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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 | How To Read And Accounts Receivable Summary

There are many reasons why an entrepreneur might not be collecting money from their clients as efficiently as possible says part-time CFO services, but entrepreneurs who are confused by their Accounts Receivable aging summary often end up unable to collect, because they are confused as to how to use the report says part-time CFO services. By learning how to read the summary, and using the information, business owners can increase the cash flow in their business by being able to confidently collect from their customers.

The first thing for entrepreneurs to understand when it comes to their Accounts Receivable summary, is what it is exactly. Part-time CFO services says that it is a list of all of the customers that owe money to a business owner. It will list the customers, the amounts that they owe, and the date from when they started owing that amount of money. There also organized by customers who do not have any outstanding invoices, invoices that are outstanding between one and thirty days, invoices that are outstanding 30 to 60 days, then 60 to 90 and eventually ninety plus.

Business owners should start getting sceptical when they see a number of invoices in the ninety plus days column says part-time CFO services. The reason for that, is because the longer and invoices outstanding, the harder it is for business owner to collect the money. The reason is because most contracts do not allow for the amount to be outstanding for so long, so business owner should wonder why they spoke the contract. Being and happy with the work, being unable to make the payment, these are a couple questions that a business owner may want to consider as to why the customer is not paying them. The longer it is that they have not paid, the more likely it is that these customers will not pay them at all.

Another reason why business owners may find it difficult to collect money from their clients, is because they are on aware of how often they should be making collection calls. They should keep in mind that reaching out on a monthly basis is at least a bare minimum. Best practices is for entrepreneurs to contact clients that owe the money every time they are about to make a payment. For example, running payroll is a great time, because they will be doing a bank reconciliation to see if they have enough money available. They will be certain that their AR aging summary is accurate, and can reach out and contact those customers, especially if they need the payments to ensure they can meet payroll.

By understanding what an Accounts Receivable aging summary is, and how often they should use it to collect money from clients that owe them outstanding invoices, can help entrepreneurs ensure that they are keeping the cash flow in their business positive. By staying cash flow positive, and on top of their Accounts Receivable, can help business owners significantly be successful in their business.

Part-time Cfo Services | How To Read And Accounts Receivable Summary

One problem that many entrepreneurs have, is they need additional funds in their business in order to meet payroll, but they lack confidence in their Accounts Receivable aging summary says part-time CFO services. This lack of confidence means that business owners have a harder time contacting clients that owe the money to facilitate a timely collection process. With 50% of entrepreneurs running out of business by the year five, 29% of those failed entrepreneurs say that running out of money was the reason why their business failed. By avoiding running out of money, business owners can significantly increase their chances of succeeding in business.

By understanding how to read Accounts Receivable aging summary, business owners can have more confidence in the information that is on it, and use that information to collect money from their clients. One of the first questions that business owners have for their part-time CFO services, is what does it mean and they see a negative number on their Accounts Receivable aging summary? While this is not impossible to have, a negative number means that a client has either prepaid or overpaid an invoice. This is often out of the norm. One possible scenario is a client has prepaid, like a deposit in order to ensure the work would start. However, since this is not a usual scenario, anytime a business owner sees a negative number on their statements, they should question it to verify its accuracy. By seeing that, entrepreneurs can ensure that their statements are free from errors.

Another number on Accounts Receivable summary that should encourage business owners to look for errors would be if an entrepreneur sees around number on Accounts Receivable summary. The reason is because invoices are rarely an exact whole number. Usually they have odd numbers and sense attached to them. Anytime a business owner sees around number like one thousand or two thousand or ten thousand, they should look into the accuracy of the information. It is often likely an estimate or an accrual, not an invoice.

Other things that business owners can look for in order to fix, and improve accuracy of their AR summary or if they see shareholder, or related party amounts, as well as payroll or CRA amounts. All of these examples should have their own account elsewhere in the balance sheets. There is no reason these should exist in the Accounts Receivable summary, because the summary should exist specifically for clients who owe money to the business that are going to pay. So that when a business owner sees there Accounts Receivable summary, they need to understand that that represents actual money that they can expect into their business.

When business owners understand their Accounts Receivable aging summary, part-time CFO services says that it can help them minimize errors, and ensure that the information is accurate so that they can confidently use that summary to collect money that they are owed. Doing this regularly, can help a business owner stay cash flow positive and increase their chances of succeeding in business.