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What is accounts receivable and why should I track it?

Accounts receivable is the money customers owe you for work completed or products delivered but not yet paid for. When you send an invoice with payment terms like Net 30, the amount becomes part of your accounts receivable until the customer pays. It shows up as an asset on your balance sheet because it represents cash you’re entitled to receive.

Tracking AR matters because cash flow keeps your business running. You can show a profit on paper while struggling to make payroll or pay vendors because that profit is sitting in unpaid invoices. A business with $50,000 in receivables looks healthy until you realize $30,000 of it is more than 90 days overdue and unlikely to come in without serious collection effort.

The aging report is the primary tool for managing receivables. It groups what customers owe you into time buckets, typically current, 1-30 days past due, 31-60 days, 61-90 days, and over 90 days. This snapshot tells you immediately who needs a follow-up call and where your collection risk sits. An invoice at 15 days past due is a reminder email. An invoice at 75 days past due is a phone call and possibly a payment plan conversation.

Without tracking, money slips through the cracks. Invoices get sent and forgotten. Customers who always pay late keep paying late because nobody follows up. By the time you realize someone owes you $8,000 from three months ago, collecting becomes harder. Some of that money never comes back, and you’ve already paid for the labor and materials to deliver the work.

Review your AR weekly if you invoice frequently or at least twice a month for lower-volume businesses. Make follow-up part of the routine rather than something you do when cash gets tight. The invoicing service VJD offers includes payment tracking so nothing falls off your radar.

Good AR management also helps you spot patterns. Maybe one customer consistently pays at 45 days regardless of your terms. Maybe a certain type of project tends to have payment delays. These insights let you adjust your approach, whether that means requiring deposits upfront, tightening terms for certain clients, or building payment delays into your cash flow projections.

If keeping up with invoicing and collections takes time away from running your business, bookkeeping services that include AR management can handle the tracking and follow-up for you. The goal is making sure the money you’ve earned actually makes it to your bank account.

Fractional CFO & Bookkeeping

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More Questions

What is cash flow forecasting and why does it matter?

Cash flow forecasting projects money coming in and going out over the coming weeks and months. It helps you plan for payroll, large expenses, and potential shortfalls before they become emergencies.

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Can a fractional CFO work alongside my existing bookkeeper and accountant?

Yes. A fractional CFO sits between the bookkeeper who records transactions and the accountant who files taxes, turning the numbers into strategic decisions. Each role serves a different purpose, and the coordination is usually straightforward.

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Which financial metrics should a small business track?

Gross margin, net margin, cash runway, revenue trends, and break-even are common starting points. But the right metrics depend on your business model. The point is tracking what helps you understand your position and make decisions.

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How do I handle estimated tax payments?

Quarterly estimated payments are due in April, June, September, and January based on what you expect to earn for the year. Keeping your books current makes it possible to calculate accurate estimates, and coordinating those numbers with your accountant helps you avoid underpayment penalties.

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How often should my books be updated?

Monthly is the standard minimum for most small businesses. This keeps reconciliations current, reports meaningful, and cash flow visible. High-volume businesses may benefit from weekly updates.

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What is a chart of accounts and why does it matter?

The chart of accounts is the structured list of categories where every transaction gets recorded. A clean, well-organized chart makes your financial reports meaningful and helps you understand where money is going.

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New Jersey fractional CFO and bookkeeping firm serving small and midsize businesses. Led by Vin Daniels with over 20 years of finance experience across government and corporate sectors. Helping business owners focus on growth since 2012.

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