Are you on top of your Accounts Receivable (Money People Owe You)? If not, you could be LOSING money and paying MORE tax than needed.
ARE YOU ON TOP OF YOUR ACCOUNTS RECEIVABLE (MONEY PEOPLE OWE YOU)?
If not, you could be LOSING money and paying MORE tax than needed.
I met Tim earlier this year (his wife had been a client of mine for a few years). He changed to me when he realized his current bookkeeper had been charging him monthly to do his books but not done any work at all! Covid-19 had hit and money was tight so he knew he needed his books up-to-date. When onboarding new clients, I provide a review of all accounts and when reviewing his accounts receivable (money people owe him) there were quite a few invoices that were overdue by 90+ days. I recommended we send out reminders to all overdue accounts and make sure that any outstanding invoices were in fact, still overdue. Some accounts had been paid but were not recorded correctly in QuickBooks (the result - Income was overstated), some were disputed and needed to be written off (result – net income would be lower) and there were two clients that wrote back to say they had not received the initial invoice and paid straight away (result – injection of much needed cash). As a result of this exercise, my client received over $7,000 within a few days, his income and net income for that period were now less (effectively saving him on taxes owed) - he was ecstatic!!
No matter how hard we work to get the sale and how diligent we are invoicing our clients, if we don’t manage the receipt of that money and any delinquent accounts, we will run into cash flow issues and be paying taxes on money never received*. Running monthly reports such as an Aging Summary Report or Open Invoices shows you instantly what accounts are unpaid. Running monthly reports such as an Aging Summary Report shows you instantly what accounts are unpaid. It is then very important to follow up on any unpaid accounts - the longer an account is unpaid, the more uncollectable it becomes. If it does become uncollectable – write it off.
image taken from Quickbooks’ Sample file…
If your accounts receivables have been neglected and you would like help getting your accounts up to date please fill out the form to set up a 30-minute free Discovery Call https://www.theaussiebookkeeper.com/contact
* when using accrual based accounting for taxes