Keeping the flow of money positive in their business should be an extremely important goal for most business owners says Edmonton bookkeeping. Since half of all Canadian entrepreneurs end up closing their doors within five years, and 29% of those business owners who failed said that the reason why their business failed was that they ran out of cash. Understanding how to help ensure that they are continuing to bring money into their business should be an extremely important goal of business owners. By learning how to read to their Accounts Receivable report, to help keep money that they are owed coming into their business.
The first thing that business owners need to know is what their Accounts Receivable report is. Edmonton bookkeeping says that this is a list of all of the customers that over the business money, how much money they are owed, and organized by age of invoice. The left-hand side will have the most current invoices, and the right side will have the longest outstanding invoices. By using this report in their business, business owners can increase the collection calls on customers that have invoices that are more outstanding.
It is extremely important that business owners are very proactive in collecting the amounts of money that they are owed by their customers. Not only is this representative jobs and products that business has provided their clients, but it is also considered an asset in the balance sheet of the business. Whenever they collect money that they are owed, it will move from Accounts Receivable into the cash of the business. However, if a business owner is not able to collect that money, Edmonton bookkeeping says that it will negatively impact the finances of the business.
The amounts that an entrepreneur is owed will remain in their Accounts Receivable report indefinitely if it is not paid by the customer. It is very important, that an entrepreneur is able to collect that money from their customers in a timely fashion, because the longer invoices are left unpaid, the harder it is to collect the money. If that entrepreneur is unable to collect that money, they have to write it off as bad debt. At that point, it will come off of the Accounts Receivable report, and be reclassified on the balance sheet from the assets to the liabilities of the business.
A business owner needs to be extremely aware of all of the money that they are owed, and collect that money as consistently as they can says Edmonton bookkeeping. If an entrepreneur is unable to collect money that they are owed, not only will this affect their profits, but it will also negatively impact their cash flow, which could put them in danger of running out of money. Therefore it is extremely important that a business owner develops great collection policies early on in their business.
In order to help an entrepreneur succeed and ensure that they have a positive cash flow in their business, entrepreneurs need to learn how to read there Accounts Receivable aging report, and use that information proactively to collect their money.
Edmonton Bookkeeping | What Entrepreneurs Need To Know About Their AR Report
Not only is it important for business owners to be able to use their Accounts Receivable aging summary in order to help collect money in their business says Edmonton bookkeeping. But it is also important that entrepreneurs are able to use this report in order to understand how to use that information proactively in their business, to help them grow their business.
It is important that an entrepreneur is also looking at their Accounts Receivable aging report, and understanding what it means when they have Accounts Receivable that is too low. Edmonton bookkeeping says that this can indicate to an entrepreneur that they may be in danger a running out of money, because they have no invoices that are in need of collecting. When an entrepreneur sees this, they should be proactive in using that information to ensure that they are increasing their marketing efforts. Not only increasing their marketing efforts, but also increasing their revenue-generating activities, can help a business owner be proactive in addressing the issue. If they’re able to act fast enough and generate enough work, they can use that information to generate enough business to mitigate the risk.
Business owners also need to be looking at their Accounts Receivable if it is extremely high as well says Edmonton bookkeeping. There are two reasons why Accounts Receivable might be high for the business. One possible reason is that it is because an entrepreneur is having a hard time collecting that money from their customers. They will be able to tell if this is the case by looking at the dates of all of the invoices that are outstanding. Business owners can be proactive to increase their collection practices in their business, to ensure that they are encouraging their customers to pay their invoices or timely. Whether that is increasing the number of times their calling looking for payments, sending out more statements, a business owner can be very active to ensure that they work to collect the money that they are owed.
Another reason why their Accounts Receivable might be very high, but be because a business has recently seen an influx of the business. Ten bookkeeping says that business owners can also review the dates of all of the invoices that are outstanding to get a sense of how current those invoices are. If they have a lot of very recently outstanding invoices, that is generally an indication that the business owners marketing activities are starting to pay off, and that they should continue those activities, or even increase them to continue to grow their business.
Entrepreneurs can gain a lot of great information from reviewing their Accounts Receivable aging summary on a regular basis. Not only can they ensure that they are collecting money from their clients proactively, but they can also use that information to proactively grow their business. By doing this, entrepreneurs can positively impact their business and become successful.