

In this guide, we’re looking at exactly how better sales ledger management can keep you on top of bad debt.
The sales ledger is a critical financial function for businesses that have credit customers. Where customers or clients don’t pay for goods or services straight away, such as through an e-commerce payment portal, you’ll need a record of all of the payments that are due and pending. This is what the sales ledger is for. The sales ledger records every customer transaction and the amount owed by each company or individual.
Without this, you would easily lose track of the money owed to your business. With no strategic process in place to retrieve this money, you could also fall into debt. It’s an essential part of cash flow management.
What does healthy sales ledger management look like?
The sales ledger needs to include all the right information and be presented in a way that’s easy to understand.
Here are some key examples of what should be recorded:
- Amounts receivable at the beginning of the period
- Sales made
- Total payments received
- Sales returned
- Discounts
- Total outstanding balance at the end of the period.
The regularity with which the sales ledger is updated will depend on the volume of sales. If you make a lot of sales, it might be worth updating daily or weekly. Make sure this task is scheduled with the relevant employee or service provider. As your business grows, you may want to review the process again to make sure the records are fit for purpose.
All of these steps will help you reliably keep track of your accounts receivable, making sure nothing falls through the cracks. You can also automate some of these processes or records with accounting software.
Review your credit control process
Credit control is the process of retrieving the money. Whether that’s sending invoices or making outbound calls to chase payments that haven’t been made within a reasonable timeframe, having a strategic process in place is key. The recording of the amounts needs to be accurate, easily accessible and updated regularly. But this is only one part of the process.
Whoever is responsible for credit control should know who to call and when. They should also know how to prioritise these communications. This will help retrieve money within a suitable timeframe.
All of the advice outlined above should help prevent cash flow problems, which, if left unchecked, can lead to bad debt.
If you need assistance with your sales ledger or would like to review your current process, the specialists at Ratiobox are happy to help. Schedule your free initial consultation with us today.