Part-time Cfo Services | It Is Important To Know How To Read And Accounts Receivable Summary
When entrepreneurs are dependent on collecting money from their customers in order to meet payroll, and be able to pay their vendors, they need to know how to collect money efficiently and effectively says part-time CFO services. To not be able to effectively collect money from clients that over the money, but it is the business in jeopardy of running out of cash, which is why 29% of all failed businesses say their business failed. By learning how to read and Accounts Receivable aging summary effectively can help an entrepreneur have confidence in that summary to collect money from their clients.
Once an Accounts Receivable summary is reliable and a business owner knows how to read it, a business owner does not know how often they need to be making collection calls. Part-time CFO services recommends that doing monthly collection calls is an absolute bare minimum. The best practices that they can recommend, is for an entrepreneur to do collection calls every time they do any other accounting processes. For example, before running payroll, a business owner needs to do a bank reconciliation to see if they have enough money available. If they do not, they will need to reach out to their customers to pay their bills, in order to have enough money to run payroll. Since entrepreneurs typically pay their staff every two weeks, this means that best practices mean that business owners should be doing collection calls with clients every two weeks.
Some business owners wonder how often they need to contact their clients if they believe that those clients are in jeopardy of not paying. There might be a reason why an entrepreneur thinks that that client will be hard to collect, or because they are already past ninety days of outstanding invoices. Part-time CFO services says that some risky behaviour could include not returning calls, but whatever the reason, if a business owner is concerned that they are not going to be able to collect the money from their client, they should feel free to call them every single day. Many business owners are hesitant to do this, because they do not want to upset their client, but they should actually see this as collecting money that is already there is, and rather than upsetting a clients, they should wonder if this is a client they want if they are not paying.
When business owners are confident in their Accounts Receivable aging summary, they can use that information on a regular basis to reach out to clients that all the money to help generate cash flow in their business. If business owners are too nervous to reach out regularly, they put their business in jeopardy of having a cash flow problem, that could potentially cause their business to fail. Part-time CFO services says that business owners should be confident in their collection, and see the money that they are owed as they are money.
Part-time CFO services | It Is Important To Know How To Read And Accounts Receivable Summary
One reason why entrepreneurs might be hesitant to use their Accounts Receivable aging summary to collect money from their clients says part-time CFO services, is because they do not know how to read it. If they are unaware of how to read the information, or verify that it is accurate, they may hesitate to use that report to reach out to clients that of the money and collect it in a timely fashion. The longer an invoice remains outstanding from a client, the harder it is to collect that money. Therefore, it is very important that entrepreneurs learn how to read their Accounts Receivable aging summary, so that they can engage in collection calls with their clients regularly to ensure they receive all their money.
The first thing that business owners need to understand when looking at their Accounts Receivable aging summary is what it is. Part-time CFO services says that an Accounts Receivable aging summary is a list of all of the customers that over the business owner money, how much money they owe them, and how long they have owed them that money. It is organized by customer and date. This report will also have a grand total of all the money they are owed in their business.
They should be very sceptical about amounts that they are owed past ninety days. Part-time CFO services says the reason why they should be sceptical about it, is because since most contracts do not allow for payment terms over ninety days, this usually is an indication that the client has broken the contract. Is the client unhappy with the work? Are they having financial difficulties? Is the business planning on not paying it and hoping that the entrepreneur is not going to litigate? Any time a business owner sees an amount over ninety days, they should do their best to collect that amount as quickly as possible. Ultimately, the goal of an Accounts Receivable aging summary would be to never have an invoice go unpaid that long.
The next thing that a business owner should understand when looking at their Accounts Receivable aging summary, is what a negative number means. Part-time CFO services says that business owners might think that a negative number means that that is the amount that their client owes them, however the amount that is owed is expressed as a positive number on the summary. Therefore, a negative number means that a client has either prepaid or overpaid. While this is possible, it is not as common, and can be an indicator to an entrepreneur that they should investigate why. If it actually is a prepayment, they can be satisfied that they have done their job. If not, they can fix the report so that it is accurate.
When entrepreneurs are able to read their Accounts Receivable aging summary efficiently and effectively, they can confidently use that information to collect money from their clients, so that they can keep the cash flow positive in their business.