The business world is going through rapid changes, and to keep pace with that, organisations must possess the right tools. For businesses to remain competitive in this digital economy, companies need to make strategic decisions based on data. One of the most important tools for decision-making is accounts receivable (AR) reports, as they provide critical insight into a company's financial standing, customers, and performance trends.
Simply put, accounts receivables are the lifeblood of your business operations and critical for your business’s cash flow. To calculate your business' profitability and clearly understand your income, you need to track your accounts receivable regularly.
Where are accounts receivables reported?
Accounts receivables are listed on the balance sheet within financial statements and is the total value of the invoices that are currently outstanding.
To generate an accounts receivable report such as a cash reconciliation report using accounting software, you need to collect and analyse the data from customer invoices, payments, and the flow of cash within a company. With that said, here are 8 key accounts receivable reports businesses should track.
1. Accounts receivable ageing reports
The first of the accounts receivable reports businesses should track is the ageing report. The AR ageing report contains a full list of unpaid invoices from customers and the type of customer transaction. Accounts receivable ageing report is primarily used by collections personnel to determine which invoices need to be paid as soon as possible based on an up-to-date payment history. In the world of accounting, accounts receivable ageing reports refer to sorting the receivables by the due date. This helps estimate the bad debt expense for a business.
This report also provides insight into which customers are having difficulty paying their dues, thus giving you a chance to intervene and offer different payment options.
The accounts receivable ageing reports also help businesses estimate the level of bad debt as well as doubtful accounts. If a receivable is deemed to be uncollectible then it is referred to as a doubtful account. The amount left is then referred to as a bad debt. If your accounts receivable report ageing report starts to demonstrate that your number of doubtful accounts is growing then it may be worth thinking about changing your credit policies. By changing your credit policies and credit terms, you can correct an issue like this. It’s just one example of how an accurate accounts receivable ageing report could be beneficial for a company managing its finances.
In this AR ageing report, a business needs to rethink its collection strategy if a large collection is overdue. It also allows businesses to identify customers who are consistently late in payments and take appropriate action to ensure that they manage their unpaid invoices on time. The organisation needs to relook at its credit control policy to mitigate risks and improve its collection strategies to achieve optimal cash flow, using the AR ageing report as an effective data tool.
To create an accounts receivable ageing report, a business must receive all its outstanding invoices. They should then segregate the invoices by using the ageing schedule as well as the amount due. Using the ageing schedule will provide an accurate representation of all customers with unpaid invoices, the amount outstanding, and the payment history.
You could also benefit from exploring the AR ageing summary report. As the name suggests, similar to the general accounts receivable ageing report this summarises all the unpaid invoices as well as the statement charges. These are grouped based on the length of time that the invoice has been past due.
2. Customer payments reports
Payment reports are accounts receivable that provide an overview of the payments received by a company. This report includes the following information:
- The date and amount of payment received
- The customer name or account number associated with the payment
- The payment method (credit card, ACH transfer, etc.)
- The invoice number
- Any fees charged for processing the payment
Payment reports are essential for tracking customer payments and keeping accurate records of the payments received. By monitoring these payment reports, businesses can stay on top of customer payments and maximise their accounts receivable management.
3. Receivables by customer reports
This accounts receivable report helps identify the customers and their amounts due, providing details on outstanding balances. The AR reports provide complete details of each customer, including their credit limit, customer credit quality, salesperson associated with the account, currency preferences, discounts, geography, payment information, and history. The Receivables by Customer Report gives a business insight into how much it needs to collect from different customers. With this report, organisations can quickly assess which customer accounts are delinquent and which customers are making timely payments. Receivables are also crucial for managing customers who have credit lines.
This report helps identify customer credit risk and anticipate potential bad debts. It allows businesses to apply discounts or incentives to certain customers who pay promptly. This report also segments customers by the amount of revenue they generate for your company. This helps you to understand customers' buying behaviour and plan sales strategies accordingly. It can also be useful for reconciling any customer accounts.
4. Cashflow forecasting reports
The cash flow accounts receivable report provides insight into a company's cash balance, future cash needs, and potential sources of liquidity. This report helps businesses identify when additional funds may be needed to meet short-term expenses, as well as plan for long-term investments.
This report is essential for any business in order to make informed decisions about how much money it needs to keep on hand and when it should invest in additional inventory or equipment. With this report, companies can also analyse whether their accounts receivable collection policies are effective and if they need to be adjusted or changed.
5. Aged trial balance
An aged trial balance accounts receivable report provides a detailed list of all accounts receivable, including the customer's name, invoice number, date of invoice, amount due, and payment status. Similar to ageing reports, this report can be used to track customer payments and determine which invoices are outstanding in order to prioritise payment collection efforts.
It is important for businesses to regularly review this report in order to ensure that all payments are received on time and are accurate. This report can also be used to identify any discrepancies or errors in customer invoices, which can help the company avoid potential disputes. In detail, an ageing detail report shows the following information for each customer's transaction:
- It shows the customer's legal name
- The type of customer transaction, including invoice, statement charge, or customer credit
- The date on which the transaction was entered into the system
- The number of transaction
- Payment due date
- The number of days past due
- Lastly, the amount due
6. Customer loss reports
Customer loss accounts receivable reports provide an overview of customers who have stopped doing business with a company. This report allows the business to identify any customer churn and make adjustments to retain its current customers.
