What are the four basic steps to collecting accounts receivable?

• A. Contract terms, timely billing, complete invoices, and regular procedures for tracking accounts.
• B. Credit checks, security deposits, late fees, and collection lawsuits.
• C. Inventory reconciliation, shipping notices, payment reminders, and write-offs.
• D. Price negotiation, discounts, credit limits, and refunds.

Answer: (A)

The main concept being tested is establishing a reliable accounts receivable collection workflow that begins with clear terms and flows through invoicing and ongoing monitoring. Clear contract terms set the payment due date and any penalties, which creates a firm expectation for when cash is due and helps prevent disputes about timing. Timely billing ensures you send invoices promptly after delivery or service completion, so cash can start flowing without unnecessary delays. Complete invoices include all needed details—itemized charges, due date, totals, taxes, and payment instructions—so there’s nothing to hold up or question, reducing friction and errors. Regular procedures for tracking accounts involve aging reports, routine follow-ups, and a defined escalation path, which keeps delinquent balances from growing and helps convert outstanding receivables into actual cash.

Other options mix in elements from broader credit policies or enforcement actions, or combine operational details that aren’t part of the core collection workflow. While those factors can influence cash flow, they aren’t the four basic steps that directly constitute the standard process for collecting receivables.