B2B Collections Best Practices: Record Keeping

If you’re wondering why many of our articles on best practices touch on such basic “no-brainers”, it’s because so many companies experience losses due to a failure to properly manage simple, commonsense business fundamentals. In this article we’ll briefly discuss the basics of record keeping: the accounts receivable ledger.

  1. Keep an accounts receivable (AR) ledger account for each customer. It is your record of each customer’s charges and payments, and can double as a customer statement.
  2. Each time a customer makes a purchase, record the sale in the Sales and Cash Receipts Journal, which will have accounts receivable debit and credit columns. Credit sales recorded in the Journal should also be posted to the appropriate customer account in the AR ledger. This ensures you know the total amount owed to you by all customers combined as well as the total owed by each individual customer.
  3. Entries made in the Journal should be totaled at the end of every month, with the results posted to the AR account in the general ledger. This is your accounts receivable “control account”, meaning that after you’ve completed all your postings, the total amount of customer balances in the AR ledger will be the same as the balance in the control account in the general ledger. If they are not the same then this means you’ve made an error in your accounting.
  4. Keep all your AR ledgers in a single file. To save paperwork, copies of the AR ledgers can double as the statements you send to customers requesting payment. If you are going to mail them out as statements, start a new ledger sheet every month. The monthly ledger sheet should start with a balance forward, which is the ending balance from the previous month.
  5. Once a month, be sure to send a statement to all your customers who have an account balance. The statement should show the following:
  • a beginning balance (the previous month’s ending balance)
  • all invoices charged during the month
  • payments on account during the month
  • any debit memos or credit memos
  • an ending balance
  • a due date

Disciplined and consistent record-keeping is an indispensible practice, and maintaining accurate transaction records will help ensure that you do not contribute to your own losses.

REFERENCE(S):   http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_1430

The Jayaram Law routinely and successfully assists its clients in their business-to-business (b2b) collection needs.  We take pride in obtaining payment on accounts receivables without fracturing critical business relationships or engaging in time-consuming and costly litigation efforts.

If you need business debt collection services conducted in a professional manner, contact our B2B (business-to-business) debt collection law firm by calling 312.454.2859 or visiting www.jayaramlaw.com.