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One of the most common questions that business owners have when they are new in business, is what is in a are summary, and how do they read it? Accounts Receivable summary is a list of all of the customers that owe a business money. It is organized by date of invoice, and it will have a list of all of customers and how much money they owe the entrepreneur. It also has a grand total of all of the money that an entrepreneur is opened in their business. It is important that they know that it is organized from left to right in columns of how old the invoices are. The far left column will show all the most current invoices, all the far right column will show all of the invoices that have been outstanding for longer than ninety days. Part-time CFO services recommends that business owners are working proactively to avoid having any invoices in this column.
The next question that many business owners ask about their AR summary is why should they avoid having any invoices in the ninety days plus column? Not only does this mean that they do not have money coming into their business, but business owners should also be very aware that the longer an invoice it is left outstanding, the harder it is to collect. There may be specific reasons why a client is not paying such as they were not happy with the work, or the client is running into financial difficulty. The more proactive an entrepreneur is early in the process, can help avoid the circumstances, but once an invoice has reached this point, a business owner needs to be extremely diligent in contacting the client to resolve the issue.
Another common question that entrepreneurs often have about their Accounts Receivable aging summary, is how often should they be reaching out to clients? Part-time CFO services says that many entrepreneurs believe that sending a monthly statement is all that is necessary, but in addition to monthly statement, business owners should actually be reaching out to their clients by phone often. The best practice is for business owner to do this any time they are dispersing money. They will do a bank reconciliation, and see if they have enough money to meet payroll, or pay those bills. If they do not have the money, collection calls are very important. However, if they do have the money, collection calls are extremely important to help a business owner bring in money to their business to replace the money that they have just spent.
By being comfortable with their Accounts Receivable aging summary, part-time CFO services says that business owners can ensure that there being proactive with bringing money into their business. This can help them maintain a positive cash flow that can help their business stay healthy and growing.
Entrepreneurs should be very aware that the second most common reason why entrepreneurs fail is that they run out of money in their business, part-time CFO services says a great collections process can help a business owner avoid this situation. By establishing early on in their business, and with their clients a regular collection routine, can help a business owner stay cash flow positive in their business that they can pay their bills, their staff and use the money to grow their business.
Business owners often ask if they can update their AR summary more often, to help them be able to do those collection calls easier. Part-time CFO services says that many entrepreneurs hesitate to send out statements, or call clients because they are uncertain about how accurate the information is in their AR summary. If business owners can learn how to update that information in their QuickBooks software, they can be very sure that any time they need to make a collection call, they have the most up-to-date information possible. All I have to do, is learn how to input a payment into QuickBooks, and apply that payment to an invoice. Then, all they have to do is learn how to upload an invoice that they have generated into QuickBooks as well. Those two steps can help an entrepreneur be confident that they have the most current AR summary.
When reviewing their statement, many entrepreneurs ask what a negative number on their summary means. The way invoices show up on an AR summary, is with a positive number. Therefore, part-time CFO services says that any time the business owner sees a negative number on their report, that means either client has paid a deposit, or potentially they have overpaid an invoice. Reason it is important to make note of this, is because while this is possible to happen, it is also rare. A business owner should be able to easily verify if an invoice has paid a deposit or overpaid. One potential reason why a negative number might show up by accident on a summary, is if a business owner has entered the payments but not applied it to an invoice.
Another question that entrepreneurs often have is should they be sceptical of round numbers in their summary. This is another situation where it is not impossible to have around number, but it is rare. Typically, whole or round numbers like five hundred dollars or two thousand dollars happen because an entrepreneur has excellently invoiced an estimate. Especially with tax, invoices usually have odd numbers and cents. Therefore, any time an entrepreneur sees around number, they should review the information to verify that it is in fact an accurate invoice.
When business owners can understand their Accounts Receivable aging summary, they can have the confidence they need to use that summary regularly to fix errors. By sending out those statements regularly and making regular collection calls, business owners can have a positive cash flow in their business that can significantly help them succeed in business.
