What reports should I review each day as a business owner?

OLYMPUS DIGITAL CAMERAI review three reports each day: Cash, Accounts Receivable and Accounts Payable. If I had inventory I would also review the inventory report.

Within the context of these reports, you have everything that you need to manage your business. Cash is king as the saying goes, so these reports contain all of the information which contribute to cash. Accounts Receivable should be managed to keep the age of your receivables within your terms. Once an account moves outside your terms, someone should contact the company and find out their payment intentions. If they are in a cash crunch, now is the time to work on a weekly payback plan. Use your best customer voice and do not be confrontational, even though the other party may get defensive. Remember, they are going through a rough time not having the cash to pay their bills. Showing a bit of compassion will help your cause which is to collect your outstanding invoice.

Document all of the conversations that you have with each customer. Stay in contact, but not more than one call per week. If it is a large amount and you are worried about the ability to collect the amount owed, a visit to the customer may be in order. By meeting with the company executives, and seeing their operation, this will give you a good idea if the problem is a temporary one or a more serious matter. Look for things such as, empty desks, a small number of employees in comparison to the size of the office and building. Also, view the shipping department and inventory areas. And finally, listen for how often the telephone is ringing. All of these things can give you a good feel for the health of the company.

When reviewing the Accounts Payable report, the same technique applies, review the aging, which will tell you if your accounting people are paying within the terms of your vendors. You should set the payment terms and if you feel that you can stretch the terms of your vendors, then do so. This can act as an interest free line of credit. But be certain that the vendors are not complaining about the terms being stretched. Once again, communication is the key. If you are experiencing a cash flow problem, call your vendors and explain the situation and set up payment schedules with each vendor. The key to making this work is to set up payment schedules that you can and will meet. It now becomes a matter of your integrity. Keep in contact with each vendor as if they were now a customer, always be honest and follow through with your promises.

The final report is your cash in bank report. You should be able to calculate a weekly cash inflow and outflow report to keep you abreast of how your business is doing, as it relates to cash flow. Having a good understanding of cash flow and upcoming cash needs will enable you to effectively mange your business and enable you to react to any upcoming cash shortage that may occur. Plus it will give you time to put together a corrective action plan to cover any cash shortage that may occur.

If you follow this procedure along with reviewing reports you will never be surprised with a cash shortage.

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