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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 | What About Accounts Receivable Summary

It is extremely important that business owners collect money from their client says part-time CFO services, because they depend on that money in order to pay their own bills and meet payroll regularly. However, if they do not know how to read their Accounts Receivable aging summary, or are confident that the information is accurate, that can cause them to not to be sending out statements regularly, or calling their clients to get them to pay bills on time. By learning about Accounts Receivable aging summaries, can help business owners understand how to read the reports, as well as ensure the accuracy of them so that they can use them in their business to collect the money that they are owed.

The first thing that entrepreneurs need to know is what Accounts Receivable, or an AR aging summary is. This is a list of all the customers that an entrepreneur has who owe the money. It is going to list all of the customers with amounts of how much they owe, and it is going to be organized in columns based on how old the invoices are that they owe. It is also going to contain a grand total of all of the money that a business owner is owed by all of their clients.

The second thing that entrepreneurs should be aware of on their Accounts Receivable summary, is that they need to be very concerned with all of the items in the ninety days plus past-due column. Part-time CFO services says the reason is because when clients have not paid their invoices and over three months, they are less likely to pay them moving forward. Business owners should be very aware of this, and be very proactive in working with their clients to get this invoice paid.

Another thing that a business owner should be aware of on their Accounts Receivable aging summary, is what a negative number means. A negative number will show up on the summary if a client has made a payment, and if that negative number precedes a positive one, that means client has paid a deposit, or overpaid an invoice. The reason why it is important to be aware of this, is because since it is not always common to have overpayments or prepayments, business owners need to be aware of this, and be verifying that any time they see a negative number, that it is because a client has paid a deposit or overpaid an invoice. If not, the business owner can easily fix that mistake. Part-time CFO services says that when mistake that it might mean, is that a business owner has accepted the payments, and entered it into their accounting software, but not applied it to an invoice yet.

Understanding how to read their Accounts Receivable aging summary, and fix errors on them can help business owners have the information that they need to confidently and regularly send out statements, and contact their clients to pay their outstanding invoices, so that business owners can maintain positive cash flow in their business.

Part-time CFO services | What About Accounts Receivable Summary

Maintaining cash flow in a business is extremely important says part-time CFO services, since running out of money is the second most common reason why entrepreneurs in Canada fail, it is extremely important that a business owner establishes a regular collection process with their clients, in order to ensure that there getting paid for the work that they do regularly. It should be the goal of an entrepreneur to never have any past due invoices in their business.

By being very familiar with how to read their Accounts Receivable aging summary, can help business owners be confident that the summary is accurate as well as current, so that they do not delay in sending out that information to their clients. There is several things that business owners can look for on their summary, to and verify the accuracy of the statement. When a business owner sees around number on their AR summary, they should investigate that number. Examples like five hundred dollars, two thousand dollars or ten thousand dollars are great examples. Most invoices, especially with tax included do not typically come out to an exact, around number says part-time CFO services. A typical reason why this might appear on the summary, is if an entrepreneur has accidentally invoiced an estimate by mistake. While this is not completely impossible, it is very improbable, so it can be a good way for business owner to check their statements.

Another way for business owners to review their Accounts Receivable aging summary to verify the information on it, is by looking at the list of customers, and verifying that they are all actual customers. Anything that is listed as shareholder, or related party are not things that belong on the AR summary. Anything listed shareholders should go in the shareholders loan account, instead of on the AR summary. Having it here, not only can trigger errors on the AR reports, but also in the rest of the financial statements of the business. By fixing this mistake, business owners can ensure the integrity of much more than just this one report.

Other things that might be listed on their Accounts Receivable aging summary that are not customers could be payroll liability, payroll expense or even CRA overpayment. Payroll and CRA should also have their own account in the financial statements of the business, and they should not show up on the Accounts Receivable aging summary either. A business owner needs to be very confident that all of the amounts that are listed on the AR report are representative of money that they are expecting to receive in their business. They should be able to look at the grand total at the bottom of the report and know that that is how much money that is coming into their business.

It is important that as often as a business owner is sending out there statements to their clients, and making collection calls, is as often as they should be reviewing their Accounts Receivable aging summary says part-time CFO services. Doing this regularly, can help a business owner ensure that the information is accurate so that they can contact our clients for payment of these invoices regularly to keep cash flow in their business current.