I’m not talking about your skin or your brain. And, I probably should have asked, “What does your Aging look like?”
I’m talking about AR and AP Aging Reports.
This is the health of your business. A primary tool for your business. A simple one to access or even put together. Yet, I usually get a dead silence or blank stare when I mention them. AR Aging Reports (Accounts Receivable Aging Reports) is a snapshot of what the business is owed by each customer/invoice, and how old that invoice is since it was generated. This is the checks in the mail or deposits to your bank account you keep watching for. AP Aging Reports (Accounts Payable Aging Reports) – How much you owe to your creditors and when these bills are due or overdue. Just like your household, there is a certain amount of money due at certain dates and a specific amount expected to be received by a certain date. It is a full picture of your cash flow or lack of cash flow at a moment in time.
Usually I receive, after explaining what it is, a ‘bunch of invoices.’ I suspect they were found in assorted piles of paper on a desk, chair, floor, just to mention a few places. Maybe even in a folder, but the folder got lost under the something else. Not a good accounting system, and not a good business practice. Some businesses are one step up from the paper piles. The invoices are on their hard drive, sometimes in a folder. Realize, I am not the most organized person, but when it comes to money due me, I know where to find these reports and read them. They’re important so I make sure they are easily accessible, as they should be to you.
If you are using Quickbooks or a similar software program, these programs have the ability to generate both of these reports for any time frame you request. You still have to enter the information on a regular basis. If you are not using one of these programs and don’t want to, you can set up simple spreadsheets on your own, but you have to be disciplined to enter the information on a timely basis. If you disorganized or this area is not comfortable for you, hire a bookkeeper for a couple hours a week. This keeps you organized, and, when taxes are due, you’re not looking at a shopping bag full of paper. This is well worth the expense.
IMPORTANT! Cash Flow, money coming in, is critical to the health of your business. If you don’t know what is due, or what is overdue, and how do you take action to get things moving forward.
Not only should you have these reports (done by you or your bookkeeper), but you should set up a regular schedule to review them. Once a week is a good place to start. Then the old invoices need follow up. If you do not have these reports, you waste time trying to find invoices, looking at what they were for, were they paid or not, and so on. Look at all the wasted time and energy which is better spent on getting new business. Now you need to make the calls to find out when they will pay. You are usually not happy doing this. As a result, you’re not consistently doing it or you just don’t. You go on, just hoping and waiting for payment – Just like song that starts “wishin’ and hopin’”
When you use a factoring company, you acquire a back office. Invoices are sent out in a timely manner, regular follow up which helps establish a timely payment schedule. You have the cash flow you need, and the support to grow your business, so you can go after new business.
If you would like to know more about improving your Cash Flow, Factoring, and AR/AP Reports, please contact me.