Home based business owners manage many tasks and accounting is one of them. Part of the cycle includes knowing how much money people owe you the products or services you provide. It also includes keeping a tally on the balances you owe to your vendors.
To stay on track here are some ways to help monitor your accounts receivable and accounts payable.
Accounts receivable
Accounts Receivable is the money that customers owe for goods or services that they receive on account. For example, customers who are billed for services may be allowed to pay within 10, 15, or 30 days. The best ways to monitor accounts receivable is to:
- Set up an account for each customer
- Include customer contact information, date, amount, and due date for each invoice. This enables you to gauge the status of the account and follow-up with your customers.
- Mail invoices upon completion of work and include a due date on the invoice.
- Contact accounts that are thirty or more days past due. Typically, the longer balances remain open the less likely it becomes to get paid.
Alternately, many business owners realize that stretching out the time to make payment to vendors improvements cash flows. A company accrues accounts payable when it receives goods and services from vendors but allowed to pay at a point in the future. Some examples of when you may have accounts payable include telephone service, payroll liabilities, and inventory purchases. When monitoring accounts payable be sure to:
- Set-up accounts payable for each vendor and include their contact information, amount due, invoice date, and payment due date
- Update balances to reflect payments that you make.
- Allocate funds for future payments within five days of the due date
- To save time, pre-schedule electronic payments through your bank account or set reminders in your accounting system to print checks
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