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E-Myth – “Why most small businesses don’t work & what to do about it”

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Part-time CFO services | Best Practices For Reviewing Accounts Receivable Reports

Getting into the habit of reviewing their Accounts Receivable reports prior to making collection calls can help ensure business owners have the confidence to contact their clients regularly says part-time CFO services. The reason why it is important that entrepreneurs do this on a regular basis, is so that they can ensure that they are being proactive in generating cash flow in their business. Since running out of money is the second most common reason entrepreneurs in Canada fail, by engaging in regular Accounts Receivable activities, can significantly impact an entrepreneur positively.

One of the first things that entrepreneurs should look at when they are reviewing their Accounts Receivable summary, is the column that shows clients that have invoices that are over ninety days past due. This is a column that needs immediate attention regularly in order to collect the money. Part-time CFO services cautions that the longer an invoice is outstanding, the harder it is to collect the money. Therefore, if a business owner has any clients that are outstanding by this long, they need to be very proactive. They should be calling or emailing the clients every day, in order to help facilitate getting that money.

Other than clients that need to be contacted daily, many entrepreneurs are not sure how often they need to be reaching out to their customers to collect money. Some entrepreneurs believe sending out a statement once a month is enough, however part-time CFO services recommends that the best practices is for an entrepreneur to call their clients on average every other week. The reason for this frequency, is so that it can coincide with an entrepreneurs payment disbursement or their payroll. Since an entrepreneur is going to be doing a bank reconciliation in order to see if they have enough money in their business to make that payment, if they do not have the money, then it makes sense for them to reach out to their customers with collection calls. And if they do have the money, making those collection calls can help ensure that they are going to be receiving more money in after they have dispersed so much.

In order to help business owners be confident that the information in their Accounts Receivable summary is up-to-date and accurate, part-time CFO services recommends that business owners learn how to update the invoices that they generate into their accounting software, as well as learn how to enter payments that they receive into their accounting software as well. If they can do this as often as they receive payments and generate invoices, they can ensure the accuracy of their Accounts Receivable summary doing this, a business owner will have to wait for their bookkeeper to updated once a week, which can increase the frequency that an entrepreneur can contact their clients to pay outstanding invoices.

It can be extremely beneficial for entrepreneurs to get into the habit of making regular collection calls to their customers, so that they can remain cash flow positive in their business which can go a long way in helping business owners be successful in their business, and have the money that they need in their business to pay their staff, pay their vendors, and grow their business.

Part-time CFO services | Best Practices For Reviewing Accounts Receivable Reports

If business owners lack confidence in the accuracy of their Accounts Receivable aging summary, they may not engage in collection calls as often as is required to ensure that they are collecting money from their clients efficiently says part time cfo services. There are several ways that business owners can learn how to review there Accounts Receivable summary to verify the accuracy of, and fix errors. Doing this, can significantly help an entrepreneur with their collections.

When an entrepreneur is reviewing their Accounts Receivable summary, prior to sending out a statement, a helpful tip is that they should scan their reports and look for anything marked shareholder, or related party. Part-time CFO services says that the reason why this is important, is because those amounts should not be on this report. The reason is because an entrepreneur has their own shareholders loan account where all shareholders amounts should be. If anything marked related party exists on an Accounts Receivable summary, that should indicate that they need to create an account specifically for that as well. That way, an entrepreneur can ensure their Accounts Receivable summary is not cluttered up with unnecessary information. Other amounts that they should watch do not sneak onto their Accounts Receivable report is anything that is marked payroll such as payroll liability payroll expense or Canada revenue agency overpayment. All of those should have their own place elsewhere in the financial statements.

When entrepreneurs review their Accounts Receivable aging summary, part-time CFO services say that they should be verifying that the amounts that they have in their summary should be actual customers that owe actual amounts that a business owner will expect to collect. By doing that, they can ensure that all of the information on that report is accurate, and can be collected. This can help an entrepreneur be confident that they can use that report in order to get engage in regular collection calls to their clients to help them make regular payments.

Before an entrepreneur makes any collection calls in their business, they should be reviewing their Accounts Receivable aging summary, in order to ensure the accuracy of the information. By fixing errors first, and verifying the information, they can use that report the confidence, and talk to their clients and increase the cash flow in their business. By making this a regular part of their schedule, entrepreneurs can ensure that they are keeping the cash flow in their business current, and avoid running out of money. This can significantly impact the success of an entrepreneur and their business, and should be something that all business owners are getting into the habit of doing on a regular basis.