We have a customer that we are considering offering an accounts receivable account. What are the factors we should consider when offering them this option for payment?

First, you will need to determine the credit worthiness of the potential accounts receivable customer. I would put this as the most important item. Request trade references from them and check with the trade references. Make sure they are reputable companies. This is vital to making sure that you are able to collect on your outstanding balances.

Second, set the terms of the accounts receivable relationship. How long do you want to give the given company to pay? I would say net 30 is fairly common. Also, do you want to offer them a discount if they pay within 15 days? A common discount amount would be 2-3 percent of the total cost. This would encourage prompt payment and your outstanding AR could be cut in half.