Do Business Well

Accounts receivable aging. If you allow your customers to purchase from you on account you will find that not all of them pay you according to terms. In fact, you will likely end up having some customers who take quite a while to pay . . . if not forever.

To track the quality of your customers‘ payments and as an aid to your collection effort you will want to produce an aging report of your A/R. Generally, it will look like this:

Customer	Current 30-60 days 61-90 days 91 days or over
ACME	380.55	57.95
B-One			195.49
Century	549.90
Dave’s				775.90
E Plus		88.80
Falcon	50.50
Total	980.95	146.75	195.49	775.90	2099.09
Percentage	47%	7%	9%	37%	100%

By spreading your receivables in this way, you get a picture of your situation with outstanding accounts. ACME, Century, and Falcon are probably okay. B-One needs some attention, but Dave’s is serious. E-Plus is a bit past due, but it is a small amount. The situation with Dave’s has even caused your entire aging to be skewed. It is very serious indeed to have 37 percent of your outstanding balances in the ninety-day column.

We will come back to this area in section 3 as we talk about how to collect receivables.

Accounts payable aging. This is done in exactly the same way as accounts receivable aging. With this report, however, you are getting a picture of how well you are paying your suppliers. Use the same chart as above, but change the “customer” heading to “supplier.” If Dave’s is one of your important suppliers you may be in danger of his cutting you off from open account or even not shipping you at all. By preparing this aging on a monthly basis, you may begin to see trends that indicate you are getting further and further behind in your bills. You will also find it easier to make decisions of whom to pay when you have less than enough to pay everyone.

Sales analysis. With this report you will take a look at how your customers are doing with you. You will probably want to look at this divided by salesperson. You will be looking for trends and opportunities. This report can be formatted in many different ways.

Hopefully, you can already see how helpful this report would be. This particular salesperson is down in her sales year to date versus last year. She was also off this month compared to the same month last year. In fact, she is down more for the month than she was year to date. It may be that she just had a bad month, but it bears careful evaluation next month.

You will note that this format lists the accounts in order of best customer by sales, YTD. This allows me to see who my best customers are. In this case clearly Falcon is coming on strong, but E-Plus has fallen way off. Why didn’t Dave’s order this month? Better to check now than to find out two or three months from now that he has switched to the competition. It may affect ordering patterns and it is easier to get him back if you call him soon after the decision was made to switch.

Other sales reports that could be valuable include item sales by customer, order frequency by customer, or profit margin bycustomer.

There are many other reports that are useful to certain industries. Restaurants may want to keep track of the number of times they turn their tables per day or per meal. They might also track waste percentage. Job shops should be interested in machine utilization analysis both by number of hours of production and value of production. Lawyers and accountants may want to know the percentage of billable to nonbillable hours worked by each partner and associate. Consider what information would be important for you to monitor monthly. Check with consultants or trade associations in your business category to see what others do.

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