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Knowing your customer: Get a handle on collecting receivables
From time to time in the course of conducting business, I have come across clients who refuse to pay on time, even if they have the funds available. Let’s face it, especially now, with the so called cash crunch going on, people are holding onto their funds more tightly. They find unique ways to pay on their time line instead of yours. Not only does this disrupt your cash flow, but it also strains the relationship between you and your customer. There are ways in which you can get a handle on your cash flow while still maintaining a good relationship with the customer. For instance, stress to the client to keep the lines of communication open. We know that things can be forgotten, especially in the course of business, however, it shows integrity when a client calls because they anticipate not being able to make their scheduled payment. I have the practice of reinforcing to the client how much I value their business and that I’m willing to negotiate terms during extreme circumstances. This shows dedication and that I’m not only chasing the money. Even in the beginning, when I first sign on a client, I’ll ask them certain questions to get a feel for what ideas they have about handling money. Or, if the company is established I’ll check their credit rating at Dunn & Bradstreet. Just like when you open a credit account, the creditor has checks and balances in place to make sure that you are credit worthy, the same should exist when soliciting clients for your business. If at all possible, find a way to become familiar with their payment history. Ask to contact their former provider. Find out why they changed providers, and make sure that they don’t have any outstanding invoices with that former provider. It pays to do your homework and learn the payment behavior pattern, if at all possible, of your clients.
Partnering for your success
Jacqueline E. Williams
Financial Strategist
BEST PRACTICES FOR MANAGING YOUR CUSTOMER RECEIVABLES
The best part of being in business is when your customers pay you and on time. The important thing to remember is to make sure that you are managing the receipt of these payments promptly or they will get away from you. Cash management is one of the most important functions of the financial process. The flow of money in and out of your company must be properly documented in order to have a clear precise profile of the company’s revenue stream. Managing receivables, or simply put, billing your customers and collecting the payments, should be handled daily. Although its time consuming, processing your receivables daily is necessary in order to accurately reflect your company’s financial standing.
What are receivables? Basically put, receivables represent the amounts owed to your company for goods sold or services rendered. Time and time again, I have come across businesses that don’t have a system for tracking their receivables. They know that they exist but have no idea of how much or when they are due. What typically happens is that the owner will suddenly become a bill collector when funds become scarce. To prevent this scenario from happening, it’s important to set up and maintain a proper Cash management system. How does one do this? It’s preferred to use an automated or software package to track all your financial data. Generally, when using software, the program will have well defined modules that step you through the entire process. With that said, I firmly believe that it’s just as important to know the basic theory behind what you’re doing. To educate you further, let’s take a look at some of the key components of an effective cash management system.
PROCESSING RECEIPTS
In this phase of the system, customer receipts are delivered in several manners; by check, by credit card, or direct funds transfer into the company’s bank account. Regardless of the method, to maintain internal controls, or to make sure that no one person has complete control over the entire process, this ametask can be designated to a person other than the accountant or bookkeeper. As the items are received, they should be recorded in some sort of log or journal.
DEPOSITING FUNDS
Preparing checks for deposit into the company’s bank account will involve endorsing the back of the check. The company should have a rubber stamp with the words “for deposit only” along with the bank account number, name and location. Once the back of the check is endorsed, a deposit slip should be prepared with the following information: customer name, invoice #, and amount received in payment. This should correspond with the same information that was logged in when received. If payments are received directly into the company bank account, such as credit card purchases or direct funds transfer, still the amount should be compared to what’s expected in the customer file. Once all payments have been deposited into the company bank account, a copy of the deposit slip should be maintained as evidence of receipt and attached to the customers invoice. This process is best handled by someone other than who processed the receipts. Once completed, at this point the information is forwarded to the bookkeeper for posting.
POSTING TRANSACTIONS
The bookkeeper, at this point will apply the information from the deposit directly into the appropriate journals and ledgers for the customer account. It’s important that these entries are recorded accurately, otherwise the integrity of the accounts receivable will be jeopardized.
Although the entire cash management process can be more complex, this is just a brief overview. The point is to get started and get organized.
Partnering for your success!
Jacqueline E. Williams
Financial Strategist
AN UPDATE FROM JACQUELINE WILLIAMS
I just wanted to make you aware of a few important events that are about to expire.
FEBRUARY SAVINGS ON BOOKKEEPING SERVICES
Recently, I’ve gotten many requests from business owners wanting to know if I had any available spaces for bookkeeping clients. Well, now I do. I have 2 openings for bookkeeping clients and because of the current economic times I’m even providing a discount of 20% to all new clients this month. But hurry, I only have 2 spots available and the discount is only good for this month.
Our services include:
1. Set up company file in QuickBooks
2. Mange and record customer payments
3. Mange and pay vendor invoices
4. Bank Account Reconciliation
5. Employee payroll processing
Reserve your space by contacting us today.
SAVE ON TAXES SERVICES
Don’t wait until it’s too late. Avoid costly penalties and interest. Now is the time to get your taxes filed. Do it quickly, all over the internet. No need to wait in line for hours. All filers signing up before Feb 28 will receive a 15% off discount. Schedule your appointment today.
Partnering for your success!
Jacqueline E. Williams
Financial Strategist
Documenting is easy as 1-2-3
Many small businesses get caught in the whirlwind of falling behind in their paperwork because they have not discovered or utilized automation to make their bookkeeping process easier. Believe it or not, many feel that as long as they have the bookkeeping software in place (ie Quick Books), they have fully automated. This is not the case. Having software to track entries is one of the steps to full automation. Still, there is the process of organizing and categorizing your data before entering it into the system. This is where human error happens if you don’t have a basic knowledge of bookkeeping. For those who are still learning, there is an easier way. Automating various bookkeeping tasks will not only keep you up to date in your paperwork, it will also streamline your entire process and save you valuable time, which can be fully utilized in other revenue producing areas of your business.
There are various products on the market that aid in automating the documentation process and are able to be fully integrated with your current bookkeeping system. With these products, you will be able to scan, organize, and in some cases attach them to your bookkeeping transactions.
Smart Vault - this on-line document management system is available for a monthly subscription fee as low as $15. Being able to access this system anywhere anytime is a major plus for e-businesses. You will be able to scan, attach, share and store your documents all within Quick Books. There is no per user charge with this product, so you are only subject to the one low monthly fee. It is currently being offered with a 30 day no risk free trial.
PaperSave® - this document management system is a standalone module that must be installed on your system. Although it’s a little pricier, $195 for a single user, you will have the ability to integrate your records directly with MS Office products Excel, Word, Outlook, & PowerPoint. Having the same ability to scan, attach, share and store documents, the software holds it own by electronically storing over 200,000 documents.
Ultimate AppendIT - this software is unique in that it creates Windows folders on your PC in directories organized the same as QuickBooks lists. All documents, images, desktop shortcuts and web pages, which are placed in a folder, are easily linked to your QuickBooks entry. You maintain full control over what’s linked and how automated you want it to be. This is a standalone program that’s easy to install and only cost $24.95 to $49.95.
Managing your small business is very time consuming, so make sure you have the tools necessary to keep you ahead of the game. Automate wherever you can to give your company the competitive edge it needs in time management and document storage and retrieval.
Partnering for your success,
Jacqueline E. Williams
Financial Strategist