- Published: Thursday, June 08, 2023 06:00
By Sean Hickey, Senior Consultant
Every company where I have done SOX (Sarbanes-Oxley Act) compliance testing has the same problem: Their over 90 days past due accounts receivable stunk. In fact, they all seemed to think that having 5% over 90 (and sometimes even close to 10%!) is normal.
These same companies also had a sea of revenue recognition journal entries on the backend of their order-to-cash process, and saw this as a normal and acceptable practice as well.
Most importantly, they failed to see the connection between these two things.
I’m here to tell you that all of those revenue recognition journal entries are neither normal nor acceptable … and if you change your order-to-cash business processes in a way that eliminates them, the percentage of your A/R that’s over 90 days will plummet.