Sales ledger

Sales ledger, in other words - account receivable, is one amongst a few helpful business monitoring instruments, right next to cashbook, purchase ledger and wages book . All sales enter to sales ledger whether or not the client has actually paid. I helps you bring to mind about trade debtors who have taken items on credit and still get into arrears and it also helps you to find each transaction which you want to check. Recurrently, for instance, on a weekly basis sum the entire volume of money owed to the business. Then remind the customers who have exceeded the limit of time for their payment of owed money. All clients who owe the sum of money ought to remain on the sales ledger up to their borrowing have been settled. The sales ledger supports keep track of loyal and fast-paying customers. Nevertheless, it is also a good idea to hold copies of invoices and receipts .

Sales ledger processing

The first phase in creating a sales ledger system is to set up client's records. First of all, these records should contain customer reference, name, surname, address, contact name, discount rates allowed, etc. Then, the dealings can be implemented each day, and details of these will generally be held during the course of the database as an independent set of ledger records, indexed by client's reference so as to the set of dealings for a definited customer can be retrieved without any trouble .

Similarities between Sales Ledger and Purchase Ledger

There are a few similarities between these two types of ledgers:

• Sales ledger as well as purchase ledger are found as a matter of a company's interior data bank, generally used by the bookkeeping division
• Information included into these two types of ledgers support to reconcile the lenders and borrowers state with the balance of individual monitoring account
• Specific information implicited in sales ledger and also in purchase ledger are figured up at the end of a concrete term, for instance once a month, and results in individual supervision inspect accounts through general ledger.

Difference between Sales Ledger and Purchase Ledger

There are also a few difference between these two types of ledgers:

• The first one is also known as the sales sub-ledger, second is known as a purchases sub-ledger
• Generally, in sales ledger is a debit balance. In purchase ledger there normally is a credit balance
• Documents of sales ledger consist of sales invoices and memos/debit notes. Documents of purchase ledger consist of supplier invoices and memos/credit notes
• When sales ledger records credit sales transactions, purchase ledger records credit purchase transactions
• While sales ledger is used to record and monitor debtors, purchases ledger is used to record and monitor creditors.

Examples of Sales ledger

• Sales ledger is a record of all the sales made in a business. It includes the details of each transaction, customer's name, amount due, amounts received, and other payment information. It is used to track the amount of money owed to the company and to ensure that all sales are accounted for.
• In a retail setting, the sales ledger includes all of the sales made in a store, including cash, credit card, and other types of payments. It is used to track the amount of money owed to the company and to ensure that all sales are accounted for.
• In an online setting, the sales ledger includes all of the sales made through an online store. It includes the details of each transaction, customer's name, amount due, amounts received, and other payment information. This helps to keep track of sales, ensure all payments are accounted for, and ensure that customers are receiving the correct products.
• In a service business, the sales ledger includes all of the services provided to customers. This includes the details of each service, such as the customer's name, the service provided, the amount due, and any other payment information. This helps to track the amount of money owed to the company and to ensure that all services are accounted for.

Advantages of Sales ledger

Sales ledger is a helpful business monitoring instrument that allows to record and track sales transactions and accounts receivable. It offers the following advantages:

• It provides a detailed record of all sales transactions, allowing businesses to quickly identify issues with payment.
• It enables businesses to effectively manage their accounts receivable by tracking customer payments, credit limits and payment due dates.
• It allows businesses to generate accurate and timely financial reports, such as sales statements, invoices and balance sheets.
• It allows businesses to make sure they are receiving timely payments from customers and that their accounts receivable remain up-to-date.
• It enables businesses to identify any discrepancies between what is owed and what is paid.
• It allows businesses to set credit terms and terms of payment, helping them to manage cash flow more effectively.

Limitations of Sales ledger

Sales ledger, or Account receivable, is a vital tool for monitoring the performance of a business. However, there are some limitations to its use, such as:

• It only records the amount owed by customers and does not reflect the actual amount of money that will be collected. This means that it is not a reliable indicator of the current financial position of the business.
• It also does not track the number of days it takes a customer to pay an invoice, making it difficult to identify late payments.
• It does not provide any information about the quality of customer service, customer satisfaction, or customer loyalty.
• It does not provide any information about the sales cycle or revenue trends.
• It does not provide any insight into customer buying habits or preferences.
• It does not provide information about customer payment preferences or payment methods.
• It does not provide any information about the business’s pricing or pricing strategies.

Overall, the sales ledger provides limited information about the performance of a business. Therefore, it is important to use other business monitoring tools to gain a full understanding of the business’s financial performance.

Other approaches related to Sales ledger

Sales ledger, or account receivable, is one of the essential business monitoring tools, along with cashbook, purchase ledger and wages book. Other approaches related to Sales ledger include:

• Credit control - an approach to manage customer balances and prevent late payments, which helps to maintain healthy cash flow.
• Bad debt provision - an approach to anticipate and plan for losses due to customer insolvency or non-payment.
• Invoice factoring - a tool to get immediate access to cash by selling invoices to a third party.
• Credit scoring - an approach to help decide whether to extend credit to a customer and set credit limits.

In conclusion, Sales ledger is an important part of managing business finances, and there are a number of other approaches related to it, including credit control, bad debt provision, invoice factoring and credit scoring.

Footnotes

Sales ledger — recommended articles

Purchase ledger — Accounting documents — Sales journal — Purchases ledger — Purchase invoice — Book of original entry — Nominal ledger — Subsidiary account — Debit Note

References

• Food and Agriculture Organization of the United Nations and AfricaSeeds, (2018), Seeds Toolkit - Module 1, Rome
• Marriott P, Edwards J.R, Mellett H.J, (2002), Introduction to Accounting, SAGE Publications
• Seunarine S, (2001), Office Procedures for the Caribbean, Nelson Thornes Ltd
• Stang N, Blewett F, (2014), Students’ Guide to Business Computing, Heinemann Newnes

Author: Paulina Matysiewicz