An accounts receivable record is used to keep track of money owed to your business as a result of extending credit to a customer who purchases your products or services. Some businesses deal in cash transactions only. In other words, the product or service is paid for at the time of the sale. If this is the case in your business, you will not need accounts receivable records. However, if you do extend credit, the amount owed to you by your credit customers will have to be collected in a timely manner to provide you with the cash needed for day-to-day operations. It will be essential to have detailed information about your transactions and to always know the balance owed to you for each invoice. This can be accomplished by setting up a separate accounts receivable record for each customer.
Format for Accounts Receivable
In order to ensure that you have all the information needed to verify that customers are paying balances on time and that they are within credit limits, the form used will need to include these categories:
- Invoice date: This will tell you the date the transaction took place and enable you to age the invoice.
- Invoice number: Invoices are numbered and can be filed in order. If you need to refer to the invoice, the number makes it easy to retrieve.
- Invoice amount: Tells how much the customer owes for each invoice.
- Terms: Tells the time period allowed until invoice is due and also if a discount applies.
- Date paid: Shows when the invoice was paid.
- Amount paid: Shows whether the customer made a partial payment or paid the invoice in full.
- Invoice balance: Tells what portion of the invoice is not paid.
- Header information: The customer’s name, address and phone number will tell you where to send statements and how to make contact.
At the end of a predetermined billing period, each open account will be sent a statement showing its invoice number and amounts, balance due, and preferably age of balances (over 30, 60, and 90 days). The statement should also include terms of payment. When the payment is received, it is recorded on the accounts receivable record. The total of all the outstanding balances in Accounts Receivable is transferred to Current Assets when preparing a Balance Sheet for your business.
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