One of the problems that a lot of entrepreneurs have according to part-time CFO services, is that they are not confident with their Accounts Receivable summary, therefore they find it very difficult to collect from their customers who owe the money. There are many reasons why an entrepreneur might not be confident with their Accounts Receivable summary, from not being able to understand the information on it, to not being certain that the information is correct. There is many things that an entrepreneur can do in order to ensure the accuracy of their Accounts Receivable summary, so that they can have more confidence in collecting outstanding amounts from their customers.
The first thing that business owners should understand, is what is an AR summary, or and Accounts Receivable summary? Part-time CFO services says this is a list of all of the customers who owe the business owner money. They can have a list of all of the customers who owe the money, the amounts that they are owed, the date when they started owing that. A business owner should also expect to see the totals of each amount each customer owes them, as well as a grand total of all of the money that the business owner is owed by all of their customers over the money.
When an entrepreneur is learning how to read their Accounts Receivable summary, they should expect to see six columns going horizontally across the page. The far left column is going to be a list of all of the customers who owe the business owner any money and the amount of money that they owe. From the left is going to have a list of all of the customers that have invoices that are not passed do, this is also called current customers. The third column from the left says part-time CFO services, is going to have a list of all of the customers that are past due by one to thirty days. The next column over will be a list of all of the customers that have invoices that are past due between thirty and sixty days, followed by a column of customers that owe invoices from 60 to 90 days past due, and finally the column on the far right will include a list of all of the customers that have invoices that are over ninety days past due.
Accountants are almost always sceptical about amounts of money that are over ninety days past due, because most contracts do not allow for payment terms over ninety days. Most payment terms are thirty days, some are even forty-five or sixty. There is even an occasional one that is ninety days, but there is nothing out there that is past ninety days. Therefore, accountants tend to be sceptical of those amounts, because the likelihood of an entrepreneur being able to collect on that outstanding amount goes down significantly. Chances are that they have broken the contract, and a business owner might not why. Where they unhappy with the work? If it is not a large enough amount that the customer will think the entrepreneur will litigate over, they may just choose to not pay that bill at all. Therefore, the collectibility of that amount is in question, and an entrepreneur might never collect that money.
If business owners do not know how to read their Accounts Receivable aging summary, or are not sure of how accurate it is, may struggle collecting the overdue amounts from their clients says part-time CFO services. By learning how to read their Accounts Receivable aging summary, business owners can not only ensure the accuracy of the information so that they can be confident in collecting that money, but it can also help a business owner understand the information on it, so that they can better use that information to get their money.
One of the most common questions that part-time CFO services get from business owners who are struggling to understand what their Accounts Receivable aging summary means, is but does a negative number mean? This means that a client has either prepaid for a job, or has overpaid on a job. It could also indicate a deposit made. This is not impossible to happen, but it is out of the norm, therefore it needs to be questioned. Why it shows up as a negative number, because typically when a business owner does the work for client, they generate the invoice, and the invoice is documented as a positive number on the Accounts Receivable summary. When they pay that invoice, it shows up as a negative number on the AR summary. The negative number cancels out the positive number and it then disappears from the summary. Because of that order of things, it is unusual that a negative number will proceed a job. Any time a business owner sees a negative number on their Accounts Receivable summary, they should ask themselves did they get a deposit? Were they overpaid? If the answer is no, chances are that that number is incorrect.
Something else that business owners should question when they see on their Accounts Receivable summary according to part-time CFO services, is should business owners be sceptical of full, round numbers on their summary? The reason why the answer to this question is yes, is because invoices typically are not expressed as complete round numbers. Usually, round numbers are indicative of estimates or accruals. While it is not impossible to have, it is more improbable, and so anytime a business owner sees around number they should look into if that number is accurate or not.
Part-time CFO services says that when business owners are aware of the information on their Accounts Receivable summary, and can troubleshoot it as well as verify the accuracy of the information, they will be more prepared to do collection calls on their clients, in order to help ensure they get paid for the work that they have completed.