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When way that business owners can ensure the accuracy of the information in their Accounts Receivable report, is to teach them how to update their invoices and their payments in their accounting software like QuickBooks. Part-time CFO services says that it can help business owners ensure that they have as up-to-date information as possible, without waiting for their bookkeeper to update the information. It might be too overwhelming to expect a business owner can update everything in their accounting software, but learning how to import invoices that they generate into QuickBooks, and then booking any payments they receive immediately, can help ensure that at least the accounts receivable aging summary is always accurate.
Business owners should also ensure that every amount on their Accounts Receivable summary should actually relate to actual cash they expect to collect in their business. Which means anything listed shareholder, or related party amounts should not exist on their Accounts Receivable summary says part-time CFO services. If it is a shareholders amount, that should actually be put into the shareholders loan account, and any related party amounts should have their own account created in order to avoid convoluted their Accounts Receivable information.
Another clue that business owners should look for to minimize errors on their AR summary, is if they see full or round numbers. While this is not impossible, part-time CFO services says that this is typically an error, because most invoices are not going to be around number. This often is an estimate, or an accrual, and should cause a business owner to question it, and verify the accuracy of that information.
Another way that an entrepreneur can minimize errors, is if they see a negative number on their summary. Because of the way this statement is read, a negative number on the statement indicates that a client is either prepaid or overpaid an invoice. Again, that is not impossible but is not as common, which should cause an entrepreneur to verify the accuracy of the number. If they did get a deposit, or receive an overpayment, then they can ensure the accuracy of the statement. If not, they should look at what error they need to fix.
Learning how to review Accounts Receivable summaries, in order to have confidence that they are accurate to make collection calls can help a business owner stay cash flow positive. Since many entrepreneurs fail because they ran out of money in their business, learning how to collect on outstanding amounts can make a significant difference to entrepreneurs.
Even if a business owner knows how to read their Accounts Receivable aging summary, part-time CFO services says if they are unsure of the best practices when it comes to collecting that money, they may not be as effective as they could be in ensuring they bring money into their business. By learning what they need to watch for on their report, and how they can most efficiently collect that money, can help entrepreneurs successful in business and avoid running out of money.
When an entrepreneur is looking at their summary, they will have columns showing how long a customer has owed a business money. Business owners should be watching very closely any amounts of money that are in the ninety days plus column. The reason for that, is because the longer and invoices left outstanding, the harder it is to collect. Therefore, business owners should be very proactive with any invoices their outstanding that amount. Part-time CFO services recommends that business owners contact their clients daily, either directly with the phone call, or an email. The more aggressively they can contact their clients, the more likely they are to collect that money. Business owners should not be concerned about upsetting their clients, because any clients that refuse to pay after three months, may not be clients an entrepreneur should be concerned with keeping.
While many entrepreneurs think that a monthly collection call is adequate, best practices according to part-time CFO services is for business owners to engage in collection calls every time they do another accounting process in their business. An example of this, is for a business owner runs payroll, they should do a bank reconciliation. This way, they can verify that they have enough money available in their business to pay their staff. This is a good time for business owner to also engage in Accounts Receivable activities. This is a big help, especially if an entrepreneur needs to increase the cash flow in their business in order to ensure that they pay their staff. This also means, that a business owner is doing collection calls at least every other week.
When business owners are aware of the best practices when it comes to contacting their clients in order to encourage payment of outstanding invoices, they can ensure that they are proactive in collecting that money. Business owners should keep an eye on what their invoices will allow for in terms of payments, most businesses have a thirty day term, some are forty-five days and even fewer are sixty. Business owners should consider having a much shorter payment term, so that they can ensure that they are receiving money a lot sooner in their business. Part-time CFO services says that by understanding that they need to be contacting their clients at least once a month, twice a month for best practices, and difficult collect should be contacted on a daily basis.
