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One of the first things that a business owner should see when they look at their Accounts Receivable aging summary, is the column that indicates how many invoices that have been outstanding for over ninety days. This should cause any business owner concern, because the longer an invoice is outstanding, the harder it will be to collect. Part-time CFO services says business owners should consider the reason why the client has not paid. Perhaps they are unhappy with the work, or they have cash flow problems themselves, or they believe they can get away with not paying it, because it is not an amount worth litigating over. However, regardless of the reason, business owners should consider invoices that are outstanding for that length of time, should be important to act on.
One business owners can act quickly on invoices that have been outstanding for a long period of time, is by engaging in collection calls regularly. While monthly is a bare minimum to contact clients that owe money to the business, and best practices is every two weeks, any customer that owes a business money for a long time, or for any reason that a business owner may think that they may not be able to collect the money, business owners should be contacting them on a daily basis through phone or email. While many business owners are worried about upsetting their client, part-time CFO services recommends that any clients that refuses to pay for work completed, are not clients that a business should aim to keep. By calling every day, they may be able to collect on invoices that might have otherwise gone stale.
When business owners are looking at their Accounts Receivable aging summary, they should expect to see that all of the amounts that exist in the summary, relates to actual amounts of money they expect to receive into their business. By expecting that, they should be confident in reaching out to their clients, in order to inspire them to pay the invoices that they owe. This is going to help a business owner stay cash flow positive in their business, which can help them ensure they always have money to pay vendors and staff, and that they will not fail in business because they have run out of money.
Part-time CFO services says that it can be very easy for a business owner to learn what they need to do in order to ensure that they are efficiently and effectively collecting money from their clients, so that they can avoid running out of money in their business.
Many business owners know what they need to do in order to collect money from their clients, but they lack confidence in their Accounts Receivable aging summary says part-time CFO services. They either are not sure that the information is accurate, or they are not sure that it is current. Helping a business owner understand how to review the report for errors, and ensure they can keep it updated on a regular basis can help them use that tool to increase the cash flow in their business.
Business owners should look for obvious errors when they first review their Accounts Receivable aging summary. Any time they see a negative number, that should cause them to ask questions and investigate it. While it is not impossible, a negative number is not usual. The reason is because a negative number represents a pre-payment or an overpayment. A business owner may have accepted a deposit on a large job, which would be shown as a negative number on the AR summary. Since it is unusual, any time a business owner sees it, they should ask themselves if it makes sense that it exists there. by doing this, they can fix mistakes that are easy to catch.
Other things that should cause business owner to investigate, are exactly round numbers. Again says part-time CFO services, this is not impossible to have, but are more often estimates and not invoices. Any time a business owner sees a whole and complete number with no cents, should cause them to investigate.
Another things that business owners can review in order to ensure the accuracy of their Accounts Receivable aging summary, is any time they see something called shareholder, related party, payroll or CRA amounts in the summary. All of these different categories should have their own account elsewhere in the balance sheet, and not show up on their AR summary. The reason is because all amounts that exists in an Accounts Receivable summary need to represent actual money that a business owner is going to be able to collect into their business.
When a business owner knows what they should look for on an Accounts Receivable aging summary, they will be able to ensure that the information is error-free, and be able to confidently use that summary in order to collect money that they owe from their clients. If business owners also understand that the longer an amount is left outstanding, the harder it is to collect, this can inspire business owner to ensure that they are reviewing their AR summary quite regularly, in order to minimize errors, and make collection calls often, to ensure that everyone who owes the money will pay.
