- Definition of accounting and basic principles for small businesses
- A look at accounting (bookkeeping) methods
The typical way for money to come into your business is because you have provided a product a service and received payment. However, there may be a time that your customer has received your product or service, but you have not yet received payment. The amount that you are expecting is known as Accounts Receivable.
A typical way for money to leave your business is when you pay for a product or service. However, if you have bills and invoices that you owe money on but have not paid, then that amount is known as Accounts Payable.
It's important to accurately track accounts receivable and accounts payable because having this information can help you determine whether or not you can afford to stay in business.
For example, if you have a small amount of cash on hand and low accounts receivable but high accounts payable, then your business is in danger of running out of money.
On the other hand, if you have a small amount of cash but you have a high amount of accounts receivable and low accounts payable, then your business may be fine.
A Word About Invoicing
You may have run into some clients who don't want you to send in an invoice. In my opinion, this is a bad practice. It is easy to get busy and lose track of whether or not these clients have paid you, or not. My recommendation would be to create an invoice for these clients, even if you never send it.
Want More?
- From Freelance Directory, How to Invoice Your Customers Properly : A List of Online Guides on Invoicing for Freelancers
- From FreelanceSwitch, 7 Online Invoicing Apps for Freelancers
(Note: This series is not intended to provide specific professional advice on the business topics covered. If you feel you need additional help in any particular area for your own business, then you may need to consult a professional.)
You can help with this series by suggesting additional topics that you would like to see covered.
Just leave a comment or send me an e-mail.
Also, feel free to comment on your own experience with any of the topics.
Image Source: Laura Spencer of WritingThoughts
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Tracked on: May 17, 2008 3:27 PM | Permalink to Trackback