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One of the easiest ways that an entrepreneur can review their AR summary in order to minimize errors, is to scan it to see if there are any negative numbers on it. While a negative number does not necessarily mean an error, it also indicates that someone has prepaid or overpaid an invoice. Since this is a lot more uncommon, it should trigger a business owner to verify the accuracy of the information. If they can easily answer the question did they get a deposit or did they receive an overpayment, then they can verify the accuracy of the information. If not, it usually means that there was an error says part-time CFO services. By fixing the air, they can ensure the summary is as correct as possible, which can help them use it for collections calls confidently.
A business owner may also see a positive and a negative number for the same customer. If they see this, it usually means that business owner received a payment to for that customer, and entered it into their accounting software, but did not apply it to the right invoice. When they see this, they can go back into their software, apply the payment to the correct invoice, and reprint the summary.
Business owners should also be sceptical of round numbers in their summary as well. Most invoices will have on numbers in them, and not be exact whole numbers like one thousand or five thousand. Again, part-time CFO services says that this does not absolutely indicate a mistake, however it is often indicative of an entrepreneur accidentally invoicing an estimate. By seeing a whole number and reviewing to verify the accuracy, can help entrepreneurs ensure their statement is accurate.
When business owners are able to review their Accounts Receivable aging summary, and locate typical, and likely errors, they can ensure the accuracy of the information on the summary, which can help them ensure the correctness of their reports, so they can be confident when they reach out to contact their clients to collect money that is outstanding. They should understand that the longer invoices are outstanding, the harder it is to collect, and so not only should they be using this report to collect money from clients, but they should be doing it on a regular basis to ensure that they remain cash flow positive in their business.
Entrepreneurs depend significantly on their clients paying invoices in a timely fashion in order to stay cash flow positive in their business says part-time CFO services. With half of all Canadian entrepreneurs failing within the first five years of opening a business, and 29% of those failed entrepreneurs say that running out of cash is the reason why their business failed, being confident in how to read and understand their Accounts Receivable aging summary, and also being comfortable with the best practices on collecting that money can help an entrepreneur ensure that they are being as proactive as they need in their business to collect the money that they are owed so that they do not risk running out of money in their business.
One of the first things that an entrepreneur should be aware of when they review their summary, is that any invoices in the ninety days plus section should cause a business owner concern. The reason for this, is because the longer an invoice is left outstanding, the harder it becomes to collect. A customer may have been unhappy with the work, and is not intending on paying it. However, if a business owner contacted them right away, they may have been able to fix the situation. The client might be having cash flow problems themselves, or they might decide that they are not paying it, and do not think the business owner will worry about litigation in order to collect the money. When a business owner sees a very long outstanding invoice, part-time CFO services says that they should be extremely proactive in collecting that money.
The best practices when it comes to collecting money, is every time an entrepreneur does and accounting process, that should trigger them to make some collection calls. For example, part-time CFO services says that when a business owner is about to run payroll, they will do a bank reconciliation in order to verify that they have enough money to make that payment, and that is a good time for them to do collection calls their customers. Not only does that mean that an entrepreneur is going to be making collection calls every two weeks, but it can also help increase cash flow that they plan to pay money and then ensure that there bringing money in as quickly. While many entrepreneurs believe that monthly collection calls are all they need to do, they should rethink that because this can significantly impact their business.
When business owners are able to confidently review their Accounts Receivable aging summary, and no what the best practices are in terms of how to collect money from clients, they can engage in the right activities in the right frequency, so that they can be collecting money often, so that they do not put their business at risk of running out of money. By doing this on a regular basis, business owners can increase their chances of succeeding in business.
