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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 Anomalies On Accounts Receivable Reports Mean

Not only are Accounts Receivable aging summaries very important, but part-time CFO services say that the accuracy of those reports is just as important. The reason why, is because this is a report that a business owner is going to be able to use in order to help them receive payment from customers that over the money. By being able to review the reports on a regular basis, in order to fix mistakes, and verify the accuracy of the information, can help entrepreneurs ensure that the report is as accurate as possible, as often as possible, so that they can use it to ensure that they stay cash flow positive. Since running out of money is the second most common reason why a Canadian entrepreneurs fail, this is an extremely important activity.

There are several things that an entrepreneur can review on their Accounts Receivable aging summary that can help verify if they have made any mistakes. One thing that they should look for, are round and whole numbers on their report. Examples of this would be complete and whole numbers like one thousand, five hundred, ten thousand. It is not impossible says part-time CFO services, that business owners are going to have a completely whole number as an invoice total, but it is less likely. The possible reasons why this might exist, is because an entrepreneur may have accidentally invoiced an estimate or an accrual. When they see a whole number, they should review the clients file, and verify that the number is what it should be.

Something else for entrepreneurs to be looking out on their Accounts Receivable aging summary, is that they should not have any shareholder amounts listed in the summary. The reason is because there is a shareholder loan account where all shareholder information should be. Part-time CFO services says that by ensuring no additional information is in their accounts receivable summary, it can be easier to read.

Other examples of how there can be additional information not necessary in their Accounts Receivable summary, is if business owners see amount listed as payroll, or Canada revenue agency. These items should also have their own account somewhere else in the balance sheet such as a payroll liability account, payroll or expense accounts or a CRA overpayment. These should not exist in the Accounts Receivable summary. In fact, part-time CFO services says that business owners should ensure that every single amount that exists in the Accounts Receivable summary, should actually be directly related to actual money that they have coming into their business. When they ensure this, they can ensure that the entire Accounts Receivable aging summary lists every penny that a business owner is owed.

When business owners can not only ensure the accuracy of the information in their Accounts Receivable aging summary, as well as verifying that all of the amounts that are in their Accounts Receivable summary represent real money that they are expecting to get, they can confidently use that report to help collect money that they are owed in their business.

Part-time CFO services | What Anomalies On Accounts Receivable Reports Mean

Accounts Receivable aging summaries are extremely important to entrepreneurs says part-time CFO services. The reason is that this is a report that entrepreneurs are going to use on a regular basis to help ensure that the money that they are owed continues to come into their business. Half of all entrepreneurs that open their business end up failing in business within five years. When asked, 29% of those failed entrepreneurs say that the reason why they failed is because they ran out of money. Engaging in efficient accounts receivable activities can help business owners avoid this.

When entrepreneurs are able to review their Accounts Receivable aging summary and fix errors, then they can ensure the accuracy of the report. For example, a business owner should review their summary in order to look for negative numbers. The reason why, is because negative numbers can indicate a prepayment or an overpayment. While this is not impossible to have, it is definitely not as typical. How amounts end up on the Accounts Receivable summary, is when a business owner does work for clients, they generate an invoice, and the invoice is represented on the Accounts Receivable summary as a positive number on the summary. When that client pays, it shows up on the summary as a negative number and then the two amounts cancel each other out, and it disappears from the report. This does not mean that a negative number cannot receive the positive one, but any time a business owner sees that, they should verify that they received a deposit, or an overpayment. Since this can be very easy to verify, they can help an entrepreneur ensure the accuracy of the summary.

A business owner might also see on their accounts receivable aging summary, alongside a negative number is a positive number for the same amount for the same customer. Part-time CFO services says that when a business owner sees this, it is usually indicates that a business owner has generated at invoice for a customer, and have received payment from that customer which was entered into books. However, that payment was not applied to an invoice. Any time an entrepreneur sees a customer that has a positive and a negative number for in the same value, they should go into QuickBooks to ensure that they have applied the payment to the invoice.

Part-time CFO services says that by reviewing their aging summary on a regular basis and fixing errors, or at least verifying the accuracy of the information especially when they see odd numbers on their summary, can help business owners be confident when they use that information to make collection calls to their clients, so that they can increase the cash flow in their business. This can help them avoid running out of money in their business which can help them not only stay in business, but also help them be successful in business as well.