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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 | Minimizing Errors On Accounts Receivable Summaries

The reason why it is so important for business owners to be able to review their Accounts Receivable aging summary in order to minimize errors says part-time CFO services, is so that they can confidently use that report in order to collect money from their clients. The more proactive they are at reaching out to their clients to get them to pay invoices, the more successful they were will be in collecting money that they are owed.

A business owner should be reviewing their Accounts Receivable aging summary often, not only just to use it to make collection calls, also to be proactive in ensuring the accuracy of the information on the summary. By being aware of common ways mistakes show up on the report, can help business owners fix mistakes, ensure they always have the most accurate Accounts Receivable summary. One way that they can easily look for potential errors, is scanning the summary and looking for a negative number. Part-time CFO services says that a negative number on a report does not necessarily mean an error, but it is less common, and should cause a business owner to question the information. Since negative numbers indicates a client is either prepaid an invoice like a deposit, or overpaid an invoice, this is not very common on Accounts Receivable aging summary. A business owner can easily check to find out if they did get a deposit or they did receive an overpayment on an invoice. If this is the case, there is no errors. If they did not, then they can fix the mistake, and ensure there keeping the integrity of their AR summary.

Something else that a business owner might see when they see a negative number, is for the same customer, have a positive number and a negative number for the same amount. This is usually indicated in two different time periods on the Accounts Receivable aging summary. What this typically indicates to a business owner, is that they received a payment for the customer for that amount, and it was entered into the accounting software, but it was not applied to any specific invoice. Part-time CFO services says that when a business owner sees this, they should go into their accounting software, and apply the payment and both entries into their summary will disappear.

Other rays that entrepreneurs can ensure that there is not inaccurate information in their AR summary, is by ensuring they do not have anything listed shareholder, payroll, or CRA amounts in their summary. Part-time CFO services says that every single amount in Accounts Receivable needs to relate back to actual cash payments they are expected to receive. These additional amounts should have their own place somewhere else in the balance sheets. When they see other amounts, they can ensure that they are putting them into the place where they belong, out of the Accounts Receivable aging summary so that the information can be as accurate as possible.

Part-time CFO services | Minimizing Errors On Accounts Receivable Summaries

If a business owner is worried about the accuracy of the Accounts Receivable aging summary, part-time CFO services says it makes it very difficult for them to use those reports to send out statements to their customers requesting they pay outstanding invoices. There are several things that business owners can do to ensure they end up with accurate and up-to-date AR summaries to help facilitate their collection calls.

1 Important Way that an entrepreneur can ensure the accuracy of their Accounts Receivable summary, is by learning how to update their accounting software like QuickBooks every time they generate an invoice, or receive a payment. It might be far too overwhelming for an entrepreneur to be able to update all of the accounting information into QuickBooks, but if they can stay on top of their invoices and payments, it can help them ensure the accuracy of the informationthey use to collect from their clients. Whenever a business owner generates an invoice, they can upload that invoice directly into QuickBooks, to ensure that it always has the most up-to-date list of invoices that an entrepreneur is owed. If a business owner can also update all payments that come into the business as soon as they are received, then they can ensure that their Accounts Receivable aging summary is always up-to-date. By doing this, business owners can ensure that any time they need to pull the summary, it will have accurate information they can use.

When business owners are making collection calls, they often believe that monthly is as often as they need to contact their clients. However, business owners should understand that the best practices to contact their clients any time they are running a bank reconciliation. The reason for this, is they are doing the bank reconciliation because they are getting ready to disburse payments, either to the vendors, or through payroll or both. Part-time CFO services recommends that this is a perfect time for business owners to reach out to their customers to pay invoices, because they will be disbursing money, and need to keep that flow of money coming into the business.

Something that business owners need to keep in mind, is for any account that they consider in jeopardy, and by that jeopardy, a business owner should consider any client that is over ninety days late paying an invoice as one of those businesses that is in jeopardy, they should be making collection calls even more often. The reason why, is because it is much more difficult for an entrepreneur to collect money the longer an invoice is outstanding. Business owners should be calling and emailing those clients once a day in order to ensure that they will be likely to pay the outstanding invoices.

By minimizing errors, and understanding the best practices when making collection calls, entrepreneurs can ensure that they are helping their business stay as cash flow positive as possible, so that they can avoid running out of money in their business, and increase their chances of succeeding.