How to Keep Track of Payments Received
As the owner of a business, you know the importance of tracking your expenses. Monitoring your customer payments is equally critical to your accounting records.
This side of bookkeeping allows you to track your success, catch problems early, and predict upcoming cash flow.
In turn, your cash flow, also called working capital, determines whether you’ll be able to pay your upcoming expenses. It’s all connected.
When it comes to managing your expenses, you probably rely on your accounting software. This program updates your ledger automatically every time you write a check or make an ACH payment.
Tracking received payments, on the other hand, is a little more complicated. Unless the amount goes directly into your bank via direct deposit, you have to input it yourself.
Most businesses accept a variety of payment methods from their clients. While more than 80% of B2B transactions go through ACH clearinghouses, it’s becoming more common to see payment through other sources.
Debit and credit cards, PayPal, and ApplePay are payments of choice for small businesses and personal accounts.
You’ll see these slowly integrate into the small- and medium- business arena as time goes on. It’s a good idea to have a plan for monitoring and recording these miscellaneous receipts before they become a big part of your revenue.
So how do you keep track of all this incoming money when there are so many streams to watch?
The key is to have stable processes in place that track your payments received.
1. Open Business Accounts
Many small business owners find it easier to combine their personal and business accounts. Unfortunately, this is a big mistake for many reasons, the least of which is tracking your income and expenses.
As a business owner, if your personal accounts connect to your work ones, you’re more exposed to risk. If anything happens in your business finances, it could impact your assets at home.
Business Accounts Improve Your Bill Pay Tracking
Another benefit to having a separate bank account is that you’ll be able to get business credit cards. You can use these to track your company’s expenses easier.
By assigning a card to specific purposes, you know exactly how much gets charged and for what. It’s an automatic bill tracker.
Building your business credit will happen naturally through the strategic use of credit card payments. With a good business credit score, you will qualify for other financial tools that can help you manage your books, too.
Of course, it’s not cost-effective to run up your credit cards to cover expenses. The key is to pay off each card when you receive the statement.
If you haven’t already done so:
- Open a business bank account
- Every time you get a new payment source from a client, like PayPal or Venmo, use your business to create the receiving account
- Make sure you add this income stream into your accounting software
2. Choose the Right Accounting Software
Your business’s financial records are only as good as your accounting software.
Dozens of software programs out there claim to be “the best,” but your business is unique. Therefore, there will be features that suit your needs better than others.
No matter which program you use, today’s accounting software must have these characteristics:
Analytic Report Features
The more you know about your business’s finances, the better. An accounting software program’s reporting features are powerful tools.
Yours should give you:
- overview insights
- detailed profit and loss statements
- accounts receivable breakdowns
- and expense tracking.
These reports allow you to break down your payments received, quickly showing who your best — and worst — paying clients are. You can then use this information to decide how to improve your accounts receivables.
Not everyone in your business needs access to all the account features in your software. But it would be helpful for some of your employees to be able to input data.
Since accounting information, particularly your clients’ sensitive data, is highly sensitive, it’s your job to secure it. Your accounting software should grant you the highest level of security possible. From there, you can choose who can access what and track their actions.
Your program should also let you correct anything that has been tampered with. If you store data in the cloud, check the company’s security protocols and make sure they, not you, are responsible for any breach.
On-Site Payment Processing Options
The easiest way to get your payments into your accounts is directly. Some accounting software includes this feature to streamline everything. The accounting system easily lets you pay vendors, and customers pay you.
The payments are then added or removed from the customer/vendor account and debited from or credited to your account transactions.
When you have multiple programs to do your financial work, it gets complicated. You should have one main brand that is on all your paperwork, from invoices to emails.
Your accounting software should be able to bring your brand and logo into all your transactions. You can set up invoices to send automatically (printed or electronically) at predetermined intervals. Most of today’s top programs even give you options for sending reminders to your clients.
Additionally, the program should link to the cloud so you can access it from anywhere. (It’s hard to find a non-cloud-based program today anyway.)
