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The first thing that people should keep in mind, is what they Accounts Receivable aging summary is, and what looks like. It is a list of all the customers that a business has that owes them money. How it looks, is a list of all of the customers that all the money, as well as the amount of money that they owe, organized by how recent the invoice is. The far left column is going to have the most current invoices, and the ones that are not past-due. The next five columns, are going to be increasingly longer outstanding invoices, until they get to the very last column which is over ninety days says part-time CFO services.
There are many reasons why business owners should be aware of the ninety days plus column of outstanding invoices. One of the first reasons is, because most payment contracts do not allow for customers to have terms over ninety days. Most payment terms are thirty days, some can even be forty-five or sixty, but once it gets to over ninety days, the business owner should be aware that the customer has broken the payment contract, and they should find out why. Where they unhappy with the work? Is the customer running out of money, or in danger of going out of business? Is the customer just planning on not paying the invoice and hoping that they will not litigate? Business owners need to realize that the longer the invoice is left outstanding, the harder it will be to collect.
Something else that entrepreneurs should know about their Accounts Receivable aging summary, is that when it is reliable, they should be reaching out to their customers often. Part-time CFO services says that many business owners email it statements monthly, but they would recommend that this is a bare minimum. In addition to emailing out statements every month, the best practice is for business owners to make collection calls to their customers every two weeks. If they make the calls in conjunction with their bank reconciliation, so that they are making collection calls every time they are about to disburse payments either through payroll, or paying their bills. This will allow business owners to ensure that if they do not have money to make those payments, that they have time to bring it in, and if they have the money to make those payments, that there proactive in bringing more in.
It is important that business owners are reviewing their Accounts Receivable aging summary on a regular basis says part-time CFO services, because it can help ensure the accuracy of the information, which can help business owners be confident about contacting their clients to pay the outstanding invoices that they have. In order to ensure the accuracy of the information, business owners need to be aware of what to look for on their summary to fix mistakes, and verify the accuracy of the information in it.
There a few very easy ways that business owners can scan the summary and look for potential errors or mistakes. Part-time CFO services says that one of these things is looking for a negative number on the aging summary. When a business owner bills a client, that is expressed as a positive number on they summary. When the client pays, it shows up as a negative number on the summary, and then the positive and the negative number cancel each other out and it disappears from the report. Therefore, any time a negative number precedes a positive one, that either indicates that a business owner has paid a deposit, or overpaid another invoice. While this is not impossible, it is not usual, and business owners need to verify the accuracy of the information. Luckily, it can be very easy for business owner to verify that is the case, and if they had no customers overpay or pre-pay, then they know it is an error that needs to be fixed
Another easy way that business owners can review their summary to verify the accuracy of its, is if they see whole, round numbers on their summary. Numbers like five hundred, one thousand, eight thousand. No odds dollars or any cents. Most invoices that a business owner is going to create, especially when tax is included are going to have odd numbers in them. Therefore, when a business owner sees around number they should question it is validity. Again, part-time CFO services says that this is not completely impossible to have, but it is uncommon, which is why business owners should verify its accuracy. Often, when numbers like this exist on a summary, it means that a business owner has accidentally invoiced an estimate, or an accrual and it should be fixed.
When business owners can fix obvious errors on their Accounts Receivable aging summary, part-time CFO services says that it can help them be confident that the information in the summary is accurate, and current, which will help them send out statements in a timely manner to facilitate collection processes, as well as allow them to confidently call their clients every two weeks to encourage them to pay their invoices. Since 50% of all entrepreneurs fail, and 29% of the failed entrepreneurs say they ran out of money, helping business owners avoid a cash flow problem can be very significant to their success.
