As soon business owner generates invoices in their business, Edmonton bookkeeping says that they need to be able to read and understand their Accounts Receivable aging summary. Accounts Receivable refers to the amount of money that they are owed by their customers. The Accounts Receivable aging summary organizes that information so that an entrepreneur can easily read and understand how much money they are owed in their business. Understanding this information is very important to help an entrepreneur collect the money that they are owed.
In order to understand how to read their Accounts Receivable aging summary, an entrepreneur needs to learn how it is organized. Not only does it have a list of each customer, and how much money they owe business, but it is also going to be organized by how long that customer has over that invoice for. Edmonton bookkeeping says that it is going to be organized in columns horizontally on the page. The far left column is going to have a list of all of the customers, and the amount of money that is just outstanding. The next column to that, have a list of all customers with invoices up to thirty days past due, the next columns will show 30 to 60 days past due, and 60 to 90 days past due. The last column, the one farthest on the right shows an entrepreneur a list of all of the invoices that are ninety days past due and over.
The reason why it is important to have this Accounts Receivable summary organized by the date this way so that business owners can keep track of all of the customers that owe money the longest. Edmonton bookkeeping says that the longer and invoices outstanding, the harder it becomes to collect. Therefore, business owners need to be very aware that they are being very proactive to collect money while it is outstanding and before it comes past due, and once it is past due, they need to be even more diligent and collecting that money before it becomes even longer outstanding.
In order to help an entrepreneur collect that money, business owners should be establishing their collection protocol even before they generate their first invoice, so that not only can they clearly indicate that to their customers so they know how long they have to pay and what they should expect if they do not, but so that an entrepreneur can be confident in contacting those customers as soon as they need to. A series of mailed monthly statements, and phone calls and emails depending on how long the invoices outstanding are great examples of collection protocols that can help entrepreneurs collect the money that they are owed.
By establishing their collection protocol early on, and learning how to read to their Accounts Receivable aging summary, Edmonton bookkeeping says that business owners can be prepared to invoice clients, and what they need to be able to do to collect the money in their business. This can help ensure that business owners are staying cash flow positive in their business so that they can meet their own financial obligations.
Edmonton bookkeeping | how to read and Accounts Receivable aging summary
Being able to read to their Accounts Receivable aging summary efficiently is an extremely important skill that business owners need to learn early on in their business says Edmonton bookkeeping. As soon as they are invoicing clients, and allowing them to pay later, it is important to understand what these reports will tell a business owner. Not only can this help an entrepreneur collect the money that they are owed from their clients, but by keeping an eye on this information, can help an entrepreneur be proactive in their business to generate more sales and grow their business.
Not only does the Accounts Receivable aging summary have a list of all of the businesses that own entrepreneur money, and when they started owing them that money, but it also has grand total at the bottom, showing an entrepreneur how much money they are owed total. It is extremely important for business owners to be keeping an eye on this, because that amount can tell an entrepreneur a lot about what is going on in their business. For example, Edmonton bookkeeping says that if this amount is too low, while it might mean that several customers have recently just paid, it more likely tell the customer that they are not generating enough invoices or sales in their business. If they do not have money outstanding in their Accounts Receivable, that could point to a future cash flow problem, because they lack money coming into their business.
The business owner also needs to be very aware of what an extremely high Accounts Receivable means as well. If they see this in their business, they should look at the date of most of the invoices. If they are older invoices, this should cause an entrepreneur to be concerned says Edmonton bookkeeping. Not only does this mean they are being less successful in collecting money from their clients, but it also could mean that they are facing a cash flow problem as well because they are not bringing the money in that they need to run their business. When a business owner sees this, they should not only work to generate more sales but also increase their collection calls, so that they can collect all the money that is outstanding.
When a business owner sees that they have a high Accounts Receivable, but the invoice dates are all quite new, this can help an entrepreneur understand that they brought in a lot of sales, and could indicate that their marketing efforts are paying off. Business owners should see this, and consider what they have been doing for marketing so that they can continue to do that in their business to continue to grow.
Reviewing their Accounts Receivable aging summary often, and understanding all the information on it can help an entrepreneur not only collects money from their clients to keep the cash flow positive in their business, but it can also help an entrepreneur be proactive in marketing their business so that they can increase sales when necessary, or see what methods are effective so that they can continue doing them so that they can continue growing their business.