Just as you don’t want to miss out on tracking your expenses, you definitely don’t want to miss out on collecting your hard earned cash. You may be making money from a number of different sources (see Revenue Plan Toolkit), which means you want to make sure you’re collecting and tracking your sales efficiently.
Money that is owed to you (called “receivables”) has to be tracked in your accounting system. You may collect money in cash, checks, or electronic payments. In all cases, you need to record the transaction and be able to tell a story with your data, from where the money originated, to where it went.
There are two types of transactions when you sell something to someone:
Promise to Pay
This type of transaction occurs when a customer orders something from you and you deliver the product or services before you take payment. Typically it is used when your customer is a business or the volume is high (e.g., bulk purchase of merchandise, writing songs for an ad agency). Because you are expecting payment at a later date (based on your invoice terms), make sure the customer is reputable and able to pay.
Pay Before Receipt
This is a typical “in-store” or e-commerce transaction where the customer pays you before you provide him with a product or service. It is a good idea to use a “point of sale” system (such as Square) to track sales and collect payments so you have a good record of where and when you received the money. These systems should integrate with your accounting system so that you don’t need to manually enter all the transactions.
Your accounting system should allow you to create and issue invoices, but if that feature is hard to use or overwhelming, you can use third party invoicing software that can be connected to your accounting system.
When you create an invoice, you will need to include the customer name, date of issue, due date and payment terms, taxes, item or service description, and pricing. Once the invoice is sent to the customer, they will owe you that money by the due date. If payment is overdue, follow up to collect that money.
Decide who is going to manage your books and keep track of financial transactions.
Managing expenses requires discipline. You will need to make decisions about your business rules and processes.