Two other reports to review on a weekly basis are to insure that your bills are being paid in a timely manner (Accounts Payable) and that you’re receiving money due you in a timely manner (Accounts Receivable).
Accounts Payable
Accounts payable reports will show you what you owe to other people and if you are making timely payments or not. Most business communities are small, and if you’re behind in payments, or worse yet, behind in payments and not communicating with your creditors, other people will begin to know about it. Your credit will begin to tighten and it will be harder to do business.
In addition, owing money and not making timely payments or re-making payment arrangements will weigh heavy on your mind if you have any integrity at all. (Although, I have to admit, there have been some people in my life—in the “helping” professions, no less—who haven’t had the courage to talk to me about money that they owe me.)
Review your accounts payable reports weekly and make your payments on time if possible. If cash flow is tight, talk with your creditor about other arrangements. And, review the accounts payable reports against your cash flow and balance sheet reports to make sure you’re planning ahead for big expenses and keeping your business afloat.
Owing money in business isn’t a problem. Not dealing with it, is.
Accounts Receivable
You don’t want to be on the receiving end of someone who won’t pay their bills either. Again, dealing with accounts receivable requires some courage as well as the ability to know that you have earned and deserve the money that someone owes you. (Some women entrepreneurs have a problem with this.)
Begin by being clear about your terms. Once someone receives a bill, how long do they have to pay it? If you want to maximize your cash flow, give your customers a “Net 15” due date. That means that their payment is due to you within 15 days of the date of the invoice.
The next step is to follow up as soon as the due date is past. Your accounts receivable reports will give you this information. Most people are honest. They may be experiencing their own cash flow problems, so by opening the conversation in a gentle way, you’ll get the best results. Even if they can’t pay now, you’ll be able to renegotiate terms.
But don’t give up. Have a process around accounts receivable. Issue statements and assess statement charges if necessary. Consider having someone else in your office make the calls if you’re uncomfortable making collection calls. Finally, consider turning your Accounts Receivable over to a collections agency or going to small claims court to get the money that is due you.
Your business depends on it.
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