There are several ways that an entrepreneur can use an Accounts Receivable aging summary in their business says Edmonton bookkeeping. On the most common way, is to use the report in order to help them collect money that they are owed by their clients. This report can help an entrepreneur see very easily not only who owes them money, but how long that invoice has been outstanding. By ensuring that they have a well-established collection policy, short terms, and a great credit policy can help an entrepreneur ensure that there able to collect the invoices that they are owed consistently.
When a business owner looks at their Accounts Receivable aging summary, Edmonton bookkeeping says that they will be able to see in order of the age of the invoice, all of the customers that owe them money, and how much. At the bottom of the list, a business owner will see the grand total of all of the money that they are owed by all of their customers. This is also going to be reflected on the business owners’ balance sheet, under assets. This is all money that an entrepreneur is considered on their financial statements to already have, so it is extremely important that a business owner is able to collect that money.
It is extremely important that business owners figure out early on in their business, what their payment terms are going to be. Edmonton bookkeeping says that it is typically thirty days, but it may be forty-five or even sixty and in some rare cases could be up to ninety days. Often, the industry will dictate what those payment terms are likely going to be. In addition to figuring out what the payment terms are, is that they can communicate that their clients, business owners need to have a firmly established collection policy that they follow very consistently. A recommended policy would be to send out statements to their clients once a month, calling clients that have invoices that are due every two weeks, and anything outstanding a significant amount or what a business owner might consider being in jeopardy should get a phone call every day. By having a consistent collection policy and adhering to it, can help a business owner ensure that there are going to be bringing and money into their business from those invoices regularly.
A business owner should consider when they allow a business time to pay, which is essentially credit says Edmonton bookkeeping. And like any credit, businesses should be picky about who they extend credit to. It is not uncommon for business owners to do a credit check, or ask a list of trade references that they can call in order to determine if their client is likely going to pay their invoices promptly. A business owner should not feel obligated to extend credit to everybody that applies. Other ways that a business owner can protect themselves, is by asking for a deposit, or payment at the time of purchase.
When a business owner can establish a great collection policy, figuring out there terms early on, and be able to choose who they extend credit to, they can increase their chances of collecting money from their clients efficiently, so that they can ensure that they have money coming into their business on a consistent basis.
Edmonton Bookkeeping | How To Use Accounts Receivable Aging Summary
Many business owners use their Accounts Receivable aging summary in order to see who owes them money, so they can keep cash flow positive in their business says Edmonton bookkeeping. And while that is great, business owners can also use the Accounts Receivable aging report in order to help them grow their business, by being able to understand what it means when their Accounts Receivable goes up significantly or goes down significantly as well.
A business owner should be concerned, when they look at their Accounts Receivable aging summary and notice that their Accounts Receivable is down significantly. While this might indicate to an entrepreneur that they recently had an influx of payments, which is great for the current cash flow business, Edmonton bookkeeping says entrepreneurs should work to ensure that they have job is being completed in a variety of stages, so that as some invoices are being created, they have more not too far behind. Accounts Receivable that is too low they indicate that the business is in danger of running out of money, that might be an indication that they are not making enough sales, or attract enough customers. If this is the case, they can increase their revenue-generating activities, and increase their marketing efforts as well. If they use this report in order to be proactive in their business, it can help them avoid future issues.
A business owner should also understand what might be going on in their business if their Accounts Receivable is very high. In order for a business owner to determine if this is a positive thing or not, Edmonton bookkeeping says that business owners should review the date of the invoices that are outstanding. Many invoices that are outstanding for a significant period of time should cause a business owner to be concerned. This means that a business is having difficulty collecting on invoices that are outstanding. Perhaps a business owner needs to increase their collection do says, so that they can collect money more effectively, and they might also want to review their extending credit to.
On the other hand, a high Accounts Receivable that has a lot of new invoices is an indication to an entrepreneur that they having a surge of business, it should be considered a great thing, and an indication that their marketing efforts are starting to pay off. An entrepreneur can ensure that whatever they have been doing they need to keep up because it is bringing in new business.
By looking at their Accounts Receivable aging summary, Edmonton bookkeeping says that entrepreneurs can use the information to gain insight as to how their business is growing, which can help them continue to grow it as well as collect money so that they can continue having positive cash flow in their business to continue to help them grow their business.