A business owner should understand that as soon as they generate an invoice in their business and allow a client to pay later, they also generate an Accounts Receivable says Edmonton bookkeeping. This refers to the amount of money that they are owed in their business. Therefore, and Accounts Receivable aging summary, is a report that shows all of the amounts that they are owed by all the customers that all the money in their business. Learning how to read this report is extremely important, not only because it can help business owners understand how much money they have outstanding in their business because it can also help them collect that money from their clients efficiently and effectively so that they can maintain a positive cash flow in their business.
The most important thing about the Accounts Receivable aging summary is how it is organized. Not only does it have a list of all of the customers and all of the amounts of money that they are owed, but it is organized by the date that those customers started owing an entrepreneur that money. The far left column shows all of the customers that have outstanding invoices. Edmonton bookkeeping says the next columns show past due invoices, starting from 1 to 30 days past due, and getting increasingly higher until the last column shows all of the invoices that are over ninety days past due. It should be an entrepreneurís mission, to collect money before they become past due, and if they cannot collect that quickly, that they collect them before they become past due for a long period of time.
Edmonton bookkeeping says that business owners need to be very diligent in collecting money based on the date of invoice, not just so that they can bring money into their business as quickly as possible, but because the longer and invoices outstanding, the likelihood of collecting that money decreases significantly. If a business owner is contacting their clients early, and often, they can often avoid this situation. For example, if an entrepreneur finds out that a customer was unhappy with a product or service, it is a lot easier to deal with it sooner, rather than when that invoices an upstanding for over ninety days.
It is also very important for business owners to understand that as soon as they generate Accounts Receivable in their business, that it is counted as an asset on their balance sheet. Edmonton bookkeeping says that many business owners believe that the only time it is counted as an asset is when they receive the money from the customer and it goes into their bank account. This is not true, the company technically owns that money that is outstanding, they just have not received it yet. Therefore it is extremely important that business owners understand that it affects their financial statements as soon as it is invoiced, and if they are unable to collect that money, that it is written off as a bad debt so that it does not stay on the Accounts Receivable report, and make it look like a business owner is going to collect more money than they will.
Edmonton Bookkeeping | What Information Is On Accounts Receivable Summary
The reason why it is important for entrepreneurs to be able to read to their Accounts Receivable aging summary says Edmonton bookkeeping, is so that they can learn how to be proactive in their business, not only in collecting money from their clients, but also in generating sales and increasing their marketing efforts.
When a business owner looks at their Accounts Receivable aging summary, they will notice that there is a grand total at the bottom, that shows an entrepreneur all of the money that they are owed by all the customers in their business. If they notice that this amount is very high, they should look at the date of the invoices to determine why. If the invoices are quite new, that should be considered a positive sign, that not only has an entrepreneur generated a lot of new sales recently, but that is typically an also an indication that their marketing efforts are paying off. Business owners should take note of this so that they can continue to do those marketing activities that are working, and to do more of them so that they can grow their business.
Edmonton bookkeeping says that it is also important to note that if that Accounts Receivable amount is very high, but the invoices are quite old, that is not so much a great sign. Not only does this mean that the entrepreneur is having a difficult time collecting outstanding invoices, or is simply not doing enough to collect those outstanding invoices. But it also can indicate to a business owner that they are facing a cash-flow problem. But not being able to collect that money, a business owner will use up the money that they have on hand, and not have the money that the outstanding to use in their business. Therefore, when a business owner sees that the Accounts Receivable is high and the invoices are old, not only do they need to generate sales to bring more money into the business, but they also need to increase their collection efforts in their business to ensure that they bring the money in that they are owed.
It is also important that an entrepreneur understands what it means when their Accounts Receivable is quite low. This is also a cause for concern says Edmonton bookkeeping, because that means that a business owner is not going to have money coming into their business. Using this information to increase their marketing efforts that they can generate more sales, can help a business owner be proactive in their business to be more money in to avoid a cash flow problem.
By learning how to read their Accounts Receivable aging summary, and using the information to be proactive in their business to bring money and when they need, and increase their collection calls can help an entrepreneur stay cash flow positive in their business.