Each business sale or purchase must be backed-up by records containing the amount, the date, and details of what the money was used for (e.g. I bought a power tool from Canadian Tire for $150 on 5th January) or received in respect of (Mrs Jane paid me $100 to fix her Shower on 1st April) .
For all of these you should keep the receipt for the power tool and you should issue an invoice a receipt for the money received from your client.
Organise your expenses
Depending on the volume of the receipts you can organise it in different ways.
If the number of the receipts is small you can put them in designated envelopes (e.g. gas, meals & entertainments, office supply and so on)
If the number of the receipts is high I am recommending you to have a storage box. You can find a reasonable good box at Staples as recycling storage boxes – 4 pack for $14.16. In this box you can have files by categories (auto, office supplies, leasing contracts and so on)
Organise your receivables
If you issue a receipt I am recommended to use a receipt book which has carbon duplicate pages, because in this way you will have a record of all your cash receipts.
In the scenario that you issue an invoice and you will collect money latter you should have a system tracing the outstanding invoices.
Here is what I am suggesting regarding your receivables:
a) Have 5 files:
– No.1 file – clients – here you will store the paid invoices from the clients
– No.2 file – invoices- here you will store all unpaid invoices from the clients
– No.3 file – due in 30 days – here you will store all unpaid invoices from the clients which are due within 30 days.
– No.4 file – due in 60 days – here you will store all unpaid invoices from the clients which are overdue by 60 days.
– No.5 file – due in 90 days – here you will store all unpaid invoices from the clients which are overdue by 90 days.
The chance to collect the money after 90 days usually is decreasing.
b) Make 2 copies of the invoices: the original you will give it to the client, 2nd copy file it in invoice file and 3rd copy file in “30 days” file.
c) Work with the invoice from “30 days” file. Review this file every 2 weeks and call or send a e-mail message with regards with the outstanding balance. Write on the invoice the date when you called or send the message to the client.
d) If is not paid in 30 days, move the invoice to the “60 days” file. Note on the invoice again the dates when you call the customer and write down on the invoices if there is a partial payment only. When you will receive a partial payment, you will still keep the invoices in the file until the invoice is paid.
e) The process from “60 days” file you can repeat it with “90 days” file. By that time you should have an idea if the amount in really collectible or not.
If you have more questions send me an e-mail at firstname.lastname@example.org
Nicole Dronca, Accountant and Tax Preparer