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Choosing the Best Small Business Checking Account for Your Business

One of the first things you’ll have to do when starting a small business is to open a checking account.  As you begin to generate revenue and invoice customers, it’ll be important to keep your business income and expenses separate from your personal income and expenses.

Also, if you are taking out a small business loan or receiving a small business grant, you will need to have a business checking account to deposit the funds into. If you haven’t already, it may also be a good idea to speak with a small business accountant on what the best corporate structure will be for your business.

Choosing the right checking account can be a daunting task for a first-time entrepreneur. It can be difficult to navigate through the numerous account options, as they can vary in terms of fees, features, services, and policies. Below we will take a look at some of the major banks and what their accounts have to offer.

Bank of America

Bank of America is the largest bank in the US, and as such, it’s one of the first banks that anyone thinks of when opening a new account. Among other perks, many people choose BOA because they have reasonable fees and many physical locations. There are two options for business checking accounts, each with benefits to your business.

Business Fundamentals Checking

This small business checking account works well for new businesses or those that keep a low balance.

What It Offers:

  • $17 per month maintenance fee that can be avoided
  • Second business checking account for $12 per month
  • Free Business Investment Account
  • Account management with flexible tools and QuickBooks integration for $15 per month

You can avoid the monthly maintenance fee in the following ways:

  • Spend $250 in net new purchases on a business debit or credit card
  • Maintain an average monthly balance of $5,000
  • Maintain a minimum daily balance of $3,000
  • Maintain a combined average monthly balance of $15,000 or more in linked Bank of America business accounts

Business Fundamentals Checking Pros:

  • Maintenance fee can be avoided
  • User-friendly online banking
  • Offers rewards program
  • Many physical branch locations

Business Fundamentals Checking Cons:

  • After 200 transactions, $0.45 fee per transaction
  • After first $7,500 in cash deposits, cash handling fee of $0.30 per $100
  • Many added fees

Business Advantage Checking

This Business Advantage checking account will work well for those who spend over $2500 a month on their business cards or keep a higher average monthly balance. This account includes all of the features of the Business Fundamentals Checking, with a few additional premium benefits.

What It Offers:

  • $29.95 per month maintenance fee that can be avoided
  • A second business checking account is free
  • Business Advantage Savings Account for no cost
  • Account management with flexible tools and Quickbooks integration included

The monthly maintenance fee can be avoided in the following ways:

  • Spend $2,500 in net new purchases on a business credit card
  • Maintain an average monthly balance of $15,000 or more
  • Maintain a combined average monthly balance of $35,000 or more in your linked Bank of America business accounts
  • Actively use Bank of America Merchant Services and/or Payroll Services

All in all, Bank of America offers solid checking account products, and the fees can be avoided by spending or maintaining an appropriate balance.

Business Advantage Checking Pros:

  • The monthly fee can be avoided
  • Many physical branch locations
  • User-friendly online banking
  • Advanced features

Business Advantage Checking Cons:

  • Low-interest rates
  • Added fees

Wells Fargo

Wells Fargo is another well-known bank with many physical locations around the United States. They offer three different small business checking accounts.

Simple Business Checking

This plan is best for home-based or smaller businesses with low cash flow activity. It includes 50 transactions at no cost, and you can deposit up to $3,000 in cash without a charge. The minimum opening deposit is $25, and the monthly service fee is $10. You can avoid the fee by maintaining an average ledger balance of $500.

What It Offers:

  • Business debit card
  • Wells Fargo Business Online
  • Wells Fargo Mobile app and Business Bill Pay
  • Optional overdraft protection

Simple Business Checking Pros:

  • Easy to avoid the service fee
  • $25 to open
  • Easy to upgrade when you outgrow it

Simple Business Checking Cons:

  • Little banking support
  • Limited to 50 free transactions

In spite of the cons, this account is good for businesses that have low cash flow and just need a place to store cash. The monthly fee is easy to avoid, and the account is fairly straightforward.

Business Choice Checking

This plan is Wells Fargo’s most popular choice for new or growing businesses. It allows up to 200 transactions and up to $7,500 in cash deposits at no cost. The minimum opening deposit is $25, and the monthly service fee is $14.

They offer three ways to avoid the service fee:

  • Maintain an average ledger balance of $7,500
  • Maintain combined business balances of $10,000
  • Have ten or more posted transactions from this account’s business debit card
  • Link to a Direct Pay through Wells Fargo Business Online
  • Have a qualifying transaction from a linked Wells Fargo Merchant Services Account

What It Offers:

  • All features offered by the Simple plan
  • Fee waivers and discounts for various business loans and lines of credit

Business Choice Checking Pros:

  • Great for growing companies
  • Comes with access to Wells Fargo National Business Banking Center
  • An affordable monthly fee that can be avoided
  • Only costs $25 to open a new account

Business Choice Checking Cons:

  • Limited to 200 free transactions
  • Offers fewer features than other banks

Platinum Business Checking

Wells Fargo’s Platinum plan is great for an established business that is looking for premium relationship benefits. This plan offers up to 500 transactions and up to $20,000 in cash deposits with no fee. It also takes just $25 to open this account, and the monthly service fee is $40.

As with the other plans, you can avoid the monthly service fee in the following ways:

  • Maintain an average ledger balance of $25,000
  • Maintain combined business balances of at least $40,000

What It Offers:

  • All features offered by both other plans
  • No monthly service fee on up to two additional Platinum Checking accounts
  • Interest bearing option
  • No fee for incoming domestic and international wire transfers
  • No fee for two domestic non-Wells Fargo ATM transactions per fee period
  • No fee for stop payments, money orders, or cashier’s checks

Platinum Business Checking Pros:

  • Interest bearing small business account
  • Personalized banking
  • Flexibility with cash deposits
  • Large number of free transactions
  • Free features such as stop payment and wires
  • Costs $25 to open

Platinum Business Checking Cons:

  • Difficult to avoid monthly fee unless you have large amounts of money

Chase

Chase is another well-known bank that offers its small business clients a number of perks and physical branch locations. Chase has three different business checking account options, with Chase Total Business Checking being most suited for small businesses.

Chase Total Business Checking

This account is designed for small and new businesses, and it requires $0 to open a new account. One advantage is that Chase offers $200 to new business checking customers with qualifying activities. This account has a $15 monthly service fee, which can be reduced to $12 if you enroll in paperless statements.

The monthly service fee can be avoided in the following ways:

  • Maintain a $1,500 minimum daily balance
  • Maintain a linked Chase Private Client Checking Account
  • Maintain a linked Chase Sapphire Checking personal account

What It Offers:

  • 100 free transactions per month
  • Unlimited electronic deposits
  • $5,000 in cash deposits per fee cycle with no fee
  • Domestic and international wire transfers
  • Account alerts
  • Chase Business Debit card
  • Access to Chase Online Banking and Chase Mobile Banking

Chase Total Business Checking Pros:

  • Offers welcome bonus of $200
  • Low service fee is easy to avoid
  • Unlimited electronic deposits
  • 100 free transactions
  • Mobile online banking in addition to physical branches

Chase Total Business Checking Cons:

  • Fees can add up with a lot of transactions
  • Fees for wire transfers

Chase Performance Business Checking

This option for a small business checking account includes the features of Chase Total Business and then some. If you are a small business that does a lot of transactions each month or has a high cash flow, this is a good option. This account costs $30 per month, but the service fee can be avoided by maintaining an average daily balance of $35,000 in qualifying business deposit accounts.

What It Offers:

  • 250 free transactions per month
  • Unlimited electronic deposits and incoming wires
  • $20,000 monthly cash deposit with no fee
  • Access to Chase Online Banking and Chase Mobile Banking
  • Chase Business Debit card
  • Interest option available
  • Monthly service fee waived on a linked Chase Business Premier Savings account
  • 24/7 customer service

Chase Performance Business Checking Pros:

  • User-friendly mobile app
  • Best for small businesses with high cash flow

Chase Performance Business Checking Cons:

  • Only two outgoing domestic wires are free
  • Can be difficult to get the monthly service fee waived

Chase Platinum Business Checking

This account is really for large businesses or small businesses that have a high enough cash flow to maintain the $100,000 balance needed to waive the $95 monthly fee. However, if you need more complex banking services, this account could be right for you.

What It Offers:

  • 500 free transactions
  • Unlimited electronic deposits and incoming wires
  • $25,000 cash deposit per statement cycle with no fee
  • Four free wires

Chase Platinum Business Checking Pros:

  • Priority service from Chase support
  • Positive customer feedback
  • Great if you have complex banking needs

Chase Platinum Business Checking Cons:

  • Expensive monthly fee of $95 if you don’t maintain $100,000 balance
  • Expensive to still limit transactions to 500

Capital One

While Capital One is a very recognizable name in the world of banking, it does not offer physical locations like some of the other banks on our list.  However, Capital One distinguishes itself from the others with unlimited free transactions. This bank offers mobile banking and online bill pay as well. Capital One offers two small business checking accounts. Which is right for you will depend on your banking needs.

Spark Business Basic Checking

The Basic Plan has a $15 monthly service fee that can be waived by maintaining a $2,000 minimum 30- or 90-day average balance.

What It Offers:

  • Unlimited transactions
  • Online and mobile banking
  • Deposit up to $5,000 with no fee; $1 per $1000 after
  • Standard wire fees

Spark Business Basic Checking Pros:

  • Free unlimited transactions
  • Online mobile banking
  • Fee can be avoided

Spark Business Basic Checking Cons:

  • Fee for all wires
  • Cannot send international wires

Spark Business Unlimited Checking

Capital One offers more features with this account. The monthly service fee is $35, but it can be waived with a $25,000 minimum 30- or 90-day average balance.  This account is a good option for well-established and high-volume businesses.

What It Offers:

  • Unlimited free transactions
  • Up to 5 free domestic wires per month
  • No fee for cash deposits
  • Online banking services

Spark Business Unlimited Checking Pros:

  • No fee for large cash deposits
  • Unlimited transactions
  • Online mobile banking

Spark Business Unlimited Checking Cons:

  • Service fee waiver requires $25,000 average balance

 

The Best Small Business Accounting Software

Managing the accounting needs of a small business is an integral part of day-to-day operations. Keeping track of cash flow, creating reports, handling tax preparation, and performing bookkeeping are just a few of the accounting tasks that are mandatory for the successful operation of your business.

Now while every small business owner would like to hire their own small business accountant to manage their books, not every business owner will have room in the budget for these services. Luckily, there are a few really great options when it comes to small business accounting software

Small business accounting software can help you manage your finances as well as generate reports, invoices, and purchase orders. When all of your financial information is automated and integrated this way, it translates into savings of both time and money.

When small businesses use accounting software to automate their business accounting processes, owners and employees have more time to focus on customers and business growth and development.

There are many choices when it comes to accounting software today, so your focus should be to find one that is easy for you to use and affordable. The software should also make it easy for you to look at a snapshot of your financial summary and track your income and expenses.

Here are some pros, cons, and comparisons of the best small business accounting software on the market today.

QuickBooks

QuickBooks is one of the most popular accounting solutions out there. Most accountants are familiar with it, and it includes many features that cover most of the needs of any small business. They offer both a desktop and an online solution, and each has its own set of benefits.

QuickBooks Desktop Pro

QuickBooks Desktop Pro has been a go-to for small businesses since the 1990s, and it is still extremely popular today. It is typically installed on one computer, and it is loaded with features that can be used by just about any small business. These features include:

  • Income and expense tracking
  • The ability to create invoices and receive payments
  • The ability to create and send estimates
  • The capability to track sales and sales tax
  • Bill management
  • Inventory tracking
  • Integration with numerous apps

You can also gain the following benefits for an additional monthly charge:

  • Added users
  • Report running capabilities
  • The ability to sync bank transactions
  • Phone support
  • Product upgrades
  • Cloud access

The cost for Desktop Pro is $299.95, but if you want accounting software that has a reputation for effective financial solutions, this small business accounting software is worth the investment. In addition, QuickBooks offers Desktop Pro Plus, Desktop Premier, and Desktop Premier Plus with additional features for an additional cost.

QuickBooks Desktop Pros:

  • Many features available
  • Integration with other apps
  • Most accountants are familiar with it
  • Easy to use

QuickBooks Desktop Cons:

  • Expensive
  • Limited account users
  • Requires local hosting

QuickBooks Online

If you are looking for greater flexibility and access anywhere you have an Internet connection, QuickBooks Online is a great choice. With a wide range of pricing plans available, you can select the plan that is best for your business. They offer the following four plans:

  • The Simple Start plan costs $25 per month and allows one user.
  • The Essentials plan costs $40 per month and allows three users.
  • The Plus plan costs $70 per month and allows five users.
  • The Advanced plan costs $150 per month and allows 25 users.

Whichever plan you choose, all of the online plans include the following capabilities:

  • Tracking income and expenses
  • Capturing and organizing receipts
  • Maximizing tax deductions
  • Tracking mileage
  • Invoicing and accepting payments
  • Running basic reports
  • Creating and sending estimates
  • Tracking sales and sales tax
  • Syncing bank transactions
  • Accessing product updates
  • Phone support
  • Cloud access

The Essentials Online plan includes these additional capabilities:

  • Scheduling invoices
  • Entering employee timesheets
  • Managing bills

And the Plus Online plan includes these benefits:

  • The ability to track project profitability
  • The ability to track inventory

In addition, QuickBooks offers payroll solutions for an additional fee. QuickBooks online is loaded with features, and it is widely popular. In addition, there are often incentives to try the first three months for a reduced cost. This software offers solutions for just about any small business, and there is sure to be a plan that works for you.

QuickBooks Online Pros:

  • Access online anytime, anywhere
  • Simple and easy to use
  • Affordable monthly pricing
  • Multiple plans to choose from
  • Easily customizable

QuickBooks Online Cons:

  • Fewer capabilities than QuickBooks Desktop

Although QuickBooks Desktop offers more functions, QuickBooks Online plans offer solutions to a wide range of small businesses. The platform is easy to learn, easy to use and offers flexibility and mobility, as well as customer support.

Xero

Xero offers cloud-based accounting software, and it is one of the fastest-growing companies in the field. Xero knows that small business accounting software needs to monitor finances in real-time to track cash flow and balance sheet shifts.

Xero offers top-of-the-line functionality combined with simplicity and mobility, and it is fast becoming one of the top accounting solutions for small businesses around the globe.

Xero offers its software in three different plans:

  • The Early Plan costs $9 per month and includes sending up to five invoices and quotes, entering five bills, and reconciling twenty bank transactions.
  • The Growing Plan costs $30 a month and offers the same services without limits.
  • The Established Plan costs $60 a month and includes greater functionality. In addition to the functions above, it can handle multiple currencies, manage expenses, and track projects.

Xero also offers payroll solutions for an additional cost.

Xero Pros:

  • Pay invoices faster with automated and intuitive invoicing
  • Manage inventory and stock easily
  • Flexibility and mobility
  • Integrate with over 700 third-party apps and tools
  • Create expense records
  • Create and email purchase orders on mobile devices
  • View a real-time financial snapshot

Xero Cons:

  • Must have an Internet connection to access
  • It’s a new company, so people are less familiar with it

Overall, Xero is a great choice for many small businesses, especially those that need flexibility and mobility. It works well for invoicing, and it helps small businesses monitor their financial picture in real-time. With different monthly plans, this software is affordable for most businesses.

FreshBooks

FreshBooks is accounting software that is cloud-based and easy to use. It is also known for its award-winning customer service, which is included in each of its monthly plans. Their small business accounting software has great functionality without being difficult to learn or use, and there are no limitations on the number of invoices, expense entries, time tracking, or estimates in any of their plans.

FreshBooks has three monthly plans, as well as a customizable option:

  • Lite costs $15 per month and includes five billable clients.
  • Plus costs $25 a month and includes 50 billable clients.
  • Premium costs $50 a month and includes 500 billable clients.

All plans offer the following features:

  • Unlimited customized invoices
  • Unlimited expense entries
  • Ability to accept credit card payments online
  • Ability to accept ACH bank transfers online
  • Automated bank import
  • Unlimited time tracking
  • Unlimited estimates
  • Insightful tax time reports

The Plus Plan offers all of the above, as well as the following benefits:

  • Unlimited proposals
  • Automated recurring invoices
  • Double-entry accounting reports
  • Ability to schedule late fees
  • Automated late payment reminders
  • Client retainers

The Premium Plan offers the same features as the Plus Plan, but it increases the number of billable clients to 500.

Freshbooks Pros:

  • Easy to use
  • Growing integration with third-party software
  • Allows for customization

Freshbooks Cons:

  • Pricing: if you have a lot of clients, it can become expensive
  • Difficult to create bulk invoices

FreshBooks is considered to be one of the top choices for small businesses looking for mobility, as it can be run on your computer or through the FreshBooks app on your mobile device. While it is not the top software for inventory management, it is ideal for businesses that want mobility, simplicity, and automated features.

Wave

Wave is one of the only options for small business accounting software that is free. Small businesses can use Wave anywhere where there is an Internet connection, and features such as the following are included:

  • Unlimited income and expense tracking
  • Unlimited bank and credit card connections
  • Ability to run multiple businesses in one account
  • Unlimited invoicing in any currency
  • Receipt scanning
  • Bill and invoice reminders

In addition, Wave offers several services that have fees:

  • Online payments: 2.9% + $0.30 per transaction
  • ACH payments: 1% per transaction ($1 minimum fee)
  • Payroll: $35 per month + $4 per active employee including Independent Contractors in California, Florida, Illinois, New York, North Carolina, Tennessee, Texas, Virginia, and Washington
  • Payroll: $20 per month +$4 per active employee including Independent Contractors in all other states.

