Control Accounts Receivable with Talentia Accounting Review Software

October 21, 2020

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One of the effects of the COVID-19 crisis on business management is the reduction in the amount of sales due to the disruptive fall in demand and the stoppage or reduction in activity. Businesses are also increasingly concerned about possible non-payments between now and the end of the year. The situation calls for increased financial control over Accounts Receivable, as they have become critical accounting accounts. Talentia Accounting review software enables increased financial control of the accounts of companies that have sometimes become critical.

As a result, clients are losing purchasing power and, as a consequence, the financial instability of some smaller companies is growing. The most affected are those belonging to the most damaged sectors, such as tourism, leisure or the automotive industry.

As a result, financial departments are juggling the need to efficiently manage cash and liquidity. This management gives the company financial flexibility, allowing it to reduce the search for external funds and offering a cushion of security in the face of uncertainty.

For EY Financial Audit Firm, the covid-19 crisis has facilitated the increase in corporate cash flows by more than US$75 billion over the last ten years.

The flexibility achieved with this management allows the company to reduce the search for external funds and offers a margin of manoeuvre in the face of the uncertainty they face.

Internal Control of Accounts Receivable according to the Three Lines of Defense Model

For the media, the Compliance WeekThe Institute of Internal Auditors’ (IIA) “Three Lines of defense” facilitates proactive, not just reactive, risk management. It seeks to protect the company’s assets, promotes value creation and fosters collaboration between departments.

First line of defense of internal control at the operational level. Focuses on optimizing the management of income and expense flows to reactivate the income statement. Managing the cashflow generated by those revenues and expenses is the soul of every company. Efficiency in the management of accounts receivable (and payable) is vital to this optimisation of cash flow. The main players are the financial director, the accounting director and the consolidation director.

Second line of defense. This is financial control and compliance with credit and collection policies and standards for the administration of these accounts. It focuses on risk management and compliance and acts on the first line of defense. This is the function of the director of management control.

Third line of defense. Objective supervision is carried out on the first two lines. This is the function of the internal auditor and supports the preparation of the external audit. It enables information to be sent to the Board and to the partners, while ensuring that policies of good governance and corporate social responsibility are complied with.

Benefits of Internal Control of Accounts Receivable

  • The control of the customer accounts allows to determine
  • The degree of efficiency in their management
  • The credit quality of the Accounts Receivable according to the company’s or the Group’s valuations
  • The level of risk assumed by the company in granting the loans
  • The degree of concentration of credit risk with third parties, etc.

The objective is to know to what extent the composition of the Accounts Receivable is contributing to generating profitability for the business or, on the contrary, is weakening it. Also, whether the management of the portfolio reflects an adequate balance between profitability and risk.

Proactively managing risk control enables decisions to be taken on credit policies (do not sell if you do not have credit to customers) and collection policies (do not collect on time). In short, to improve and automate processes to facilitate collection and ensure the viability of the business.

Talentia Accounting Review, the internal control software under the Three Lines of Defense Model

Talentia Accounting Review is a solution that digitizes the accounting review process based on the Three Lines of Defense Model. It allows for the collaborative review of all groups of accounts that are fundamental for a company, including client accounts. Specialized cycles can be created according to:

  • The company’s internal control needs
  • Group policies
  • Your business models or industries

Our accounting review software provides total flexibility for users to create and modify review cycles, languages, periodicity, etc. And it integrates office tools and spreadsheets. It allows the digitalisation of the accounting review process, generating a dialogue between the members of the finance team involved. Control certain groups of accounts, (in this case Accounts Receivable or Clients & Sales) according to their function, generating additional support information and generating an audit trail for later traceability.

In the Work Programmes, various control questions are generated that require the corresponding answers and documentation, after the review of the accounting accounts extracted from the accounting software itself (from heterogeneous or homogeneous systems). Summary notes of the verification process are generated, or review notes if any doubt has been generated and it is necessary to establish a digital dialogue with another user of the platform.

Everything is fully traced, localized and documented. You can download the files or documents generated by the software or even segment the information and extract it in a PDF or other format. For example, share the information of dubious clients with the Commercial Department so that they know the current situation and do not continue to sell to those clients.

This is just one of the many processes that can be digitally activated to control critical accounting accounts. There are many others, such as: Own Funds, Tangible Fixed Assets, Inventory, or Operations with Partners or associates. These processes offer the necessary versatility and coverage for each sector and its corresponding business model, based on the circumstances of the moment. To this end, the Talentia Accounting Review software is designed to facilitate proactive control and to speed up and improve strategic decision-making in both the short and long term.