Preparing Statements of Account

At the end of every month, it's important to know which customers still owe you money. You do this by looking at the aged accounts receivable report. This report will tell you who owes how much and how old the receivables are. If you are on a manual system, the aged accounts receivable report will simply be the sub ledger that you prepared when you made your credit sales entries. If you're on a computerized system, this report will be one of your standard reports. Examine the receivables report at the end of the month. Are your receivables growing? Are they getting older? If so, why? If your terms are 30 days and you have many receivables aged 60 days or more, you may have some underlying collection problems that you must examine further.

Once you know who still owes you at the end of the month, it's important to make sure your customers remember, too. Prepare a statement of account for all customers who still owe you at the end of the month, not just for those who are overdue. Don't worry that your customers will think you are pushy. Sending a monthly statement of account is standard business practice, and your customers will expect it. In fact, if you don't do it, they might get the impression that you are disorganized.

The statement should show the dates of the original invoices and will indicate in which aging "bucket" the receivable belongs. Sample 10 shows a statement of account.

Use a highlighter to mark the amounts that are older than your credit terms allow. Many businesses have stickers printed up in bright colors with messages reminding the customer (gently) that the invoice is overdue. Having a strong statement of account system will make it much easier for you to get money in the door.

You need perform no accounting for these statements. They are simply reminders to customers of balances you have already recorded in your books. The only exception would be interest charges on overdue amounts. If it is your policy to charge customers interest on overdue accounts, you would book interest entries at the end of every month.