Do you sell to your customers on credit?
By that, I mean do you offer some sort of payment terms such as:
- Net 30 days
- Net 45 days
- Net "Hope My Clients Pay Me Someday"
If you do sell on credit, it is essential to the financial health of your business to have a solid system in place to monitor the following information:
- Who owes you?
- How much they owe you?
- How long they have owed you?
THE ACCOUNTS RECEIVABLE AGING REPORT TO THE RESCUE!
If you use QuickBooks or other accounting software, the built-in Accounts Receivable Aging Summary report will be your best friend.
This report quickly summarizes the key details mentioned above for easy review and monitoring as shown in the screen shot below:
Naturally, you will want to build an internal system that allows you to take follow-up actions on anyone that has gone into overdue status (or to even be proactive on invoices about to come due!).
ACCOUNTS RECEIVABLE ARE THE LIFEBLOOD OF YOUR BUSINESS
A simple thing to remember - every dollar that shows up on the accounts receivable report above is a dollar that is NOT in your business checking account. That money is not helping you pay your bills, purchase inventory or meet your payroll obligations.
I know it is difficult to envision playing the "bad cop" and having to contact your customers to collect on overdue amounts. However, if you don't make these important calls, your invoice may very well go to the bottom of the stack. And that is not a good place to be.
ADDITIONAL RESOURCE
The Guide to Getting Paid: Weed Out Bad Paying Customers.. by Michelle Dunn
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