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AR >90 Column Recruiting Industry

We have a pretty healthy AR except every now and then the over 90 day column gets large due to special situations and becomes more of a holding column for these issues than a collections one.

For example, if we need to replace a candidate that didn't work out (and received partial payment) or if it looks like they are going to let someone go soon.

In each of these cases it is dependent on a recruiter or business development restarting the placement or getting in touch with the client. The cycle can be a long one.

Our contracts typically stipulate a person has to be there 90 days for our fee. Should I be clearing out these ARs? We do recognize them as revenue on the date originally placed.

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

1. "Our contracts typically stipulate a person has to be there 90 days for our fee." - Your revenue recognition policy should be looked at again. Recognition should also be contingent. At the very least, a deferred one since you also implied that partial payments to you may be required if the candidate does not work out.

2. I really don't focus on a hard/specific "90" (or whatever number) day figure as it really depends on your business/pricing model. In short, it is all relative.

3. I would focus on the process rather than the specific figures. Ex. what is the process when an A/R reaches a certain mark. Who is responsible? etc etc. This will all depend on your business model or business principles.

4. My opinion is that clearing out A/Rs (legitimate ones) is a management decision NOT solely an accounting/finance decision. It should also involve the relationship managers/recruiters and opine on the collectibility of the account.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

As I read your question, are you saying that your terms are 90 days, so until that A/R turns 90, it sits in your current category?

Under that assumption, the invoice is actually 180 days old if it hit the 90 day column. During that 180 days, haven't your staff been in contact not only with the client, but the person you placed?

Taking what Emerson said in his no. 4, your people should have been involved with the account for the last 180 days. The A/R should never have gotten past 30 day bucket without management being aware.

You have a system issue that needs solving.

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