Ask FundThrough

Working Capital

How to Audit Your Cash and Accounts Receivables

Auditing Cash Banks and Account Receivables

Before you know it, it’ll be the end of the first quarter. That means it will be time to learn how to audit your cash and account’s receivables, and file taxes. It’s also a critical time to have every transaction down on paper to ensure proper compliance. 

It also means that you’ll need to conduct your quarterly analysis on your accounts receivable and cash balances. 

Cash flow is the lifeblood of any small business. 

But any company that is growing fast can fall behind on managing their balance sheet.  

Don’t wait until tax time or the end of the quarter.  

Every two weeks at the most (and month at the least), you should audit your cash transfers and accounts receivable to ensure profitability and sustainability. A delay on just one late-paying customer can dramatically alter your cash position and forecasting. 

Today, we’re going to discuss the best way to avoid accounting mistakes, invoicing errors, or even fraud. This is a simple guide to conducting an audit of your cash accounts and outstanding customer invoices.  

How to Audit Your Cash and Check Accounts

Before you know it, it’ll be the end of the first quarter. That means it will be time to file taxes, and critical to have every transaction down on paper to ensure proper compliance. 

It also means that you’ll need to conduct your quarterly analysis on your accounts receivable and cash balances. 

Cash flow is the lifeblood of any small business. 

But any company that is growing fast can fall behind on managing their balance sheet.  

Don’t wait until tax time or the end of the quarter.  

Every two weeks at the most (and month at the least), you should audit your cash transfers and accounts receivable to ensure profitability and sustainability. A delay on just one late-paying customer can dramatically alter your cash position and forecasting. 

Today, we’re going to discuss the best way to avoid accounting mistakes, invoicing errors, or even fraud. This is a simple guide to conducting an audit of your cash accounts and outstanding customer invoices.  

Auditing Your Accounts Receivable

Accounts receivable are the purchases by customers on credit. You have to exchange your goods and services with your customer and you will allow them to make payments at a later date. You should send your invoices as soon as possible to ensure prompt payment (and make sure to add your logo to the invoice).

 

Your next step is to align your invoices to all checks, digital payments, and corresponding receipts.

Again, the figures should match all the way down to the penny

If you are currently looking at an invoice that lacks a check or payment, you need to check your records to confirm. If you have no payment listed, it is important to contact your customer to check for payment. 

When speaking with them, be sure to ask for payment confirmation for your records. 

Next, take the time to explore and confirm any shipping. Bills of lading will tell you what you shipped to customers. If you do shipping, you should have copies of these bills of lading. If an invoice doesn’t match a bill of lading, you likely failed to send a bill to your customer. Contact the customer and send a new invoice directly (and be sure to utilize any best practices around invoice management).

 

Finally, if you find that noted that the invoice was paid – but you have no confirmation of payment – you likely have an issue with check or payment processing. You will want to check to see if you issued a receipt for this invoice. Then, you will want to contact your bank with the payment confirmation to identify the location of your payment. 

A failed payment may suggest incorrect account information used by the customer or sent to them. 

Bringing Everything Together

Keep in mind that any outstanding invoices count on your balance sheet as account receivable. When you total your check deposits, cash deposits, credit card, and other receipts, and accounts receivable, this figure should match the total amount of gross sales for the specified period. 

If these figures do not match, you should repeat the process to identify sales transactions, inventory, and other processes to determine where the gap exists.

 

If you have an unusually large amount of outstanding invoices, you may have a collection problem. In this case, it is important to speak with cash flow experts who can help you address payment issues and explore potential options. If you regularly have late-paying customers, you might want to consider other collection and funding services like invoice financing and invoice factoring to boost your cash flow and help improve the accounting of your accounts receivable.

 

If you’re looking to learn more about these types of services, please contact one of our experts in the chat. 

 

We can explain more on invoice financing – the process of using your outstanding invoices to receive a payment within 24 hours – and ways to improve your cash flow management.

 

Learn more, right here.

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest

Get our latest insights that can help build your business and improve your cash flow

Suggested Readings

Person holding cash after getting a revolving line of credit

What is a revolving line of credit?

A small business revolving line of credit is a lending solution that operates similarly to a credit card. This form of funding allows users to