Keeping an eye on your accounts receivable is key to keeping your cash flow fluid. It is amazing how many business owners don’t know how much money they earned. Once a sale is made, many business owners move onto the next sale. However, many business owners don’t take the time to collect the money from the sale. This is critical to growing your business.
Key Expenses
There are several key expenses that need to be paid timely.
- To keep your vendors happy, you need money to pay your vendors. Otherwise, the vendors won’t sell you the products needed to run your business.
- For your employees, payroll needs to be funded to keep them happy and paid.
- Corporate and sales taxes should be paid on time. The late fees and penalties are unnecessary and avoidable expenses.
Key Report
A key financial report is the accounts receivable aging report. This should be reviewed on a regular basis so you can follow up with your customers as soon as the due date approaches. I prepare the aging report on a monthly basis for my clients. One client starts making phone calls to his clients. Another client tells me to send a reminder email. Below are common categories of aging:
- Current – before due date, not due yet.
- 30 days past due – you can send a reminder. QBO has a reminder invoice you can send.
- 31- 60 days past due – send an email with firm wording as to when you will expect payment.
- 61- 90 days past due – now is a good time to call the customer. You may consider informing the customer that you will no longer provide products or services until the account is paid in full.
- Over 90 days past due – If all the above actions were taken and no response from customer, then perhaps consider making the customer inactive and write off as bad debt.
By keeping an eye on your accounts receivable, you will become adept at nudging your customers to pay with properly worded late notices. When customers don’t pay on time, your business’s cash flow can dry up fast. Pay attention to when your receivables are due and contact late-paying customers right away to nudge them along.
Non-payments
There may be reasons for your customer to not pay you. Being in constant communication puts you in front of the customer in a positive light. If the customer has issues in their business, hopefully, they will be forthcoming to share their problems. This is a good opportunity to show your partnership with them.
There is the possibility that your invoice was misplaced or sent to the dreaded spam folder. When I send a client their first invoice, I always follow up with an email stating that their first invoice was sent and to please confirm delivery of the invoice. So far, all my clients have appreciated this gesture.
Stay ahead of your accounts receivables. You earned the money. Now collect the money! If you need help tracking your sales as well as collecting on those sales, please contact Monmouth Virtual Solutions. As a Virtual Assistant Bookkeeper, I can help you manage your money and your financial books.
