Becoming very comfortable with how to read their Accounts Receivable aging summaries can be a significant benefit to entrepreneurs says Edmonton bookkeeping. The reason is that this report cannot only help business owners understand what customers over the money, about how long they have the money, so they can use the information to be proactive in collecting that money from their clients.
The way and Accounts Receivable aging summary is organized is very strategic says Edmonton bookkeeping. Not only it does it have a list of all of the customers that owe money to the business, but it is also organized according to the date that they started owing to the money. It will also have a total of all the money each customer owes the entrepreneur, as well as that an entire grand total of all of the money that all customers over the business. An entrepreneur should understand that by looking at this Accounts Receivable aging summary, it will be able to get a good idea of how much money they will be able to bring into their business.
The reason why having the Accounts Receivable aging summary organized by date is important is that business owners should understand that the longer and invoices outstanding, the more difficult it becomes to collect. Edmonton bookkeeping says that business owners should be aware of when a client is not paying them, and try to find out why. Since most payment terms are thirty days, if a client has gone past thirty days, they have essentially broken their contract and a business owner should find out why. Perhaps the client is unhappy with the product or service, and by finding that out early, could potentially help an entrepreneur resolve the issue and get paid for that job. It could be that business is experiencing financial difficulty, and staying in regular contact with that client can help an entrepreneur work out a payment plan that the client. By being proactive by looking at the date, entrepreneurs can be more likely to collect money from their customers.
It is also very important that entrepreneurs have a well-established collection protocol in their business so that as soon as they generate their first invoice, they know how often they are going to be reaching out to their customers to collect the money. Ten bookkeeping recommends that business owners are sending out a monthly statement, they are also calling clients before they disperse payment, so that they can help ensure they have the money to meet their financial obligations, and also bring more money in once they have made those payments.
By learning how to review their Accounts Receivable aging summary efficiently and effectively, can help entrepreneurs ensure that they are being proactive at keeping their business cash flow positive so that they can ensure that there paying their staff and their bills, but also so that they can use the increased cash flow to grow their business as well.
Edmonton Bookkeeping | How To Review Accounts Receivable Summaries
Accounts Receivable aging summary is a list of all of the customers that owe money to an entrepreneur, as well as a list of how much money they owe says Edmonton bookkeeping. This is organized by invoice date so that an entrepreneur knows how old the invoices are that they are owed.
The reason why this is important to note is so that business owners can use the information to efficiently collect money in their business. When business owner start selling their products or services, they should have a well-established payment term that they clearly communicate to their clients. Typical payment terms are thirty, forty-five or sixty days. Edmonton bookkeeping recommends that entrepreneurs have the shortest payment term that they can get away with, to ensure that there bringing in money as quickly as possible to their business. Therefore, if they have clear payment terms that their customer is aware of, they can use their Accounts Receivable aging summary to help remind their customers of those payment terms.
The first column in their Accounts Receivable aging summary is on the far left and will have a list of all of the customers that have outstanding invoices says Edmonton bookkeeping. These invoices are not to past due, and ensuring that these customers get a monthly statement at the end of the month so that they are aware of their financial obligations, can help ensure that a business owner is being proactive in helping a customer pay all of the money that they owe and on time.
As soon as a customer does not pay by the payment term, that amount is now past due, and a business owner should increase their collection calls. In addition to emailing out a monthly statement, a business owner should also be calling the client to let them know that their invoices are now past due and that they are expecting payments. Edmonton bookkeeping recommends that entrepreneurs do this in conjunction with their bank reconciliation prior to dispersing a payment. That way, if the business owner does not have enough money to meet that financial obligation, they can use those collection calls to bring the money in that they need to make that payment to. And if a business owner does have enough money in their business to cover that payment, then this is a great proactive way that they can ensure that there bringing in money to replace the amount that they have just paid.
Once a business owner sees that client is more than thirty days past due, they should increase their collection calls exponentially, calling every week, and for the most outstanding clients, every day is recommended, to inspire a client to pay their bill.
By learning how to read their Accounts Receivable aging summary, and learning the significance of why it is organized by date, can help an entrepreneur significantly in collecting the money that they need to bring into their business to pay their bills and their staff efficiently and effectively.