Need an A/R Makeover? A Quick, 5-Item Best Practice Checklist

Technology has allowed businesses to make substantial improvements in their customer invoicing processes.  The good news is that when you implement these technologies, you will almost always get paid much faster.

If it’s been a few years since the last time you’ve changed your accounts receivable processes, it’s time for a new look.  Here are five tips you can use to rate your own invoicing process, step by step.

1.     Invoice Creation

The best way to create all of your invoices is by the push of a button from one of about five types of systems that already have all of your data:

  •  Time and billing, if you bill hourly
  • Estimating and project management, if you use proposals
  • Customer relations management (CRM) systems that have invoicing as a feature
  • Point of sales systems that track open accounts
  • Accounting system that includes an A/R component

There are a couple of key best-practice concepts to follow at this step:

  • Eliminate any duplicate data entry you can.  You should only have to enter your invoicing data in one place, and it should flow to every other system that needs it.
  • Automate as much of the process as possible.  Never start in Word or Excel, because this always means duplicate data entry somewhere.
  • Have an easy approval process so someone else can do the data entry if needed.
  • Keep your invoice data real-time so you can benefit from the next step, which is….

2.     Invoice Delivery

How you create your invoice will vary by the type of business you have, but the main thing to make sure of is that the invoice is approved quickly and sent out to the client as soon as the work has been done.

The only way to do this is electronically.  If you’re still printing, stuffing, stamping, and mailing you invoices, you’re losing anywhere from two days to nearly a week before your customer even sees the bill.  Change that by using email or delivering the invoice electronically.

3.     Invoice Terms

When do you want to get paid?  Most people feel it’s realistic to aim for 30 days.  But if you set your payment terms to Net 30, you’re more likely to get paid in 45 days, not 30, according to recent research by Xero, where over 12 million small business invoices were reviewed.

Set your terms to 13 days or less, Xero suggests, because most small business debtors pay two weeks late.  Here is the infographic in case you want to check it out:  http://www.xero.com/guides/invoicing/

4.     Payment Method

How does your business rate when it comes to payment options?  If all you take is checks, you can add another week’s delay to your payment.  Instead, we recommend creating lots of choices for customers, such as taking:

  •  Credit and debit cards through MasterCard, Visa, American Express, and Discover
    • You can set up links online (best) or receive a fax or scanned form where you can enter the card into your back office.
  • PayPal
  • ACH for recurring payments that the client agrees to draft from their bank account
  • Checks

Your industry may even have more options.  For example, in accounting, Intuit has their Intuit Payment Network (IPN) where small businesses can receive money electronically and send and receive requests for money.  IPN is far cheaper than PayPal fees, too.

5.     Receipt

When you get paid electronically, it’s in your bank (or your merchant account) within minutes.  If you bank online, you can see things immediately now (it’s really amazing!).  When you receive a check, you have the overhead of preparing the deposit and making the trip to the bank.  If you have hundreds of paper checks, you also have additional bank fees incurred from processing the checks.

If your accounting system interfaces with your bank, then you save a lot of time and money not having to post those transactions.

Invoice-Free Zone

Why not get out of the invoicing business altogether by offering a pay-in-advance option?  Your Accounts Receivable balance goes to nothing, to name one of many benefits.  Not every industry can adopt this practice, but if you think creatively, you might find some ways you can implement this in your business.

How did your A/R process rate on the 5-point checklist?  Got some ideas for improvement?  As always, please reach out if you have A/R questions or if we can help you implement your best practice invoicing system.

A Match Made in Heaven

July 4, 2013 · Posted in Accounting, Cloud Accounting, Xero · Comment 

Traditional accounting systems have you enter your data in a ledger format where there is a debit and a credit.  Accountants have done this for hundreds of years; the first evidence of a double-entry bookkeeping system dates to the year 1300 (Source: Wikipedia).

What’s different in Xero is that one side of the debit/credit entry is already handled for you when it comes to banking and credit card transactions.  You have three choices for each transaction:

  • Match
  • Create
  • Transfer

Match

In Xero, you use matching when the transaction has already been entered in Xero, such as an invoice that is awaiting payment or a check you are waiting to clear the bank.  When the transaction comes in via the bank feed, all you have to do is accept the match that Xero presents to you automatically.

The beauty of matching is it’s at least twice as fast as most other accounting systems.  Your bookkeeper will save considerable time.

Create

If there is no matching transaction in Xero, you can choose Create, which will record the new transaction.  In this case, you’ll need to enter the customer or vendor name plus the account that you want the other side of the bank transaction coded to.

