It is really important for entrepreneurs to learn how to review their Accounts Receivable aging summaries early on in their entrepreneurship says Edmonton bookkeeping. The reason why is because the Accounts Receivable report tells an entrepreneur how much money they are owed by their customers, and how long it has been since they last paid. This can help entrepreneurs develop systems for how to collect money from their clients efficiently.
one of the most important things that an entrepreneur can do, is established terms early on in their business, on how long they are going to allow a business owner to have an invoice before they are expected to pay it. A good rule of thumb is that business owners have the shortest terms possible, typical is thirty but if a business owner can get away with less they should. Edmonton bookkeeping says that often, certain industries have a certain amount of time that is standard for the industry to pay an invoice. For example, oilfield companies usually will pay their invoices in forty-five days, not thirty.
When a business owner is starting off in business, they should also ensure that they have developed a collection protocol, so that they know how they should respond, when they look at their Accounts Receivable summary and see that they have invoices outstanding. Edmonton bookkeeping says that examples of this would be a business owner that creates a protocol that says they are going to email out a statements to their clients every month, and then phone all of their clients that have an invoice outstanding once a month, invoices that are overdue thirty days call every other week, invoices that are overdue sixty days, call every week, and invoices that are outstanding ninety days or more will get a daily call until it is paid. Edmonton bookkeeping says that by having a pre-established protocol, can help entrepreneurs have a clear way to react when they see that they have amounts that are outstanding. Business owners should also keep in mind, that the longer and invoices left unpaid, the harder it will be to collect that money. Therefore, the more aggressive then the entrepreneur can be in collecting that money, the better.
Business owners should also ensure that they are being very picky and choosy about who they are allowing credit to be extended to. For example, they should not allow all clients to be able to take thirty days to pay. They should be doing credit checks and reference checks can help a business owner ensure that they are extending credit to the customers that are most likely to pay says Edmonton Bookkeeping.
Learning these things, business owners can ensure that they are reviewing their Accounts Receivable proactively, and then they have a plan in place on how they are going to act if they have clients that are not paying them. By setting the protocol, and being clear with payment terms of clients upfront, as well as ensuring that business owners are being choosy on who they extend credit to, they can ensure that they are bringing money into their business as effectively as possible so that they can avoid running out of money in their business.
Edmonton Bookkeeping | How To Effectively Review Accounts Receivable Reports
It is extremely important that entrepreneurs are learning how to review their Accounts Receivable aging summary early on in their business, and effectively says Edmonton bookkeeping. The reason why is because this report can help entrepreneurs effectively collect money from entrepreneurs clients that owe the money consistently. Since 50% of all entrepreneurs fail in their business within five years, and when asked about the reason why their business failed, 29% of them said they failed because they ran out of money. By learning how to efficiently collect money, can help entrepreneurs ensure that they are remaining cash flow positive in their business, and avoiding running out of money in their business. If they are generating the invoices, they should be bringing that money in.
One of the ways that entrepreneurs can review their Accounts Receivable aging summary, is my understanding that the report is a list of all of the customers that owe the business owner money and has not paid yet. It is going to contain a list of all of the customers, all of the amounts that those customers owe, and are organized by the date of when that invoice was generated. It is going to be listed in columns says Edmonton bookkeeping, a far-left column will have a list of all of the customers who have an invoice that is not yet passed do. The columns will continue on to the right, going from one to thirty days past due, 30 to 60 days past due, 60 to 90 days past due, and finally the far right column will be ninety days and up past due. An entrepreneur should have a goal of first of all never having any past due to invoices, and by reviewing this report, business owners can use the dates to ensure the invoices that have been outstanding the longest get the first and most persistent phone calls.
It is extremely important that entrepreneurs understand that the amounts of money that are in their Accounts Receivable aging summary, is not money that is scheduled to enter into the business, but it is actually already considered an asset on the balance sheet says Edmonton bookkeeping. It is not that invoices that are left unpaid will not go into the business’s assets, because they are already there. Therefore it is extremely important if a business owner does not want to negatively impact their financial statements, that they collect the money.
When entrepreneurs learn how to read their Accounts Receivable aging summary, they will be more able to proactively contact customers that owe them money, so that they can be more likely that they collect that money. Since this is representative of work and product that a customer already has, a business owner needs to be very proactive and diligent in ensuring that they receive that money as quickly as possible.