138: Cleaning Up Accounts Receivable Whether You Are Starting A Business Or Side Hustle
138: Cleaning Up Accounts Receivable Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
Your accounts receivable balance is an important number to know throughout the course of your business. It will help you when you are projecting how much cash you’ll be receiving in the future, but if you don’t have an accurate accounts receivable number to begin with, you could run into issues with your projections. Your accounts receivable balance is also included on your balance sheet in the asset section. When you get familiar with your accounts receivable report and understand how you should take care of items that are inaccurate, you’ll definitely help ensure your financial reports are accurate. In today’s podcast episode, I’m covering how you can clean up your accounts receivable balances so that you can feel confident in the amount of money you’ll be receiving from your customers. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA; there are many instances where you may need to clean up your accounts receivable accounts, and when you stay on top of any adjustments that need to be made, it will make cleaning up your accounts receivable report easier for you. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
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Show Notes:
Your accounts receivable balance is an important number to know throughout the course of your business. It will help you when you are projecting how much cash you’ll be receiving in the future, but if you don’t have an accurate accounts receivable number to begin with, you could run into issues with your projections. Your accounts receivable balance is also included on your balance sheet in the asset section. When you get familiar with your accounts receivable report and understand how you should take care of items that are inaccurate, you’ll definitely help ensure your financial reports are accurate. In today’s podcast episode, I’m covering how you can clean up your accounts receivable balances so that you can feel confident in the amount of money you’ll be receiving from your customers. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA; there are many instances where you may need to clean up your accounts receivable accounts, and when you stay on top of any adjustments that need to be made, it will make cleaning up your accounts receivable report easier for you. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
Welcome Back…whenever you have receivables from customers, there’s a chance that you may need to make adjustments to the original balances that they owed. In the last two podcast episodes, I covered how and when you may need to issue a credit to a customer as well as refund credit balances to your customers. Today I want to talk about some of the best practices when it comes to cleaning up your accounts receivable balances, and the first part is being aware of what is making up your accounts receivable balance. When you look at your balance sheet, you’ll see your total accounts receivable balance in your asset section. To see the details on what is making up this number, I recommend that you run an accounts receivable aging summary report. You can find this report in QuickBooks Desktop by going to the reports tab in your top menu bar and selecting customers and receivables and then accounts receivable aging summary. If you are using QuickBooks Online, you will go to the reports tab, and under who owes you, you’ll see the accounts receivable aging summary report there as well. When you run this report, you’ll be able to see each customer and their balances, which make up the total accounts receivable amount that shows up on your balance sheet. I always recommend that my clients look this report over on a monthly basis so that they can clean up any balances that may not be correct.
If you have any credit balances that you need to refund your customer for, you can listen to my last Mastering Your Small Business Finances Podcast, number 137, regarding how to refund your customer with a credit balance. If you have a customer balance that you need to issue a credit for, please go back and listen to podcast episode number 136 about how to issue a credit to a customer. These two episodes cover many of the issues you may encounter with your accounts receivable balances, but you may also find that there are items on your accounts receivable report that are over thirty days past due. If you have a customer that has not paid their invoice on time, make sure that you have a procedure in place to remind them that their balance is due. You can send statements to help remind them, or you may need to have a collection process in place to receive these payments. Don’t forget that you always have the option to access finance charges on any invoices that have not been paid. Just make sure you are letting your customers know about these policies in advance.
Some of the issues that I often see clients have with their accounts receivable report is when they have a duplicate customer, and the invoice is issued under one of the customer accounts, and the payment is received under the other account. This produces a credit and an amount due on separate lines of the accounts receivable report. If you have this showing up on your report, you can either reapply the payment to the correct customer, or you may want to merge the two customers. To merge the two customers, you will want to edit one of the customer’s accounts to match exactly how the other customer account was set up. When you do this, QuickBooks will let you know that there is another customer with this name, and it will give you the option to merge the two accounts into one. Another issue that I see come up for many clients is when you are looking at your accounts receivable report, and you see a customer with a zero balance. The reason this customer is still showing up on your accounts receivable report even though they have a zero balance is because QuickBooks was not able to link all of the transactions together appropriately. To fix this, you will want to go to receive payments and apply the credit and or payment to the invoice. Once you do this, QuickBooks has everything linked correctly, and your customer with the zero balance should no longer appear on your accounts receivable report. The last issue that I would like to mention is when the balance that is showing up on your accounts receivable report is no longer going to be paid. If you determine that the balance is uncollectible or was recorded in error, you will want to issue a credit memo and then apply that credit memo to your original invoice or invoices so that the customer then has a zero balance.
Now that you understand how you can easily clean up any issues that may come up on your accounts receivable reports, make sure that you are setting up a process to review your accounts receivable report on at least a monthly basis and block off the time in your calendar. This will not only help you keep your financial statements accurate by having the correct balance in your accounts receivable account, but it will also help you to receive payments in a timely manner. When you are on top of your accounts receivable report, you will be able to notify your customers of any past due amounts quickly so that you can continue to have a cash flow that supports your business operations. The older the receivable gets, it is often harder to receive payment on what is due. If you are struggling with your accounts receivable procedures or if you want help setting up efficient processes or strategies in your business, sign up for one of my free consultation sessions. You can go to www.FinancialAdventure.com and click on the work with me button. I’m looking forward to meeting with you soon and digging deeper to see where you currently are in your business and start creating actionable steps so that you can reach your vision and goals for the future, not only in your business but also in your personal life. I’m ready to work with you, see all of your successes, and watch you become a thriving business owner while creating your best work-life balance. I’ll post links to this and other valuable resources for business owners and accountants where you are listening to this podcast.
And, you know I’m going to ask…what’s at least one thing you will take away from this episode that will help your business succeed and grow your bottom line? If you need some accountability, join our PRIVATE Facebook community and post your action item, we’d love to support you.
