When you run a business, be it small or big, you will have to maintain accounts. These accounts have to be maintained properly, to ensure you are on track with all your deliverables and receivables.
Even if you are doing business with kith and kin, you need to keep a record of your accounts receivables. Accounts receivables is nothing but the money your business is expected to get in the future. This amount is shown on the assets side of the balance sheet and adds value to your business.
Keeping a close watch on this amount requires you to keep a proper account of each of the transaction. All customers will not pay it in one installment. There will be customers who will pay up the amount in a few installments of fixed amounts or even varied amounts. In such situations, it is necessary to keep a track of what has come in and what is yet to come it. This will ensure you will not get cheated or lose out on what your business should receive.
When tracking this credit is so complicated and time consuming, wondering why at all do businesses on credit? When it a small business, you can afford to sell only on payment. However, as the business grows, associates and regular customers will become part of the business and it is necessary to keep them in the good books and conduct business in a manner that can benefit both. When you sell your goods out on credit, your customer gets the stock immediately and can pay you as and when he realizes the money. This way, his business grows and your stock is all sold too.
Selling on credit becomes a necessity to survive in an industry filled with competition. If you refuse to sell on credit, there is always another seller, ready to give a discount or even on full credit. This will result in you losing a considerable part of your business and thus the market share.
How To Track It
One can have manual accounts to track the accounts receivables but now a days, there are many software and other programs that can automate the accounts and make it easy to track it all. It is like using Goji Cream for a flawless skin instead of grinding all the ingredients in your kitchen for that perfect face cream. These programs are here to make life and business easier.
If you’re near the southern Pennsylvania area, come on out on November 15th for the P.A.U.L. Study Club for Office Managers! I’ll be presenting Successful Systems for Accounts Receivables and Insurance Management. Won’t you join us for not only education but quality networking with other managers in your field? Here is the event page with the study club contact information: