Accounts Receivable in QuickBooks: A Comprehensive Guide

Managing accounts receivables effectively is one of the most crucial aspects for maintaining healthy cash flow for a business. Accounts receivables in the simplest words means extending credit to your customers for the provision of goods and services, with the expectation of receiving payment at a future date. The credit period is short ranging from a few days to a few months depending on the business. Late payments or mismatched receivables can lead to financial stress, and that is exactly when QuickBooks Online accounts receivable come into the picture.

Developed by Intuit, QuickBooks is a one-step solution for streamlining the entire accounting and bookkeeping process. From accepting payments to tracking unpaid invoices, this effective software offers everything you need to stay on top of your finances. Whether you are using QuickBooks Online or QuickBooks Desktop, the account receivable feature enhances your cash flow management by simplifying receivables and taking full charge of your business finances.

Moving further in this blog, we’ll thoroughly dive into the intricacies of the accounts receivable in QuickBooks for a better understanding.

What is Accounts Receivable in QuickBooks?

To stabilize the financial aspect of any organization, QuickBooks Online accounts receivable is an important element to optimize their accounting processes effectively. It serves as a record of all outstanding invoices and payments owed to the business. QuickBooks allows users to track accounts receivable efficiently, providing tools to create, send, and manage invoices in order to monitor the payment status of each customer.

By staying on top of accounts receivable, businesses can effectively manage their cash flow, improve collection processes, and ensure customers promptly fulfill their financial obligations.

Effective management of accounts receivable via QuickBooks Online involves regular monitoring of outstanding balances, timely invoicing, and consistent follow-up on overdue payments. QuickBooks offers features such as customizable invoice templates, automated reminders for overdue payments, and detailed reports that provide insights into the overall financial health of a business. By leveraging these tools, companies can streamline their overall accounting processes, reduce the risk of late or missed payments, and maintain a steady cash flow to support their ongoing operations and growth.

What is the Accounts Receivable Turnover Ratio?

The accounts receivable turnover ratio is a financial metric that assesses how efficiently a company collects payments from its customers within a specific accounting period. This is also known as the “receivable turnover” or “debtors turnover” ratio.

The formula for calculating the accounts receivable turnover ratio for one year is as follows:

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

Current Ratio

This financial metric, often referred to as working capital, serves as an indicator of a company’s liquidity. It assesses the company’s capability to meet short-term financial obligations using readily available cash or other liquid assets that can be converted into cash within one year.

Working Capital Ratio = Current Assets/Current Liabilities

Days Sales Outstanding (DSO)

This metric reveals the average duration it takes for your customers to settle payments for the goods and services provided by your company.

Days Sales Outstanding = Accounts Receivable for a Given Period/Total Credit Sales X Number of Days in the Period

How to Manage Account Receivables with QuickBooks?

Being one of the most convenient platforms for managing account receivables, QuickBooks simplifies complex accounting processes and enables businesses to achieve operational efficiency. Here’s a streamlined approach to manage your accounts receivable effectively via QuickBooks:

1. Establish Credit Policies

The initial step is setting up your credit management process. Before extending credit to customers, assess their creditworthiness & their ability to make timely payments. QuickBooks Online accounts receivables can assist in automating and tracking these assessments.

2. Invoice Generation

Issue and generate invoices for the provided goods or services. Make sure that invoices are accurate and detailed to avoid confusion or disputes. Simplify and streamline the invoicing process by integrating with QuickBooks.

3. Payment Collection

After sending invoices, focus on collecting payments efficiently. Accept payments through various methods, but integrating QuickBooks into accepting payments can expedite the process and enhance customer convenience.

4. Address Overdue Payments

Establish a clear resolution for managing past-due payments and disputes. Maintain open communication with customers to address their concerns and resolve issues promptly. QuickBooks Online accounts receivable can help you track and manage these interactions effectively.

5. Conduct Regular Reconciliation

Consistently reconcile payments with outstanding invoices to identify discrepancies or overdue accounts. Record each payment in your accounting system to keep your financial records accurate and updated.

By following the above-mentioned approaches, you can ensure efficient accounts receivable management and maintain healthy cash flow. Before concluding, let’s take a look and understand how to add customers’ information in QuickBooks.

Also Read: Benefits and Importance of Account Reconciliation in Accounting

How to Add Customers’ Information in QuickBooks?

1. Launch QuickBooks and click on the “Customer Center” button.
2. Choose “New Customer and Job” from the top of the customer center menu and then select “New Customer.”
3. Enter the customer’s name in the provided field.
4. If applicable, input the customer’s outstanding balance in the “Opening Balance” and “As Of” fields.
   Note: Avoid entering information in the “Opening Balance” field for multiple jobs recorded under one customer or client. Instead, create a separate customer or client balance while creating a new QuickBooks Job entry.
5. Optionally, include additional information such as the customer’s address, contact number, and sales tax details in the appropriate columns. Click “Next” to save and input more customer information, or select “OK” to save and exit.

Adding an Accounts Receivable Account

1. Launch QuickBooks and select the “Chart of Accounts” from the “Lists” menu.
2. Click on “Account” at the bottom of the list, then choose “New,” followed by selecting the “Accounts Receivable” option and clicking on “Continue.“
3. In the “Account Name” field, enter the desired account name, and if available, input the account number in the “Number” field.
4. Click “Next” to save the account and create a new one, or select “OK” to save and exit.

Conclusion

Mastering the art of directing accounts receivable in QuickBooks Online and Desktop is key to effortlessly managing the cash flow of your business effectively and ensuring prompt payment collection. Leveraging features like automated invoicing, real-time tracking, and customized payment reminders allows you to streamline your processes and avoid payment delays. Also, accepting credit card payments with QuickBooks leads to enhanced convenience and improved customer experience.

So, embrace the power of QuickBooks and optimize your accounts receivable management to keep your business running smoothly. For more information on managing accounts receivable or setting up QuickBooks, connect with our QuickBooks support team for quick response. 

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