The end of the year is fast approaching, and you’re most likely in one of two camps: Either you’ve been diligent in your collections, or you are just now realizing that you have hundreds, even thousands of dollars in fees billed but not collected. Ouch. Ann Irons, a CPA in Holliston, MA who offers accounts receivable services for businesses and law firms, explains that waiting until the last minute can have serious implications for your finances.
The Dangers of Delaying Collections
Delayed collections pose different kinds of challenges depending on whether you are a sole proprietor or solo attorney vs. a partner. As a lone operator, you can hardly cut yourself a check if the money you’ve worked so hard for has not been collected. Likewise, calculating salary and wages for several owners or lawyers is difficult because many business and firms calculate compensation using the amount that has been collected, not the amount that was actually billed. For law practices and some types of businesses, revenue dips in December, further complicating things.
Managing Collections at the End of the Year
The aged accounts receivable report is one of the simplest tools for finding out how much revenue is owed to you but has not yet been collected. For someone who has neglected to tend their A/R in the previous months, the discrepancy can be unnerving, to say the least. For example, the report may reveal that the amount of cash and liquid assets available to you at that date is far from what you have been using to prepare your budget and make decisions about your business. If you find that you are far behind, it may be time to consider outsourcing accounts receivables.
Tips on Collecting More at Year-End
The best place to start is by reaching out to any customers or clients who have unpaid bills that are between 30 to 60 days overdue. Statistically, you will have more success collecting on these accounts than those that have gone unpaid for longer. If the unpaid bills belong to clients with whom your firm actively services, this is a good time to bring up the matter of payment. It can be somewhat awkward to approach clients for payment, but you must remember that you have every right to do so; you performed the work, you should be paid accordingly.
About Your Holliston, MA Accountant
Are you an attorney or small business owner in need of accounting, A/R, or A/P services? To learn more about our accounting and bookkeeping services, or to schedule a meeting with Ann Irons, CPA, contact us at 508-966-0700. We welcome individuals, businesses, and law firms located in Bellingham, Boston, Medway, Woonsocket, and the surrounding areas.