All small business owners should be educated in finances such as accounts receivable. This can help them make sure their employees get paid on time and they meet all of their tax liabilities. A business owner should be knowledgeable about their cash flow. Tracking accounts receivable will also help a business determine if they are making a profit. There are some tips from Doug Foshee financial expert to help a small business correctly track their accounts receivable.
A business should communicate prompt and often with their clients. They need to stay on top of all transactions such as what clients have paid their bill, if the bill has been paid in full, how much money a client still owns, and the payment schedule.
Create a Process Internally
Small business needs to develop a process for performing the tasks for accounts receivable. They need to train their employees in this process and stick to the guidelines. There should be a specific day of the week, each and every week that is dedicated to creating invoices and mailing them out. Another day should be used to create an accounts receivable report and review it. If there is a customer that has not paid their bill this is also the day that they should be contacted. As the business continues to grow and develop this tasks may have to be split up among employees and it is important to have a proper system and procedures in place that everyone is taught.
A small business should follow up a week after an invoice was sent to the client to confirm that they received it. There are times when things do get lost in the mail or an email may accident get deleted. Asking the client if they have received the invoice is also a great way to check on when their payment was sent out. When someone reaches out to the client it is also a great way for them to get feedback on the performance of the goods or services that were provided.
Everything that has to deal with accounts receivable should be properly documents. All invoices should be kept for tax purposes. Be sure to keep all contacts with clients and vendors properly document as well. Everything that the company spends money on from gas to a company lunch should be documented. Be sure to get a receipt for all transactions and keep a record of them. This will also help a business owner check for fraud and make sure that all money is being used for business related purposes.
These are just some tips to help a business handle their accounts receivable. Accounts receivable is the main cash flow of the business so it is important this system is structured and organized well.