It is extremely important for business owners to get into the habit early on in their new business, of reviewing their Accounts Receivable aging summaries says Edmonton bookkeeping. The reason is, this contains a list of all of the customers that all the money. Therefore, being able to review that on a regular basis to contact those clients is extremely important to the cash flow of their business. Since running out of cash is the second most common reason why entrepreneurs in Canada fail, being proactive to ensure that they are bringing money and consistently is an important activity for all entrepreneurs.
The first thing that business owners should understand when reviewing their Accounts Receivable aging summary, is that it is going to contain a list of all the customers that owe business money, as well as the amounts of money that they owe. It is going to be organized by date of invoice, from left to right horizontally on the page. Edmonton bookkeeping says that the far left column has a list of all the customers that have invoices, that are not yet past due. The columns continue horizontally across the page, getting older and older until the final column on the far right shows a list of all of the invoices that have been upstanding for over ninety days. Edmonton bookkeeping says that entrepreneurs should have a goal of ensuring that they collect money before they become past due.
It is important that entrepreneurs are reviewing this information regularly, and keep in mind that the longer invoices remain outstanding, the higher the likelihood it is that an entrepreneur will never be able to collect that amount. Therefore, business owners should ensure that they are reaching out to their clients who owe invoices for longer period of time more often.
It is extremely important that business owners established early on in their business, not only the terms that they expect their clients to pay by but there communicating those terms to their clients clearly and upfront says Edmonton bookkeeping. By doing this, it makes it very easy for entrepreneurs to ask those clients to pay. By writing the payment terms directly on the invoice as well as all of the statements that they send, can ensure that an entrepreneur is always reminding the client of this prior agreement.
Another great protocol that business owners can get into the habit of early on in order to facilitate collecting money from clients, is being proactive in choosing who they will extend credit to. Edmonton bookkeeping says that this can sometimes impede an entrepreneurís ability to attract customers, but if they are doing credit checks as well as reference checks, business owners can be certain that their extending payment terms to the clients that are most likely going to pay it.
By reviewing their Accounts Receivable aging summary, business owners can be certain that they are staying on top of the most important invoices that need to get paid, with a predetermined protocol that can help them ensure that they are going to receive their money.
Edmonton Bookkeeping | The Importance Of Reviewing Accounts Receivable Summaries
Not only is it extremely important for entrepreneurs to be reviewing their Accounts Receivable aging summary so that they can use that information to collect money from clients says Edmonton bookkeeping, but there is other great bits of information that entrepreneurs can get from regular reviews of these reports.
One reason why an entrepreneur should be reviewing their Accounts Receivable aging summary on a regular basis is to keep track of the amount of money that the entrepreneur is owed to see if it is going up or going down. Edmonton bookkeeping says that while business owners want to ensure that their Accounts Receivable is decreasing because clients are making payments, they also need to ensure that their continuing to see new invoices being added. It needs to be a balance so that business owners can ensure that they are invoicing new clients as they are collecting money. That cycle is going to help an entrepreneur ensure that they have regular cash flow in their business. If the Accounts Receivable is too low for too long, that could indicate that an entrepreneur might be facing a future cash flow problem. This is a great time for them to increase their revenue-generating activities as well as their marketing.
Entrepreneurs should also be keeping an eye on their Accounts Receivable in ensuring that there paying attention to when that number is really high. An extremely high Accounts Receivable can indicate that an entrepreneur has recently invoiced many clients says Edmonton bookkeeping. How they would determine that is, is by looking at the dates of the invoices that they have. If there all new invoices, then it is a good sign that their marketing efforts have recently paid off. However, if the Accounts Receivable is extremely high, and the invoices are not new, this could be a warning sign. This also could indicate that an entrepreneur is about to face a cash shortage because they are having a hard time collecting money from their customers. By keeping an eye on this, and ensuring that they are engaging in collection calls consistently, can help an entrepreneur collect the money that they are owed so that they are bringing their Accounts Receivable down, and ensuring that they are working to ensure they do not have a shortage of cash in their business.
It is extremely important for entrepreneurs to review their Accounts Receivable aging summary, not only so that they can keep track of which clients they need to call to make payments on invoices, so they can use the information proactively in their business to avoid cash-flow shortage, and also to ensure that their marketing efforts are paying off. By doing this, business owners can use this information grow their business, and not only become successful but also proactively avoid problematic situations.