For example, this report helps businesses understand why certain customers are no longer making purchases or availing services from them. The information provided in this report can also be used to assess the effectiveness of marketing campaigns and adjust strategies accordingly.
The AR report can provide useful insights into customer buying behaviour and preferences, allowing the business to tailor its products or services more effectively. Furthermore, this report helps businesses avoid costly mistakes by providing them with valuable data on their customers' experiences.
7. Customer credit reports
Accounts receivable Credit reports provide an overview of a customer's creditworthiness. This report includes information on the customer's payment history, debt limits, and current financial status. Credit reports generated by accounts receivable automation solutions such as HighRadius combine data from multiple credit agencies such as Experian, TransUnion, and Equifax.
This report helps businesses determine the risk of extending credit to customers, calculate payment terms and discounts, and monitor customer payments for accuracy. Credit reports also help businesses to identify customers who may be at higher risk for non-payment or defaulting on debt. Essentially, this helps limit levels of credit risk.
Companies can also use this AR report to set appropriate credit limits based on each customer's financial situation. This helps businesses manage their accounts receivable and potential bad debts more effectively. They can also be used for decisions relating to extending credit lines for certain customers.
8. Revenue by customer reports
Revenue by customer reports provides an overview of a company's total sales revenue broken down by customers. This report can be used to identify customers who are the most profitable and those who are at risk for non-payment or defaulting on payments.
This report also helps businesses track customer purchasing trends, enabling them to better understand their customer base and target customers more effectively. In detail, this report shows the following information:
- The total amount of sales revenue generated by each customer
- The date on which each sale was made
- The type of product/service purchased by a customer
- The payment terms and discounts offered to customers.
By regularly monitoring this AR report, businesses can identify opportunities to improve customer loyalty and profitability. This helps businesses maximise their accounts receivable management and increase overall sales revenue.
9. Transaction reports
Transaction reports may be used to track the transaction history of your customers’ invoices. As such, transaction reports will often play a crucial role in the accounts receivable transactions auditing trail. Typically, these AR reports will include the billed amount, any payments that apply to the invoice, and the current balance that is due.
10. Sales reports
Sales reports are used to identify the most profitable products as well as those with the highest level of returns and complaints. These AR reports can be used to track key performance indicators related to sales including:
- Number of sales made
- Revenue generated
- Customer lifetime value
Importance of automating your accounts receivable reporting process
Businesses use accounts receivable reports to monitor their customers' payment activities. These reports give businesses a better understanding of their customer's payment patterns and help them manage cash flow more effectively. By automating your accounts receivable process you're also able to automate and streamline your accounts receivable reporting as well. Below are the benefits of automating your accounts receivable process for reporting purposes.
Improved accuracy and efficiency
Accounts receivable reporting helps to ensure accuracy by eliminating manual entry errors that can occur when manually entering data into spreadsheets or other systems. The automated system allows for more accurate and up-to-date data, which is critical for making informed decisions. It eliminates the need for manual entry, which can be time-consuming and difficult to manage while also impacting your cash flow. The reports are created quickly, eliminating the need for manual calculations or data analysis. Without the correct, accurate information, provided by AR reports businesses run the risk of working with inaccurate financial statements. This will lead to more issues with attempts to manage cash flow and is always going to be detrimental to the financial health of a company.
Improved security
Automating your account receivable process helps to ensure data security and privacy as the data is securely stored away from unauthorised access. This type of automated AR reporting protects customer information from being accessed by anyone other than authorised personnel, ensuring that customer information remains secure. This is particularly important if you are exploring aging reports which will include a lot of sensitive data on your customers.
Helps with employee retention
Automating a business's accounts receivable reporting process helps to ensure that employees are spending less time on manual data entry tasks, freeing up their time for more important activities. Employees will always dread gathering the data for things like aging reports and with automated AR reports, this can be avoided. It can help reduce employee turnover and improve overall employee retention.
Forget the old ways of doing things
Manual systems can negatively impact your business's productivity, cash flow, accuracy, and security. Automating the AR reporting process helps businesses save time and money while ensuring accurate and timely data is available for decision-making. It ensures that you can access all the AR reports you need without wasting crucial amounts of time or money. This allows businesses to focus on more important tasks and initiatives that will help them grow and succeed.
Grow your business using accounts receivable reports
In conclusion, understanding the different types of accounts receivable reports is critical for effective accounts receivable management. By monitoring examples such as an accounts receivable ageing report on a regular basis using an enterprise resource planning tool, businesses can ensure that they are maximising their sales revenue while keeping their customers satisfied. Businesses should explore all relevant AR reports including aging reports, cash reconciliation reports, sales reports and customer reports. The more reports you analyse, the easier it will be to mitigate risk by managing the finances of your business. With the right accounts receivable management strategy in place, businesses can maximise their profitability and customer loyalty.
