As soon as an entrepreneur starts selling their product or services, and generating invoices for clients, Edmonton bookkeeping says that business owners need to start to become very familiar with their Accounts Receivable aging summary. The reason why it is important is that this is a tool that can help an entrepreneur learn how to effectively collect money from clients that have any outstanding invoices.
Before an entrepreneur starts generating invoices for clients, not only should they be establishing a very clear on payment term that their clients are aware of, they also should ensure that they are very clear in what they are going to be doing to collect that money from their clients. By having a plan in place before they even generate their first invoice can help an entrepreneur understand how they are going to proceed to collect money from the clients that owe the money.
Edmonton bookkeeping says that once an entrepreneur has generated that invoice, and has an Accounts Receivable aging summary, learning how to use that summary is very important in helping them with collecting money. The reason is that an Accounts Receivable aging summary is organized by date of invoice. The importance that an entrepreneur adjusts the way they are collecting money from their clients based on the age of the invoice. Emailing monthly statements to all customers that have an outstanding invoice is a great start, but making a phone call with the increased frequency depending on how long that invoice has been outstanding can help an entrepreneur collect money from that client sooner.
The goal for a business owner should be not to have any invoices that are past due any significant amount of time, especially because Edmonton bookkeeping says that the longer and invoices not paid, the likelihood of receiving payment on it drops dramatically. If an entrepreneur has been keeping regular contact with their clients, they could find out if their client was potentially unhappy with the product or service, and fix the issue, before it is outstanding for several months and the client has no intention of paying it. By staying in contact with clients, can help ensure that lines of communication are open, and can help an entrepreneur ensure that they are going to get paid on those outstanding invoices.
Business owners should understand that all of the money that is listed on the Accounts Receivable aging summary as an amount that an entrepreneur is old, will also show up on their balance sheet as an asset. Edmonton bookkeeping says that many entrepreneurs do not realize that this amount is actually already listed in their financial statements as money they received, so it is very important that an entrepreneur manages to collect the money that they are owed, so that they can will negatively impact their business financial statements.
By learning how to make effective collection calls with their clients based on their Accounts Receivable aging summary can significantly help a business owner ensure that they are collecting all the money that they owe from their clients as efficiently as possible so that they can increase the cash flow in their business.
Edmonton Bookkeeping | Using AR Summaries To Collect Payment From Clients
It is very important that entrepreneurs learn how to collect money from clients that are owed says Edmonton bookkeeping. Industry Canada says that half of all entrepreneurs that open businesses in Canada and up closing them within five years, and out of those failed business owners, 29% of them said that they ran out of money in their business. This makes running out of money the second most common reason why businesses fail. One way that business owners can significantly avoid this issue in their business, is by being able to efficiently collect money that they are owed from their clients.
As soon as an entrepreneur sells a product, and generates an invoice, they will have an Accounts Receivable aging summary. Learning how to read this early on in their business can help them develop great collection processes, they can use to ensure their getting their clients to pay their invoices properly. One of the first things that an entrepreneur can do however before they start issuing invoices, is by being very picky at who they are going to extend that credit to. While some businesses are nervous about doing this, because they are worried about scaring away potential clients, Edmonton bookkeeping recommends businesses that if having a credit policy on file is going to scare way clients, business owners should consider those clients as ones they do not want, because they would be less likely to pay their invoices efficiently. By not only checking the credits of clients that they are going to issue invoices to, but also calling trade references to see if they are efficient at paying their invoices can help an entrepreneur understand if they want to extend credit to that customer.
Business owners should ensure that they have clear policies on how they are going to determine who gets credit, what their payment terms are, and how they are going to go about collecting outstanding invoices from their clients. By having this clear in their business, can help entrepreneurs have the confidence they need to contact their clients that all the money to collect it.
When an entrepreneur is looking at their Accounts Receivable aging summary, they should look at the date that the invoices are due, and contacting clients by phone who owe them any outstanding invoices. They should increase their phone frequency based on how long the invoices have been outstanding, and ensure that they are doing this on a regular basis. Edmonton bookkeeping says that by maintaining regular contact with clients based on the dates listed in their Accounts Receivable aging summary, can help ensure that a business owner is being proactive in collecting the money that they are old in their business so that they can ensure they have money in their own business to meet their own financial obligations as well as being able to grow their business.