In The News

Thu 26 Jan 2017

Do You Know Who Owes You Money and Whom You Owe Money To?


Finance & Insurance

In my last blog post we demystified the balance sheet by exploring the different items in the report and what to look for in order to understand what a business owns and what it owes. The fourth part of our series of blog posts on ‘Understanding Your Numbers’ will unravel two more of the reports required to understand your numbers – the aged debtors and aged creditors reports.

These two reports tell you how much your customers owe you and how much you owe your suppliers. The Aged Debtors report details how much your customers owe you and how long they’ve owed it to you. The Aged Creditors details how much you owe your suppliers and when you need to pay it.

These reports list all outstanding invoices including the customer/supplier, amount owing and how old it is. They give you a level of detail that is missing in the Balance Sheet (which just gives you the overall total). This level of detail is invaluable when you are short on cash and urgently need to chase customers for money or conserve cash by finding out when suppliers are due to be paid.

One of our clients was short on cash and needed to start chasing debtors to recoup unpaid invoices. To find out who owed what, we ran an aged debtors report from their accounting system. It gave us all outstanding invoices for customers including the amounts they owed and how old the debt was.

This enabled the company to identify the clients to chase and they were able to recoup much-needed funds, without making unnecessary calls to good customers.

When short on cash another option is to conserve cash by dragging out supplier payments. To find out who you owe money to, how much and when it is due, an aged creditors report can be run. This ensures you make full use of your suppliers trading terms and don’t pay them too early. It also helps to ensure you pay them on time so you don’t run the risk of damaging the relationship with your suppliers.

Next month we will continue our series of blog posts on understanding your numbers, where we will explore the annual budget to discover what information it provides and how to make the best use of it.

Do you take the time to look at your aged debtors and aged creditors reports? If you do what benefits have you gained from them?

Would love to hear your thoughts!


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