I read an article recently on cash flow management for small businesses. The author said the key to managing cash flow in a small business is to keep your eye on the balance sheet. That’s great advice but what does that really mean? And what should you be looking for on your balance sheet?
Balance Sheets
First of all a balance sheet is a snapshot of how much money you have in the bank, the total value of assets owned, total value of unsold inventory, total unpaid customer invoices, total unpaid debt, and to keep this brief how much money is invested and drawn out of the company buy the owner. So with all of that said where do you look first? My advice to you is to keep your eye on collections.
QuickBooks has various reports and tools to support you with keeping cash flow constant and keeping collection activity to a minimum. For now, I am just going to focus on the reports. My favorite report for managing collections is the A/R aging detail report.
Accounts Receivable = A/R
The A/R Aging Detail Report shows unpaid invoices by what is current, then what invoices are going past due in groupings of 30, 60 and 90 days. This report is based on the terms you give to a customer. If you give net 30 or 60 day terms the report will tell you how many invoices are still unpaid by 30 days, 60 days and 90+ days from the due date. This is an example of an A/R Aging Detail report from a company that gives their clients terms of net 30.
What you want to avoid happening is having invoices going unpaid for more than two weeks past the due date. The longer it takes for the client to pay the bill the more unlikely it is the client will pay. There are 9 ways to use QuickBooks to speed up the payment process.
9 QuickBooks Tips
1) Invoice clients immediately. Do not get behind more than a week with invoicing customers
2) Use the merchant account services with QuickBooks (add link) to accept visa, mastercard, Discover and American Express credit cards.
3) Email invoices to customers with the optional link to allow the customers to pay with a credit card
4) Use terms with discounts to encourage customers to pay sooner. For example 2% net 10/30 means the customer will get 2% off the invoice if they pay with in 10 days otherwise the bill is due in 30 days. People will often pay sooner if they get a discount for doing so.
5) Stay on top of unpaid invoices using the open invoice report and the A/R Aging Detail report.
6) Use the collections report to contact your customers by phone of unpaid invoices at starting at 15 days past due. The report includes the contact information of the customers, the unpaid invoices, the due dates and the aging of each over due invoice.
7) Issue finance charges on overdue invoices according to the terms of the contracts with your clients.
Send out statements every month. This reminds the clients they have unpaid invoices and gives them an idea if any are past due.
9) Use the collection letter templates in QuickBooks for sending out collection letters
QuickBooks Set Up
Proper QuickBooks set up is essential for taking advantage of all the program has to offer. Get additional QuickBooks training if you need to. Then managing receivables and cash flow becomes a process consistency and using the reports for ongoing oversight.
Posted under QuickBooks Tips, Uncategorized
This post was written by Gayle Goldman on November 10, 2008
