Accounts Receivable

Cash owed to the business from customers. Credit is extended by the owner to entice the sale of the product or service provided. Customers typically have 30 days to pay the amount due. Some customers are extended additional time to pay based on their history etc.

Accounts Receivable Turnover Ratio

One of the activity ratios in business is the receivables turnover ratio or rate.   This ratio measures the frequency of collecting the entire balance of accounts receivable during a standard accounting year.   The ideal turns rate is twelve with a higher value indicating an aggressive collection process.   A lower value is a warning about accounts …

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Working Capital Management – Production and Sales Flow

There is no single management style to address the multitude of working capital cycles existing in the various business sectors and the underlying industries.   Taking raw resources and turning them into consumer goods has different time frames depending on the item produced.   In addition, the sales period varies from product to product.   …

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Bookkeeping – Controlling Cash (Lesson 48)

In small business, cash is almost always the number one issue.  There is simply never enough.  This is primarily attributable to growth.  Growth requires both physical assets to produce more and expansion of accounts receivable.  Technically the expansion of accounts receivable is the economic equivalent of lending cash.  So if accounts receivable grows $50,000 in one …

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Bookkeeping – Cash or Accrual (Lesson 25)

Generally Accepted Accounting Principles (GAAP) advocates using the accrual basis of accounting over cash basis.   The difference between the two methods is important to understand as a bookkeeper. In general, cash basis focuses on the bank account, entries are only made whenever there is any form of an economic impact on the business.   …

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An Explanation of Current Assets

The asset side of the balance sheet is divided into 3 major sections.  They include current assets, fixed assets, and other assets.  Current assets carry the most value to the small business entrepreneur because of the cash conversion aspect.  Cash is the blood that keeps a business alive.  So what are current assets?  How do …

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