Don't fall in love with your Accounts Receivables

Of all the bookkeeping accounts that affect your business, the one that is most deceiving  is your accounts receivable.

In business we are always thinking more.  Sales up, profit higher, more clients, checking account balance higher.  Good, Good, Good.  Accounts receivable up, good too right?  Not exactly. 

It's natural as a business owner to look at a growing accounts receivable balance, see that you are owed a decent amount of money, and feel like it's money in the bank.  However, the thing to remember is accounts receivable balance is money OWED, not money you HAVE.  And there is a huge difference.

Some service businesses, and especially seasonal service businesses, will look at a big accounts receivable balance as a nice payday they will collect at the end of the season or when business gets a little slow.   The problem with this thinking is that the longer you let a client go without paying, the less likely you are to collect your money.

Another thing that service business owners sometimes do is become uncomfortable asking for their own money when it is late. They think that if they call a client and ask for their payment, they may lose or anger that client. You cannot be worried about that.  If your company provided a service the money owed to you is a legitimate debt and you should not feel one shred of apprehension attempting to collect it.

So if your company is growing and you see your accounts receivable balance going up, congratulations.  However, don't look at that balance as money in the bank and always make an effort to convert that money from OWED to PAID.  And never hesitate to ask for money when it is late. 


Thank you,
Robert Flynn
The Service Business Bookkeeper, LLC