How To Review Accounts Receivable Reports | Part Time CFO Services
Being able to make regular collection calls is extremely important to the cash flow of the business says part-time CFO services. One way that can help entrepreneurs ensure that they are regularly reaching out to their clients to pay their bills, is to help them understand how to review there Accounts Receivable aging summary, so that they not only can understand what it says, but be confident that it has few errors. Since half of all entrepreneurs go out of business by their fifth year, and 29% of those businesses that fail say running out of money was the reason why, this can be significant in helping business owners be successful.
The first thing that business owners should do, is understand what they are looking at when they review their Accounts Receivable summary. This is going to show them a list of all of the customers who owe them money. It is going to be organized by the dates that they are owed that money, starting with the far left column showing a list of all the customers that all money that are not past-due tracking all the way to the right where there the last column is going to show all of the customers that own entrepreneur invoices for ninety days or more.
The first thing that entrepreneurs should do when they review the report says part-time CFO services, is pay attention to the ninety days plus column. Since most invoices that entrepreneurs will issue, will not have payment terms as late as ninety days, business owners have to consider why these clients have broken their contract. Another thing for them to consider is the longer and invoices left unpaid, the harder it is to collect. Therefore, business owners need to be extremely proactive if they ever get clients that have been outstanding this amount.
Many entrepreneurs are nervous to call their clients daily in order to collect this money, but rather than being worried about upsetting clients, they should instead see that these clients are standing in the way from entrepreneurs getting the money that they are owed, and the more persistent they are in collecting that money, the more likely they are to actually receive it says part-time CFO services.
When it is not outstanding for as long as ninety days, is owners also need to know how often they should be reaching out to their clients. While many entrepreneurs believe sending out a monthly statement is all that is necessary, part-time CFO services recommends in addition to sending out that monthly statement, business owners actually call clients that all the money every two weeks. The reason why, is that it can coincide with the disbursements of payments such as payroll, not only to ensure that an entrepreneur has the money in their bank in order to be able to afford payroll, but to help facilitate the cycle of bringing money in so that they can make their payments.
When entrepreneurs are able to read there Accounts Receivable aging summary, and be confident and how often they should be making collection calls, they can ensure that they are being as proactive is necessary to bring the money that they are owed into their business.
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One of the reasons why entrepreneurs may lack confidence in their Accounts Receivable aging summary says part-time CFO services, is because they are unsure of the accuracy of the report. This will cause a business owner to avoid sending out regular statements, and making collection calls that can impede the flow of cash they have into their business. Learning how to review their AR summary in order to minimize errors, can significantly benefit business owners and give them the confidence they need to make those regular collection calls.
When an entrepreneur is reviewing their AR report, one of the first things they can look for is a negative number. While a negative number usually indicates that a client has either paid a deposit, or overpaid an invoice, the reason businesses should look for this, is because it is not as typical to have been. If an entrepreneur sees this on their report, and they cannot verify that they received a deposit or an overpayment, he can indicate an error.
What a negative number can also indicate on Accounts Receivable summary says part-time CFO services, is that an entrepreneur has received a payment, and entered that payment into their accounting software, did not apply it to an invoice yet. How that will look on an Accounts Receivable summary, is a positive number for certain client, and then a negative number in the same amount for the same customer in a different time period. When a business owner sees that, they should check their accounting software and see if they need to apply that payment to an invoice. Once they do that, they will see that those two numbers cancel each other out and disappear from the report.
Other things that can cause entrepreneurs to look for errors would be if they see around number on their report. Again, this does not necessarily mean it is an error, but it is not likely that an invoice will exist in the system that has a whole number part-time CFO services says that what this typically is is if an entrepreneur has accidentally invoiced an estimate instead. Any time they see a whole number, they should review the information to verify that this was not the case.
Learning how to review there Accounts Receivable aging summary can help entrepreneurs have the confidence they need to ensure the accuracy of the information, so that they can send out their statements, and make their collection calls. When they do this on the regular basis, they can ensure that they are being proactive enough to increase the cash flow in their business so that they can avoid running out of money and putting their business at risk.