Basic accounting for checking your aged receivables
How often do you find you are celebrating your sales victories only to find out later that some of these accounts haven't paid their 1st invoice or they are paying late?
It is not uncommon for business owners to focus their attention on only the income statement and/or their bank account. Another important financial document, however, that business owners should not overlook in their bookkeeping tasks is their Aged Receivables report. This report details the list of outstanding invoices that customers have not paid yet.
What does the report do?
The aging report tells you, quickly, how well you are doing at billing and collecting on invoices. The report will highlight any problem payers; which should prompt some collection activity.
Collection activities should include:
- mailing past due statements or reminders
- calling clients
- evaluating the need for taking legal action.
How often should I view this report?
How often one should look at their Aged Receivables depends on the quality of the report. If almost all accounts are within due dates – then once a quarter could be adequate. However, if there are several accounts creeping into the over 60+ days old category, then a monthly review should be instituted, until the receivables are under control.
If your business is cyclical/seasonal or very dependent on economic fluctuations, good bookkeeping tips will tell you to review your Aged Receivables regularly.
Finally, by reviewing your aging receivables report consistently, you can also determine your cash flow forecast. Likewise, you can decide if you need to put into place other financial programs to incentivize your clients to pay more promptly. Early payment discounts or late payment penalties may help encourage clients to pay more timely. To get more helpful small business bookkeeping advice visit our blog where we discuss this and more on Tulsa bookkeeping.
LUXA Enterprises offers outsourced accounting services for small businesses in the Tulsa and surrounding areas. If you’re considering a short or long-term approach to outsource accounting, give us a call for more information at 918-928-7288.