Having thousands of dollars in limbo each month can give any entrepreneur nightmares. Before you make changes to accounts receivable, get insider advice on this popular sales feature.
Accounts receivable, or A/R, is a method of granting short-term credit to your customers. The client gets a product or service and you get an IOU for payment. Under accrual accounting, the initial transaction involves a credit to sales and a debit to accounts receivable. When the money arrives, the payment gets credited to accounts receivable and debited from a cash account.
When looking at accounts receivable, consider these important points:
You need customers to pay quickly to keep cash flow high and maintain accurate financial forecasts. Here are a few tips to improve the A/R collection process.
Overall, remember that money left in accounts receivable is uncollected profit. Take steps to limit credit balances, speed up payment and decrease outstanding debts. A/R offers significant benefits for small business owners who are willing to manage the process.
At Verdeja, De Armas & Trujillo, LLC, our team of Miami accountants is dedicated to providing personalized and financial guidance. We provide accurate and comprehensive financial statements as well as in-depth business analyses. Contact us today for a small business accounting consultation.