by Hugh Johnson, Posted on 8/22/2018 11:14:25 AM
Accounts Receivable (also known as Trade Receivables) are monies owed to you by customers whom you have invoiced for products or services supplied but for which you have not yet received payment. Your Trade Receivables are an asset (since you expect to receive cash from them) and in your accounting software, your total trade receivables will be the balance of your Debtors Control Account on your Balance Sheet.
This should also equal the sum of all of your customer balances in your accounting software.
When you raise a sales invoice, then your accounting software will debit your Debtors Control Account by the gross amount of the invoice. When you receive money from customers then your accounting software will credit your Debtors Control Account by the gross amount received.
Your trade receivables affect many people.
What is right will depend on your business, but here are some suggestions:
Cash is the lifeblood of your business. If you don't get paid for your services you will go out of business. Tracking your accounts receivable and driving down your debtor days is critical for any company, but especially for a company that is expanding quickly and needs cash to invest in stock.
Your accounting software will have the hard data needed to track your performance, but typically does not present this data in a way that is particularly digestible or actionable. I would recommend a consistent, clear and automated report that is very focused on the activities listed above. In this report, I would expect to see a number of Accounts Receivable KPI's that can be used to track particular aspects of the health of your receivables book and your ability to collect against it.
Learn more about our Accounts Receivable Reporting solution for Sage 50, built using Microsoft Power BI.