Jessica Croft of Bookkeeping by Prismatic Jess specializes in accounts receivable review and reconciliation, helping businesses stay on top of unpaid invoices, improve collection processes, and ensure that revenue is accurately recorded.
This guide will cover the importance of accounts receivable management, common AR mistakes, and how Jessica helps businesses improve cash flow and financial accuracy.
Accounts receivable refers to the money that customers owe a business for goods or services that have been delivered but not yet paid for. These are short-term assets recorded on the balance sheet.
Examples of accounts receivable include:
Proper AR management ensures that businesses collect payments efficiently, keeping their revenue stream steady and predictable.
1. Improves Cash Flow and Business Stability
If customers do not pay on time, businesses may struggle to cover operational costs, payroll, and other expenses. Reviewing AR ensures that cash flow remains strong.
2. Reduces Late Payments and Bad Debt
When invoices go unpaid for too long, they can become bad debt, meaning the business may never collect the money owed. Proper AR review helps identify and follow up on overdue invoices before they become uncollectible.
3. Identifies Billing Errors and Customer Disputes
Customers may dispute invoices due to pricing errors, duplicate billing, or incorrect product quantities. A thorough review helps resolve these issues quickly.
4. Ensures Accurate Revenue Reporting
Mismanaged accounts receivable can lead to overstated revenue and inaccurate financial reports. Regular AR reconciliation ensures that revenue is recorded properly and matches actual payments received.
5. Strengthens Customer Relationships
A well-managed AR process ensures that businesses communicate professionally with customers regarding invoices, payment terms, and any necessary clarifications. This builds trust and helps retain long-term clients.
6. Helps Secure Business Loans and Investment
Lenders and investors review AR reports to assess a company’s financial health. If AR is too high or overdue invoices are increasing, it can signal cash flow problems. A well-maintained AR system improves a business’s financial credibility.
1. Not Following Up on Overdue Invoices
Some businesses wait too long before reminding customers about unpaid invoices, increasing the risk of non-payment.
2. Failing to Establish Clear Payment Terms
Without clear payment terms in contracts or invoices, customers may delay payments. Businesses should set expectations on:
Payment due dates.
Late fees or interest charges for overdue payments.
Accepted payment methods.
3. Recording Payments Incorrectly
Some businesses:
Fail to match payments to the correct invoices.
Record customer deposits as revenue before services are completed.
Do not reconcile customer payments with bank statements.
4. Offering Credit to High-Risk Customers Without Proper Screening
Extending credit to customers without credit checks or payment history analysis increases the risk of non-payment.
5. Ignoring Small Unpaid Balances
Businesses that neglect small unpaid balances may lose revenue over time. Regular AR reviews ensure that all outstanding amounts are collected.
6. Not Using Accounting Software to Track AR
Manually tracking accounts receivable can lead to errors, missing payments, and duplicate invoices. Using QuickBooks Online or another accounting system helps businesses track outstanding payments efficiently.
Jessica helps businesses identify and correct these common AR mistakes to improve cash flow and financial accuracy.
1. As part of monthly bookkeeping services, Jessica will review your Accounts Receivable balance with you and provide you with an Accounts Receivable aging report upon request.
2. Customer payments will be matched to the proper invoice if identifiable, or Jessica will alert you to any errors that need to be corrected.
3. Jessica will inquire about any unapplied payments each month as part of monthly bookkeeping services to ensure your books are up-to-date.
Keeping your accounts receivable organized, accurate, and up to date is essential for ensuring that businesses get paid on time and maintain strong financial stability. Following proper workflows will allow the software to track your receivables as it should. Jessica can teach you to implement simple step-by-step processes to keep your books clean efficiently.
