Bookkeeping Services

Bookkeeping defines accounts receivable as credit extended to a customer for goods or services provided. This is an asset to the business owner. A common error by small business is offering extended credit. Cashflow or lack of cashflow is a major issue for small businesses. Businesses often use payment terms of 30 days – which means payment is due in the amount of the invoice 30 days from the date of the invoice, and other payment terms of 45 to 60 days. For a small business this is not an acceptable way to trade – no small business will be able to stay afloat offering between 30 to 60 days.

If you are a small business person and you are offering between 30 to 60days terms of trade – unless you have very deep pockets full of money – I would not suggest you will be able to trade for a long time offering those terms of trade. Depending on the industry – accounts receivable payments can be expected between 10 – 15 days after the due date – this is why your due date has to be a short length of time. So if you were to offer payment on completion of the work, and the client took between 10 – 15 days to pay – it would be possible to manage cash flow. But, if you offer extended credit up to 10 days – it is very important that there is a process to follow up after 10 days with a view of receiving payment by 15th day. This system becomes part of your business strategy. Sometimes small business owners find it very difficult to ask for money owed to them. Here at SMBB Bookkeepers we offer debtors collection service. The business owner should never chase up outstanding funds – because the business owner needs to be seen as the good guy – and not someone who collects money. Also built into the business strategy should be a stronger means of collecting outstanding debts – such as collection agencies. This business strategy is often used by businesses who offer a service as opposed to offering a product. It is quite common to ask for payment of a product before it leaves your premises, but often it is difficult to ask for the payment of a service before the customer leaves. If you have customers who are regular bad pays, do not be afraid to ask for payment at the completion of the job. Sometimes customers will take as much time to pay the account as the supplier will allow. Also if you have consistently bad payers do not be afraid to suggest they find a new supplier, if you have not been successful in raining in their late payments.

When setting up your business strategy – consider using electronic delivery of invoices and suggest your clients/customers use electronic payments. Electronic invoicing is immediate and cost effective – it does not incur the expense of invoice preparation and postage. But have your bookkeeper set this up so it looks professional. Depending on the accountant package you are using – there is a facility to customize your invoicing. You may be saving on postage but do not skimp on professionalism – it is important to be professional with your invoicing. Make it easy for your customer to pay you as quickly as possible. Make sure your invoicing clearly and accurately describes your bank details for direct transfer of payment into your account.