For example, if a transaction comes through that is a bank charge or bank draft that is not previously recorded, then you can use create to enter it. In the case of the bank charge, you’ll enter the account Bank Fees and the bank name.

Transfer

The third choice is a transfer.  This is when money is moved from one bank account to another.  All you’ll need to do to record the transaction is to select the bank account.

Look Ma, No Data Entry

These three coding options are at the heart of how Xero saves business owners and bookkeepers so much time.  Since the bank feed side of the transaction is taken care of, all you have to do is code the transaction.

If you keep your books via the accrual basis where you enter your invoices and bills ahead of when they are received or paid, then you will use matching most often.  If you wait for the transaction to hit the bank, which is similar to cash basis bookkeeping, then you will be using the “create” function most often.

Game. Set. Match.

If you haven’t seen this part of Xero, you’re in for a treat.  Give us a call, and we’ll set up your free demo today.

 

Receiving Inventory With or Without Bills in QuickBooks

When your goods come rolling in, be sure to document them correctly.
 
You’re probably happy to see couriers delivering inventory items you’ve ordered since it means you can ship to customers, but recording the new stock means yet another repetitive task. 
QuickBooks’ tools can help with this, but you need to be sure you’re using the right forms. There are two different ones that you’ll use, depending on whether or not you’ve received a bill.
Bill in Hand
Either way, you’ll get started by opening the Vendors menu (or clicking the arrow next to Receive Inventory on the home page). If you do have a bill, select Receive Items and Enter Bill(Receive Inventory with Bill on the home page). The Enter Bills screen opens; select your vendor from the drop-down list. If you had entered a purchase order, you’ll see something like this:
 

 photo QBC0713image1_zps0e54741d.jpg

Figure 1: If any purchase orders exist for that vendor in QuickBooks, you’ll see this message.

Click Yes. The Open Purchase Orderswindow will open displaying a list. Select the PO(s) for the items received by placing a checkmark in front of it/them and click OK.
 
Tip: If you accidentally click No, the vendor’s information will be filled in on the Enter Bills screen, and you can click the Select PO icon in the toolbar.
 
Now the PO item information has been entered in the window. Check the form for accuracy, then save it. 
 
Of course, if there was no purchase order, you’ll enter the information about the items you received (descriptions, prices, etc.) in the Enter Bills screen.
 
Delayed Billing
 
If you receive items without a bill, you still need to document the shipment. Open the Vendors menu and select Receive Items (or click the arrow next to the Receive Inventory without Bill). 
 
The Create Item Receipts window opens. Select the vendor by clicking the down arrow next to that field. If a message about existing purchase orders for that vendor appears, click Yes orNo, and either select the appropriate POs or enter the information about what you received.
 
If the items were already earmarked for a specific customer on the purchase order, the Customer column will have an entry in it, and there will be a check mark in the Billable column. If there was no purchase order and you’re entering the information, you can complete those two fields manually. 
 

 photo QBC0713image2_zpse15ed7be.jpg

Figure 2: If a purchase order was already assigned to a customer and is billable, that information should appear in this window.

Enter a reference number if you’d like. The Memo field should already be filled in with Received Items (bill to follow), and the Bill Received box should not be checked. 
 
Warning: Be sure that theItems tab is highlighted when you’re recording physical inventory. If there are related costs like freight charges or sales tax, click theExpenses tab and enter them there. 
 
Paying Up
 
When the bill comes in for the merchandise that you’ve already recorded on an Item Receipt, you’ll use this procedure to pay it:
  • ClickVendors | Enter Bill for Received Items, which opens the Select Item Receipt window.
  • Select the vendor, then the correct Item Receipt.

Note: If the bill corresponds to more than one Item Receipt, you’ll need to convert each into a bill separately. You can create a new bill if some items received were not accounted for on Item Receipts.

  • Click the box next to Use the item receipt date for the bill date if you want to match it to the inventory availability date. 

 photo QBC0713image3_zps3885889b.jpg

Figure 3: You’ll select purchase orders that you want to create bills for in this window.
  • Click OK. The Enter Bills screen opens, which can be processed like you’d handle any bill.

Though it may seem like extra work, this last procedure is important, since it prevents you from recording the same inventory items twice.

It’s easy to get tangled up on these procedures. We hope you’ll consult us when you being implementing inventory management in QuickBooks, or when you’re taking on a new task there. It’s a lot easier to prevent errors than to go back and fix them.

 

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