December is such a blurry month with all the holiday festivities, meeting goals, and the necessary accounting activities needed to close out the year. Accounts Receivable and Accounts Payable should be on your checklist to finalize. Read below for some quick tips.

Accounts Receivable

2. Review aged receivables for write-off

3. Follow-up on current and outstanding invoices

4. Send outstanding accounts to collections

5. Calculate Accounts Receivable Turnover Ratio (Use the calculator below)

• Accounts Receivable Turnover Ratio = Net Sales/Accounts Receivable

1. Calculate Average Collection Period also know as Days sales outstanding (DSO)

• Average Collection Period = 365/Accounts Receivable Turnover Ratio

The longer an unpaid invoice stays on the books, the longer your days sales outstanding (DSO) and less cash flow available. The DSO is a good indicator of your business’ ability to collect on receivables and could affect potential credit or investment opportunities.

Accounts Payable

1. Review accounts payable summary and compare what was paid against accrued

2. Pay any outstanding balance with vendor

3. Remaining unpaid debt should either be listed as a liability or accrual expense on the balance sheet.

Keeping track of all company debts is crucial to managing your finances effectively.

Stay tuned for our final tip on Review Year-End Financials and Plan for the New Year.

Need assistance with managing your accounts receivables and payables? Click here to schedule your bookkeeping analysis call.