Wave Pros:

  • Free
  • Easy to navigate
  • Data syncs instantly
  • Allows all your finances to be in one place
  • Multi-currency compatibility
  • Ability to create automated reports

Wave Cons:

  • Limited mobile app integration
  • Not as friendly to large businesses

Email support is available for all software, and live chat support is available for paid services. Wave is a great choice for small businesses, sole proprietors, and anyone who wants a simple, free, and automated accounting system that is mobile.

Zoho Books

When you are looking for small business accounting software, you need to consider Zoho Books. This software is affordable, yet it offers many features. Its price point makes it a great option for small businesses that want to save money.

Zoho Books offers the following three plans:

  • The Basic Plan costs $9 per month and allows 50 contacts, two users, and ten automated workflows.
  • The Standard Plan costs $19 per month and allows 500 contacts, three users, and ten automated workflows.
  • The Professional Plan costs $29 per month and allows unlimited customers, ten users, and ten automated workflows.

The following features are included in all three plans:

  • Bank reconciliation
  • Custom invoice creation
  • Expense tracking
  • Project and timesheet creation
  • Recurring transactions
  • Sales approval

The Standard plan also includes:

  • Bills
  • Vendor credits
  • Reporting tags
  • Purchase approval
  • Budgeting
  • Twilio integration

Finally, the Professional Plan includes these additional features:

  • Purchase orders
  • Sales orders
  • Inventory
  • Custom domain

Wave Pros:

  • Affordable
  • Solid bookkeeping and accounting features

Wave Cons:

  • Fewer third-party integrations
  • Lacks payroll capability

Choosing The Best Accounting Software For Your Small Business

Choosing the right accounting software for your business is a very important decision, especially if you’ll be managing the books yourself.  It’s important that you find a tool that meets all your needs, functionality requirements, and is easy enough to use.

If you have any questions at all about accounting software, small business accounting, or having us manage your QuickBooks for you don’t hesitate to reach out.  Our team of QuickBooks Certified Pros is standing by to help.

How To Void A Check In QuickBooks

If you’re a business owner that is using QuickBooks to manage your accounts, then it’s very likely you’ve needed to figure out how to void a check in QuickBooks at one time or another. Whether you’ve made an error on the amount of the check or even who you’ve made the check out to, mistakes do happen.

As there are a number of different check types as well as various versions of the software, there will be slightly different procedures for voiding a check depending on the scenario. We’ve outlined some of the most common situations below, but if you’re still having trouble voiding a check, you can contact us at any time for more assistance or to schedule training.

How To Void A Check In Quickbooks Desktop

QuickBooks Desktop is used by countless businesses around the world to manage accounting, payroll, transaction history, and budgeting. One of the reasons it’s so widely used is because of how easy it is for account management.

  1. First, click the “Banking” tab and then click on “Use Register.”
  2. Next, click on the account the check was written from.
  3. Click on the check you want to invalidate to select it.
  4. Next, click “Edit” and then click “Void Check”. You should then see a prompt asking you if you want to cancel the check for the current period. Clicking yes will turn the check’s amount to zero.
  5. Now click “Record” to finalize the void process.

Voiding a Paper Check Within QuickBooks

If you’ve written a paper check, the check voiding process may be a bit different. Here are the steps to follow in this scenario.

  1. First, click on the “Banking” tab and then click the button that says “Write Checks.”
  2. Now, click on the account the check was written from under “Expenses”
  3. Now find the “Check Number” field and enter the check number from the paper check you want to void.
  4. Next, enter a date into the “Date” field
  5. Now, click “Edit” and then click “Void Check” to void the paper check.
  6. When prompted, select whether you want the check voided for the current period or for the date the check was written.
  7. Now click “Record” to void the check.

Void a Payroll Check

If the payment in question is a payroll check there will be a slightly different procedure that you will need to follow.

  1. First, find “Payroll Center” in the main menu if you use a third-party provider or click “Employees” if you process your own payroll through QuickBooks.
  2. If you use a payroll service, click the arrow next to “Related Payroll Activities” and then click “Void Paychecks.” If you don’t use a payroll service, simply click “Void Paychecks”.
  3. Next, enter a date range to set the pay period that the check was written in. You can then press “tab” to display the checks within that pay period.
  4. Now, click on the paycheck you want to void, and then click the “Void” button. After the void is complete, the check amount should change to zero and you should show as a voided check in the memo field.
  5. One you’ve finished, simply click “Done” to exit this screen.

