The reason why it is extremely important for entrepreneurs to be extremely comfortable reviewing their Accounts Receivable aging summary says Edmonton bookkeeping, is because they depend on collecting that money that they are owed from their customers in order to meet their own financial obligations. Since 50% of entrepreneurs in Canada failed within the first five years, 29% of those failed entrepreneurs went on to say that the reason why their business failed was that they ran out of cash. Helping business owners stay cash flow positive can help them avoid that reason that other businesses failed, and it can help them have the money that they need in their business to grow.
A business owner should understand what their Accounts Receivable report is, and how to read it. Edmonton bookkeeping says that this is a report that is going to show a list of all of the customers that owe entrepreneur money, the totals of the money that they owe, and organized by age of their invoices. The report is going to read horizontally from left to right, with the far left column showing all the current invoices, with the subsequent columns showing invoices that are increasingly past due until the final column shows invoices that are over ninety days.
An important goal for entrepreneurs should be to collect money from their clients well before they have any amounts that are outstanding a significant amount. Edmonton bookkeeping says that entrepreneurs should keep in mind that the longer an invoice goes unpaid, the less likely they are to collect that money. Because of that, it is extremely important that business owners should establish a protocol early on in their business for collecting money from clients.
Edmonton bookkeeping recommends that great collection procedure would be one where business owners are sending out monthly statements to their clients once a month, and then calling clients that have amounts that are outstanding once every two weeks, to coincide with a business ownerís disbursement of funds. Any customers that an entrepreneur is concerned they may not pay, either because they stopped answering their phone, or because they have been outstanding for a long time, business owners should be comfortable with phoning or emailing them on a daily basis.
In addition to a great collection procedure, Edmonton bookkeeping recommends that entrepreneurs establish their payment terms early on in the relationship with their clients, to set the precedent early on. There earlier they can make their terms the better. Typical terms are thirty or forty-five or even sixty days, but the shorter it is, the faster they will collect money. if they can get away with a very short term like fifteen days, business owners should do that to ensure that they can efficiently collect that money.
By establishing payment terms early on, and a collection protocol, business owners know that they are going to be able to do as soon as they review their Accounts Receivable aging summary. By knowing what to do, and doing it consistently can help ensure that business owners are bringing in the money that they are owed efficiently and consistently.
Edmonton Bookkeeping | Helping Entrepreneurs Understand Accounts Receivable
Understanding how to read their Accounts Receivable aging summary is important for all entrepreneurs says Edmonton bookkeeping. This report can help entrepreneurs have the information that they need to collect on money that they are over consistently and regularly so that they can increase the cash flow in their business. In addition to that, entrepreneurs can use the information to minimize errors in their financial statements, is that they can be sure that they have the right financial information at all times.
The Accounts Receivable and aging summary is a list of all of the customers that an entrepreneur has that was the money. Business owners have completed the work or delivered the product to the customer, and they have not paid yet. Edmonton bookkeeping says that business owners need to be aware of how long these customers have owed a business owner money, so that they can stay on top of talking to those clients to encourage them to pay.
Edmonton bookkeeping says that this is money that is up to be encountered towards the business assets on their balance sheet, and so it is extremely important that an entrepreneur collects that money. To fail to do so, not just negatively impact financial statements of the business, it would negatively impact the cash flow in the business as well. By reviewing the Accounts Receivable aging summary, entrepreneurs can be in regular contact with customers that over the money, and the longer they have invoices that are outstanding, the more often a business owner can be in contact with them to collect their money.
Something else that business owners should be aware of when they review their Accounts Receivable report, is that there may be errors on the report, that could impact their ability to effectively use the information do their collection calls. For example, if a business owner sees that there is a negative number on their report, that typically indicates that a client has prepaid or overpaid. If the entrepreneur can ensure that this is not the case, they should check to see if the payment has been applied incorrectly, if it has, a quick fix can ensure that Accounts Receivable aging summary is as accurate as possible, and the business owner can use that effectively to continue to collect money for their business.
By being proactive and contacting clients regularly to collect money from them, can help an entrepreneur avoid having any amounts of money go uncollected and then having to be written off as bad debt. Edmonton bookkeeping says that this is extremely important for an entrepreneur so that they donít run into the problem of running out of money in their business. By being aware of their Accounts Receivable aging summary, and being proactive on collection calls, a business owner can positively impact their business and continue to have the money flowing into the business that can help them succeed.