Why Your Software Needs to Be Cloud-Based
There are significant benefits to cloud accounting when it comes to keeping your business organized. For one thing, you don’t have to worry about losing any information. It’s all stored securely on the cloud. The only thing you have to do is make sure your passwords are secure.
But when it comes to organization, cloud-based programs are the way to go. Think about tax season.
Are you always running around trying to find all your receipts and records?
With cloud-based accounting software, uploading your tax documents is an in-the-moment thing. You get your receipt in your hand, scan it, and assign it to a folder. All your expenses and income are in one place when it’s time to send everything to your accountant.
How much valuable time would that save you?
Investing in a robust accounting software program brings priceless returns, both financially and in your daily life.
Wondering how you can collect more accounts receivable? Click here for 9 tips.
3. Integrate Your Payment Methods and Accounting Software
If you can integrate all your revenue streams with your accounting software, your job becomes much simpler.
Not all payment sources and accounting programs offer this option. But if you can find one that does, you don’t have to deal with tracking payments once you do the initial setup steps.
Doesn’t that sound too good to be true?
Yet, it is true! If you use an accelerated invoicing program like NowAccount, the company integrates with QuickBooks.
Get Rid of Manual Journal Entries With NowAccount
All you have to do is connect NowAccount with your ledger. Then, the program automatically begins reviewing your invoices as they save in QuickBooks Online. This integration feature completely removes the need for you to enter the invoice in your journal entry manually.
NowAccount then manages and reconciles any payments received for invoices uploaded through the program.
No matter which program you use, it’s time to get your business streamlined. Your goal should be to gradually remove any manual journal entries and replace them with an automated integration.
Create your NowAccount to see if you qualify for faster payments!
4. Remember To Run Aging Reports
Human error happens more frequently than we’d like to admit. Having a system of checks and balances through aging reports is one way to limit this problem.
When a client pays, either online or by mail, you have a system in place to apply the payment to their account.
How does that payment make it into your accounting software?
If it’s not automated, it’s possible to miss payments. And it’s all too easy to overlook small recurring payments. These errors seem minor, but they can lead to big headaches.
A payment that you didn’t apply to the client’s account often results in customer phone calls with complaints that you or your staff have to deal with. It’s a waste of resources and adds stress to the day when you could have caught it easily.
Run your aging reports regularly. Then cross-reference the payments in your ledger to those on your report.
Another way to make sure you don’t overlook any expenses or payments is to print a bank ledger for your checking account. It’s old-school, but it works!
5. Check for Patterns
The longer you follow these steps, the more accurate your income tracking procedures and budgeting will become. In addition, this will allow you to watch for patterns in your business.
As you monitor your income, you can predict upcoming cash flow and cut back or add to expenses accordingly.
Using Reports to Check for Patterns
You can save most of your reports as an Excel spreadsheet.
Learning how to use these lets you:
- Compare prior months and years
- Keep track of bill payments and due dates
- Track monthly expenses
As you watch your spreadsheet for patterns, you can catch problems before they become major concerns. For example, a steady decline in profits might mean you need to increase your pricing or make other business decisions.
Another reporting feature you can maximize is the loss report and payment tracking information. This analyzes invoice numbers and due dates and lets you know which clients are consistently late or a bad debt.
The information from these reports helps inform your decisions about individual clients.
Do you need to tack on late fees or reduce a client’s open credit? Is the client worth the risk at all, or should you decline their order unless they pay upfront?
Without an organizational system to watch for these patterns, you’ll miss warning signs that could become costly.
The need to track our outgoing expenses is common business sense.
But how can you tell if your business is on the right track to continue to grow or not without income-tracking processes?
With an automated method of tracking payments, you as the owner know exactly what’s going on in your business. When there’s an ebb in cash flow — you know it. If there is a potential problem on the horizon, you catch it early.
Keeping track of payments received can get complicated, but it doesn’t have to be. With these tips, you can create a system of procedures that streamlines the work for you.
The time you save on manual work is better spent analyzing your reports and growing your business …
Or simply reaping the benefits of your years of hard work!