If there is one thing you need to keep up to date as a business owner is your accounts receivable balance, or sub-ledger. This means you’re invoicing out of your accounting system, posting bank deposits as they happen and matching them against invoices. Or, if you have an integrated payment services system, this is all happening automatically for you.
Why keep so up to date on this?
It’s because keeping this information live will give you an accurate “Accounts Receivable Aging” report. Accounts receivable are unpaid invoices owed to you by your customers. Your aging report shows how old every invoice is getting, by customer. With this report, it will let you know how old your invoices are and which ones to begin following up on.
Why does it matter?
Simple – you need to get paid. And that is obvious, but when you’re running a business it’s easier than you think to lose track of who has and hasn’t paid you. You’re busy getting a job done, and suddenly, you’re two weeks out, payroll is coming due and that client that always pays on time hasn’t. You can’t miss payroll, so unless you have an operating line of credit that money is coming out of your pocket.
I’m too busy to check it each day – what can I do?
Good news – with a program like Xero you can set automatic invoice reminders to be sent to customers as the due date of invoices pass by. This can help you keep tabs on payments without having to be in there all the time. Debtor Daddy is another software that does a great job and integrates with Xero if you need a bit more tracking.
That doesn’t excuse you from checking yourself. Some of those really slow to pay customers need a human touch so check that Aged A/R report and give them a call – and remember! You catch more flies with honey.