5 Reasons to Regularly Review Your Sales Ledger

If you provide a high volume of services and/or products to customers and are paid through invoicing, you’ll need a rigorous system to keep track of all transactions and pending payments. Part of this system will involve regularly reviewing your sales ledger.

Why should we review our sales ledger?

Your sales ledger is the account that records all the outstanding payments from credit customers. It could be easy to see how, without this data, your cash flow management could start to unravel.

Here are the top reasons it makes good business sense to regularly review your sales ledger.

1. Easily identify problem customers

If there are invoices that are repeatedly paid late, incorrectly, or not at all, your sales ledger should make it easy to flag this up. You can then take reasonable steps to retrieve the money, escalating action if required. If necessary, you can choose to add interest to late payments and get your credit controller to prioritise communications with this customer.

If late payments are harming your cash flow or even your growth potential, it’s important to take action and protect your business.

2. Improve cash flow forecasts

Making your cash flow a little more predictable can help you make more informed business decisions. It will never be 100% predictable, but by having a strategic credit control and sales ledger management process in place, you can have a clearer picture of your financial situation at various periods throughout the year.

3. Nip financial problems in the bud

The sales ledger is your window and guiding light to upcoming cash flow shortfalls. Ideally, you’ll want to make sure that the amount due to your business never goes over a certain amount. This can change as your business and financial circumstances change, but having a threshold in mind will help your accounting team have a strict goal in mind.

4. Reduce the risk of bad debt

By ensuring that money owed to your business is received within a reasonable timeframe, you can help reduce the risk of acquiring bad debt. You can also identify the optimum time to send invoices and know when to apply for funding opportunities.

5. Make sure that your credit control is under control

You will want to have a fine-tuned sales ledger and credit control system in place. Regularly reviewing your sales ledger management will help you determine whether the amount in your accounts receivable is increasing or decreasing. This could be an indication that you need more or less time spent on your credit control process. It’s all about scaling to suit your business requirements as and when they change.

Managing a sales ledger can be a balancing act that requires a great deal of time and attention. It needs to be up-to-date and accurate—that’s a given. You can choose to update daily, weekly or monthly. How often you update will depend on the volume of billable work or items.

If you would like professional assistance with managing your sales ledger and credit control, the industry experts at Ratiobox are happy to help. Book your free, no-obligation consultation with one of our specialists today.