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Don’t Miss This Critical Step in Managing Your Business Finances

Written by: Scott Gregory

Article Overview: Do you have an effective system of monitoring your accounts receivable? Without one, your business may be at risk and suffer from poor cash flow management!

Don’t Miss This Critical Step in Managing Your Business Finances

Every dollar you have outstanding on open customer invoices is a dollar you DON’T have in your bank account. If it isn’t in your bank account, you can’t use it for the operations of your business.
Unfortunately, many businesses pay scant attention to the money that is due to them, figuring that their customers will get around to paying eventually. Why hope and pray for this to happen? Develop an effective accounts receivable management system instead.

First of all, ensure that the invoices you send out contain the following critical information: the correct amount due, the correct purchase order number (or other identifying information your customer needs to track it), correct details about what was purchased, your selling terms (i.e. net 30 days), and a remittance address for them to send the check. You don’t want your customer to have any excuses (they have plenty already) about missing information so that your invoice ends up in a pile somewhere in their accounts payable office.

Once the invoice has been created, review the various reports available in your accounting software to monitor the receivables. For example, in QuickBooks, there are several very helpful reports that can be instantly generated to provide a real-time status: the A/R Aging Summary, the A/R Aging Detail, the Open Invoice Report, and the Collections Report to name a few. Each of these reports provides a unique view on the details of who owes you, how much they owe you, and how long they have owed you. All of this is very critical information that needs to be monitored on a regular basis.

Once you have researched the report tools available to you, create a procedure so that you can then follow-up on overdue invoices sooner rather than later. Choose a combination of steps that may include: faxing or e-mailing copies of invoices that are overdue by a certain amount of days, calling the customer on invoices that are overdue by a longer period of time, and then getting the principals of the customer involved for invoices that are getting really old. Be sure to document each contact made for each customer in your accounting system so you know exactly who said what about when the overdue invoices will be paid. This also provides a history for you to use in determining whether future sales will be done on open account or other alternative methods of payment.

It isn’t easy to ask for money. But remember, it’s YOUR money! If you don’t ask for it, who will?

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Article Tags: accounts receivable in quickbooks, free quickbooks tips, quickbooks collection reports, tips for improving accounts receivable



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