Part-time CFO services | Errors To Look For On Accounts Receivable Reports
Accounts Receivable aging summary is an extremely important tool for entrepreneurs to be able to use in their business says part-time CFO services. The reason why, is because it can help business owners efficiently and confidently collect money from clients who owe them. Since the second most common reason why entrepreneurs fail, is because they ran out of money, being proactive on collection calls can help entrepreneurs avoid running out of money in their business.
One of the first things that entrepreneurs can do to ensure they are using their Accounts Receivable aging summary effectively, is look for anomalies, or errors that might make a report to be inaccurate. Part-time CFO services says that one of the most easy things to review is looking for negative numbers on their report. Typically what a negative number on an Accounts Receivable aging summary means, is that a client has paid a deposit, or overpaid an invoice. While this is not impossible, it is also not common, which is why business owners should look for it. If they do see a negative number, they can easily verify if that should be there or not. Did an entrepreneur get a deposit? Did they get overpaid? If the answer is no, then they can look for where the error exists on their Accounts Receivable aging summary.
Another way that a negative number might exist on the Accounts Receivable aging summary says part-time CFO services, is when it is also accompanied by a positive number for the same customer in the same amount. It usually will occur in two different aging periods, and usually what this indicates, is that an entrepreneur has generated an invoice for client, and that client has paid the invoice, and even the entrepreneur has entered that invoice into their accounting software, but has failed to apply it to the invoice of that customer. Anytime a business owner sees a negative amount for customer and a positive amount for the same customer, they should ensure that it was not an accounting error.
Other ways that business owners can review their Accounts Receivable summary for errors, is if they see any whole numbers on their summary. Part-time CFO services says that whole number examples are five hundred, two thousand, or ten thousand. The reason why this is important to note, is because while it is possible for business owners to have complete whole numbers as invoice totals, this is also uncommon. What this often is, is an entrepreneur who has accidentally invoice an estimate or an accrual. By reviewing the invoice, and verifying the accuracy can help an entrepreneur fix any errors.
By having up-to-date and accurate Accounts Receivable aging summary reports, can help entrepreneurs ensure that they have the most accurate information possible in order to help them be confident when they are reaching out there clients by doing this, entrepreneurs can be certain that they are doing everything in their power to increase the cash flow into their business and avoid running out of money in their business.
Part-time CFO Services | Errors To Look For On Accounts Receivable Reports
It is extremely important that entrepreneurs get into the habit early on their business of great Accounts Receivable activities says part-time CFO services. The reason is, because Accounts Receivable activities are going to help entrepreneurs stay cash flow positive in their business and with 50% of entrepreneurs feeling in business, and 29% of all entrepreneurs that fail say the reason why their business failed was because they ran out of money, Accounts Receivable activities are extremely important to the success of business.
One of the reasons why entrepreneurs may not engage in Accounts Receivable activities as often, is because they are unsure about the information on their Accounts Receivable aging summary, and they do not know how to troubleshoot it, or verify the accuracy of the information. However, part-time CFO services says that business owners can easily learn how to review their AR summary so that they can verify these reports as accurate, and be confident when they can contact customers to request payment. The first way that they can do this, is by looking at their Accounts Receivable aging summary for anything called shareholder or related party amounts. The reason why they should look for this, is because shareholder amounts should exist in the shareholders loan account. Since there is already a place for this information to live, it should not appear on the Accounts Receivable summary. By reviewing the information and pulling out the information that does not belong there, business owners can ensure that they are helping their Accounts Receivable summary be uncluttered, and thereby easy to read.
The next thing that entrepreneurs should do is look for any other information that exists on their Accounts Receivable summary that does not directly relate to a customer that owes the money. Examples of this might be related party amounts, payroll liability account, payroll expense account, or Canada revenue agency overpay amount. There are literally accounts for payroll and Canada revenue agency amounts. If there is a related party amount that does not already have an account dedicated in the balance sheets, entrepreneurs should contact their accountant in order to help set up an account for that purpose to clear up there Accounts Receivable summary.
Part-time CFO services says that whenever an entrepreneur is able to verify that all of the amounts in their Accounts Receivable summary represent real clients that owe them real money, that can help an entrepreneur be confident in the information in their summary, that can help them contact their clients regularly and ask for payment. When business owners do this, they can be certain that they are being proactive enough in their business to improve cash flow so that they can avoid running out of money. When they do this, they can significantly impact their businessís ability to succeed, and at least know that they are doing their best to eliminate reasons why businesses may fail.