important to rely on the current version.

Why customer debts grow unnoticed

Receivables rarely appear all at once. They build up from payment deferrals, unconfirmed deliveries and small underpayments that individually do not seem significant.

So control is built not on one-off reviews but on regularly reviewing settlements with each counterparty.

Classifying receivables

It is useful to split receivables by age and by prospects of collection: current, overdue, disputed, and those where the debtor is effectively unreachable.

This split immediately shows which part of the reported figure is real and which exists only on paper.

• current receivables within the agreed payment term
• overdue receivables
• disputed amounts under claims
• dormant balances with no movement
• advances paid to suppliers

Documents that support a debt

Support requires a contract with payment terms, documents evidencing performance and a reconciliation statement. Missing any one of these weakens the position in collection.

Reconciliation statements are useful not only legally: they regularly reveal accounting discrepancies that neither party knew about.

How this area affects reporting

Overstated receivables make the balance sheet look better than reality: the assets are shown, but there is no cash behind them. An outside reader sees this in the trend and structure.

So managing debts is not only about collection but also about the reliability of the financial statements.

The organisational side

Accounting sees the numbers, but decisions on whether to keep shipping are made by sales and the company's head. Without their involvement, this area cannot be put in order.

A practical solution is a regular debtor summary for the head of the company: it turns accounting data into a management decision.

What to prepare before a review

The work requires a list of debtors with amounts and due dates, contracts with payment terms, performance documents and the latest reconciliation statements.

If there have been no reconciliations for a long time, we start with them: without confirmation from the other party, any figure on the list remains one-sided.

Differences for an individual entrepreneur and a company

For an individual entrepreneur (IE), receivables are usually concentrated in a few counterparties, and a review takes little time. A company has more debtors and needs a regular procedure rather than a one-off count.

The documentary requirement is the same in both cases: a contract, evidence of performance and a reconciliation.

Specialist support

We handle the settlements area as part of our accounting service and review the state of receivables during audits.

Leader Audit is an audit firm with 13 years of practice and 220+ audits.