How To Void A Check In Quickbooks Online

If you use QuickBooks Online in your business, the procedure will be even easier.

Void a check from the Check page

You can void a check from the Check page, which lets you review the details of the original transaction.

  1. Click on Accounting in the navigation menu
  2. Next, click Chart of Accounts at the top of the screen.
  3. Now click on the bank account in question and then click on View Register.
  4. Find the check in question, and then click on it to select it and click Edit.
  5. At the bottom of your screen click the button that says More and then click on Void.
  6. Now it will ask you to confirm that you’d like to void the check and click Yes

Void a check without opening the transaction

You can also void a check right from the Expense Transactions list without having to even open the transaction.

  1. Go to Expenses.
  2. In the Expense Transactions list, locate the check to void.
  3. From the Action column, select Void from the View/Edit drop-down menu.
  4. When prompted, select Yes to confirm you want to void the check.

Working With A QuickBooks Professional

If you’re finding that working with QuickBooks is a bit more complicated than you had originally thought, we are here to help. We work with a number of clients providing a wide range of services including bookkeeping, small business accounting, QuickBooks management, training, payroll and much more.

 

Is Accounts Receivable an Asset?

When it comes to accounting, few things are more important than keeping your accounts straight and your books balanced. When it comes to running a business, few things are more important than keeping your assets straight and figuring out how to turn a profit. With accounts receivable, these two aspects of the financial and commercial world overlap.

Chances are good that, whether you are an accountant, a business person, or work in the corporate sector in any major capacity, you have heard of accounts receivable. That said, the question remains – is accounts receivable an asset? What are accounts receivable, why do they matter, and are accounts receivable an asset? How can and should you manage them to get the best results?

Accounts Receivable 101

For those not in the know, accounts receivable is a term used to refer to the amount that is owed to a seller by one or more customers. Simply put, it is a legally enforceable term for the money you have due to you.

Notably, the answer to that initial question of “is accounts receivable an asset?” is yes – with the caveat that it can count as different kinds of assets depending on the nature of the payment.

Accounts receivable can be listed on your balance sheet for the year as either a current or long-term asset. In many cases, they are listed as a current asset, since chances are good that if you are listing something like an account receivable, you will be receiving payment for them only once, and within the year.

Accounts receivable do not typically extend past a one-year period. That said, if they do last for more than one year, they are instead recorded as long-term assets.

In this latter case, you may also wish to list them as a note receivable.

While no one ever wants it to happen, there is always the possibility that some accounts receivable will never be collected due to the customer in question defaulting on the payment or not paying due to other circumstances.

In this eventuality, the account and associated losses are put down via accrual-based accounting as an allowance of doubtful debts.

The name there says it all – you have reason to “doubt” you are going to receive this debt, and are thus making allowances in your recordkeeping accordingly. This can help you keep straight which debts are accounts receivable which you can “depend upon” being repaid, and which are more dubious.

The advantage of this system is clear. If you know how many outstanding accounts receivable you have, you can budget accordingly, knowing that they are, relatively speaking, “sure” things, rather than budgeting according to more “doubtful” debts and assets which may never materialize.

Other Important Points

With the distinction between accounts receivable and allowances of doubtful debts clearly delineated, let’s take a look at a few other key points for noting and handling each.

Your balance sheet will likely be comprised of paid and unpaid receivables. In addition, your balance sheet is likely to include invoices from the current period as well as past pay periods. You will want to make sure all of these are clearly distinguished from one another on your balance sheet.

That said, due to accounts receivable being an asset that has not yet been converted into revenue, this discrepancy is likely to show up on your balance sheet, with your balance with the accounts receivable added likely being larger than your reported revenue for a given period. You will, therefore, want to be careful to check these two against one another to make sure that you know how much actual revenue you have at any given moment.

It is also important to note that accounts receivable only arise in instances where companies allow customers to pay via credit. When this is not the case, and all customers pay upfront, accounts receivable do not exist.

A Note on Analysis

Finally, if you are analyzing a business’s health, one point you’ll want to compare are its accounts receivable balance against its revenue on a trend line. If you find the ratio to be declining, the company is likely experiencing cash flow or credit collection problems from clients.

That said, when properly understood and utilized, accounts receivable can be vital to a company’s long-term success. If you are in need of help with your accounts receivable, you can always engage a CPA firm like Sanjay Gupta & Associates, LLC.  If you’d like to schedule a consultation, feel free to give us a call or send us an email today.

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