Bookkeeping Workbook For Dummies
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Whenever your business sells to customers on credit, you will need to monitor how quickly your customers are paying their bills. You also need to keep track of customers who aren’t paying on time. As you do your bills at the end of the month, make a list of all your customers and how much money they have outstanding in their accounts and the date on which the original charge was made.

As an example, here is a list for five customers who bought on credit from the office supply store and have not yet paid their bills as of 3/31/2011:

Customer Date of Purchase Amount Purchased
Sue’s Insurance Company 3/5/2011 $79.50
Joe Tester 2/25/2011 $64.20
First Baptist Church 2/15/2011 $85.60
3/15/2011 $67.20
Jane Doe 1/15/2011 $49.50
Harry Man 12/23/2011 $89.20

In addition to sending out invoices on April 2, you should also prepare an Aging Summary for your manager that summarizes all your customers that owe money. You would group this summary based on time of purchase.

For example, here is what an Aging Summary report would look like as of March 31 for all outstanding customer accounts:

Aging Summary: As of March 31, 2011
Customer Current 31–60 Days 61–90 Days >90 Days
Sue’s Insurance Company $79.50
Joe Tester $64.20
First Baptist Church $67.20 $85.60
Jane Doe $49.50
Harry Man $89.20
Totals $146.70 $149.80 $49.50 $89.20

You can quickly see who is behind in their bills and how much old debt you have on your books. You should give a copy of this information to your manager, as well as the sales or store manager so they can make decisions about whether or not they want to continue offering credit to customers who aren’t paying their bills. Your company will also need to establish a collections process.

Sometimes your company will have to accept the fact that you’ll never collect the money from some customers. When that happens, you’ll need to write off the loss as a bad debt. Each company sets its own policy on how long they will keep an account on the books before it is written off as bad debt.

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About the book author:

Lita Epstein, who earned her MBA from Emory University’s Goizueta Business School, enjoys helping people develop good financial, investing and tax-planning skills.
While getting her MBA, Lita worked as a teaching assistant for the financial accounting department and ran the accounting lab. After completing her MBA, she managed finances for a small nonprofit organization and for the facilities management section of a large medical clinic.
She designs and teaches online courses on topics such as investing for retirement, getting ready for tax time and finance and investing for women. She’s written over 20 books including Reading Financial Reports For Dummies and Trading For Dummies.
Lita was the content director for a financial services Web site,, and managed the Web site, Investing for Women. As a Congressional press secretary, Lita gained firsthand knowledge about how to work within and around the Federal bureaucracy, which gives her great insight into how government programs work. In the past, Lita has been a daily newspaper reporter, magazine editor, and fundraiser for the international activities of former President Jimmy Carter through The Carter Center.

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