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Aging is inevitable… except in accounting systems. There, it’s optional.
Aging, at least as far as Accounts Receivable (AR) goes, is a useful process to let you know how far behind you are on collecting from customers. Whenever you invoice a customer, there’s always a Due Date. Once that due date passes and you haven’t collected from a customer, that invoice becomes past due. Typically, most people track past due amounts in aging buckets of 30, 60, or 90+ days past due. It’s important to watch these values, as the more past due your customer accounts become, the less cash you have to work with. Which is rarely good for business.important to watch these values, as the more past due your customer accounts become, the less cash you have to work with. Which is rarely good for business.
Tracking cash flow is paramount to any business’ success, as usually when the cash is gone, the business cannot operate. Freeing up cash by watching your AR aging, and being more assertive in collecting from customers, can literally make the difference in whether or not a company survives.
Tied to AR Aging is the concept of AR Days. Accounts Receivable Days are a measure at a point in time of how long it takes customers to pay you, on average. The formula is:
For instance, if you have $3 million in annual revenue, and your AR Balance today is $275,000, then (160k/3m)*365 calculates to 33.5 days to pay.
This means on average it’s taking customers 33 days or so to pay their bills. This means your aging report will show quite a few customers are past due.
With that same AR Days calculation, imagine if you could improve your AR Days to 17 or so, roughly half. Do you realize that would free up half of your AR Balance, or $137,500? That’s usually enough to make payroll, and can be the difference in keeping your doors open.
Accounts receivable software helps you track all the money your company is owed but has not collected yet. This includes invoices you’ve sent for products or services you’ve already delivered. Here’s how to find a solution that helps you improve your collections by automating processes, tracking receivables, and running comprehensive reports.
How Accounts Receivable Software Can Work For You
Acumatica Accounts Receivable helps you generate invoices, send statements, collect and apply payments, verify balances, track commissions, and deliver customer reports. This accounts receivable solution is fully integrated with all other Acumatica modules.
Some important features to think of when you are looking at a new ERP are:
- Recurring Billing
- Multiple currencies support
- Multiple A/R Accounts in the GL
- Automate Tax Reporting
- Customer Balances and Credit Limit Verification
- Payment Reversal and Automatic Payment Application
- Audit Trails
AR Aging is a simple concept that most ERP systems handle. Keeping tabs on your aging is easy to do, given Acumatica’s mobile offerings and ease-of-use. So next time you’re feeling the crunch of cash, you might want to peek at your AR Aging and start calling some customers.
Before jumping in, Rockton Connect is here to help understand your business strategy and cloud strategy. Working with growing businesses for more than 20 years has taught us a thing or two about what companies want from an ERP solution. We are helping businesses thrive by connecting people, processes, and priorities.
By: Rockton Connect, www.rocktonconnect.com, Colorado and North Dakota based Acumatica Partner.