Follow-up Unpaid Invoices – Year-end Accounting
The year will soon get to an end. This is the time for small businesses to start getting back their payments. It’s very important for you as a business owner to start chasing your unpaid invoices before you close your books for this year.
You may have clients that may not pay you what they owe you. Others may have forgotten to pay. It’s time for you to send them a reminder as the year gets closer to its end.
When preparing for end of year tax filing, the first thing you get in order is your bookkeeping. You need to ensure all your business expenses have been recorded. Also make sure to separate your business expenses from personal.
As a small business owner or manager, you’re required to gather and record all your receipts and bills for the year’s purchase, as well as customer invoices and bank account statements.
Most common activities during the end of year are done to provide you with insights on the financial situation of your business. This includes closing entries and journal adjustments. Writing off bad debts and other accounting and tax activities.
Note that business documents (invoices, receipts and bills) can be requested by the tax administration any time the need arises. As a taxpayer, you are obliged to keep your business transactions and documents for at least ten years.
It’s now time for you to take a closer look at some of your transactions to figure exactly how you’ll follow up unpaid invoices.
Do you have unpaid invoices?
If yes, then know it’s absolutely important for you to start checking on your creditors. If you have unpaid invoices, you will need to recover them before the end of the year.
In reality, it’s very rare to find a business that isn’t owed. If you are one of such businesses with clients that are unlikely to pay their dues, note that not many remember to pay on time. In this case, you will have to remind them about what they owe you.
You have to frequently send out reminders to your customers who have pending payments to make. This task will help you get paid on time. This can help you save a lot of time for the year-end accounting last-minute stress.
Free invoicing and accounting software
Wave is one of the most popular free online accounting software for small business. Wave App has a web app and a phone-app version. It has an invoice software that is free and easy to use. You can automate reminders to your business’ creditors. With Wave, you can create profession invoices for free.
There is also Khatabook which you can use to manage your business and personal ledgers on your phone as well as your computer. The web version is still on Beta version.
Reminders for unpaid invoices
Frequently reminding customers that it have unpaid invoices will help you get paid on time. I know most business owners in Cameroon hate the invoicing process as it consumes a lot of time and can at times be frustrating. This frustration gets worse when you are not paid on time. At times, you are not even sure they received it.
Unfortunately, not all your clients will pay you, even after several reminders. When such happens, you can write it off as a bad debt, especially if you think they are never going to pay.
Bad debts? When to write off
There are times some unpaid invoice stay for long until they become worthless. Once a business does not expect to recover its unpaid invoices, the debt becomes a bad debt and written off.
It’s necessary to write off bad debts when you consider the unpaid invoice is uncollectible. If not, the business will have a high accounts receivable balance. This will overstate the amount of outstanding unpaid customer invoices that will be converted into cash.
Writing off a bad debt can help reduce the tax liability of the business, as part or all of the amount in the invoice will not be considered as income.
To ensure an invoice has stayed long without being paid, you need to go through your transaction report detail in order to find out how long. Clients that have kept unpaid invoices for a long time can be found in the report. Make sure you send a final unpaid invoice reminder. One doesn’t know, you can get a response. On the other hand, if there is no response, write it off as overdue.
If time is not what you have, you can outsource it to experts who can do it for you. OpenHub Digital has an expert team and partners at your disposal.
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This content has been prepared for information purposes only. It is not intended to provide, and should not be relied on for, tax, accounting or legal advice. You need to consult your own tax, accounting or legal advisors before engaging in any transaction.