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Knowing what you’re owed

Your company’s receivables report may not be as accurate as you think
Friday, April 19, 2013 - 13:41
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What if I told you that you don’t really have an accurate handle on your company’s receivables? You might disagree and point to a report printed from your management system. But stick with me through this column, and I bet you’ll realize that report may not be as accurate as you think and isn’t all that you need to properly understand and manage receivables.

But first, let me introduce myself, in this my first column for ABRN. Last year I joined Mike Anderson’s team of consultants at CollisionAdvice, helping collision repair businesses interested in having clear and accurate financial information with which they can measure and improve their business. I’m a CPA and brought with me to this new position years of banking and small business accounting experience – including experience helping single-location and MSO collision repair operations.

That experience has given me access to dozens of shop’s financial records, and I can tell you that virtually all of them initially had problems related to receivables.

Here’s one reason. Most of the collision repair businesses I’ve worked with are using a management system, and most run a receivables report from that system. But most shops are not also reconciling receivables in their accounting system, so the two systems may show very different numbers for receivables balances.

One way this lack of reconciliation of both systems impacts your business is at tax time; chances are, your CPA uses figures from your accounting system rather than your management system, so if the two don’t jive in terms of receivables balances, your CPA isn’t getting accurate information.

I recommend checking with your bookkeeping staff to ensure they are trained to reconcile receivables correctly in the accounting system. In some systems, for example, if the name on an invoice and the name on a payment aren’t exact matches – even just a missing comma can create an issue – the payment may not be matched up to the invoice in the system, and both could be left hanging out there.

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