Featured Coaching Training: Accounts Receivable Defined
How much money do people owe you? Learn everything you'll ever need to know about accounts receivable and other accounting tips that will help your business here in this training taught by the Small Business Administration's "Entrepreneur of the Year" Clay Clark.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Lesson Nugget: Increasing your knowledge of accounting and financial terms empowers you to communicate more effectively with others in the business world.
Ask Yourself: Am I allowing my accounts receivable to accumulate to a point that is damaging to my business?
Accounts Receivable: Amounts owed to your business that you expect to receive. Accounts receivable include sales your business made on credit.
Fastidious: Very attentive to and concerned about accuracy and detail.
amazing.com for accounting and time management
-My name is Caleb Taylor, and my favorite job here at Thrive 15 is sitting down with ClayClark, and today, we will do just that as he defines for us what the accounts receivable means and how it applies to your business. Here atT hrive15.com, the online platform that teaches time management, sales, marketing and more, we believe that knowledge without application is completely meaningless. So today, always ask yourself, how can I apply these principles to my life and my business? If not, today's episode could be more meaningless than being late to a seminar on being prompt.
All right, Clay. It's wonderful to see you back here again.
-I would do anything for love, but I won't do that.
-OK. That's good. Good. On that note, actually, let's talk about accounting. OK. So in the financial planning, and then we're going to specifically dive into this topic of defining the accounts receivable. And as you guys have seen, I think what we're doing is we're defining a lot of these terms in a quick five-minute burst. OK.
And we're doing that to make sure you understand these terms. You've actually shared a story on another one of these episodes about a lady who did not know some of these terms and how that was embarrassing for her and ultimately led to the failure of a business deal.
-Well, if you're a pastor, or you're a counselor and you watch this, you'll see that like half of marriages are destroyed through financial issues, through infidelity, through whatever, and you become almost, if you're not careful, numb to marital problems, because you see it so much. As a businesscoach, I see this all the time. I see this. I see people who have no idea about these financial terms. They're an absolute expert in their skill, whether it be dentistry or roof building or whatever, and they don't know anything about these accounting terms.
So we've got to get into this. We're going to define these things, so you can have a mastery over it and a power. And when you have a mastery over a word. That gives you power. So you can now meet with a banker and confidently lead the way. Sometimes just learning a new word can open up a whole new-- it's like a golden key to unlock all these possibilities. Just one new word. It's unbelievable, so we want to make sure we learn these words, master these words so that we can have success and live at our peak.
-We're trying to give you that golden key. So here it is. The definition that we're talking about is accounts receivable, and accounts receivable are amounts owed to your business that you expect to receive. Accounts receivable include the sales of your business made on credit, as well. Now Clay, go ahead and define that for us, and make that really simple for us to understand.
-If you own a business, and people owe you money, and you've already given them service, and they owe you money, you've already given them the product, but they owe you money, that is an accounts receivable. And I will tell you, the biggest-- the biggest-- I'm kind of a biggest or the worst--
-Right. Everything's the extreme
-I'm the kind of extreme, but let me try to keep it moderated for a minute, kind of middle of the road. Most businesses that I see that go out of business go out of business because their accounts receivable is out of control. You can't be-- like your uncle Darryl can't come in, and he's like, hey, can I get some cake?
And you're like, yeah, Uncle Darryl. Well, you got any cash? Well, I don't have any cash. Well, we'll put it on your tab. You do that a lot, you'll go out of business. And it literally happens all the time. I see manufacturing companies that literally are like shipping products, and then the customer says, we'll pay you in 60 days.
-And they're waiting and waiting and waiting. I've had people that I know very, very closely who've been waiting on checks from the government, and they never came in. And the government decided to cancel that contract and say, well, we're not going to pay that thing anymore, because we've changed our mind. This stuff happens.
-So you have to become clear-- like you have to understand this topic really well to apply it to your business.
-I would like our producers to take the word fastidious and put that word on the screen right now, the word fastidious, because they put the definition of it on the screen. Put that up there, because we have to be very, very detailed with how you manage your dollars. You've got to know how much money is owed to you at all times, or you're in a rut.
-But what if I don't enjoy doing that? What if I just want to make the cakes and that's it? I don't want to do this.
-I sat down with a guy just about seven months ago. I don't want to throw him under the bus here, but seven months, there's a guy I was working with. I'll change his gender. Let's say it was a lady. I'll change the state. Let's say it's in Wyoming.
-That tricked us. Now I think it's a woman.
-I'm working with a woman in Wyoming, and her hair was purple. Anyway, we found out that she had not collected her accounts receivable for over a year.
CALEB TAYLOR: Wow.
-She was $60,000 of money owed to her, which meant-- by the way, I set up a ridiculous marketing program. And so this lady in Wyoming was getting a ton of business, and every time she would get a new client, she would go farther in debt. And she only found out that she was out of cash when she overdrew on one of her accounts.
-Understanding the accounts receivable is important, and you've got to apply that to your business today.
-Yeah. Absolutely. And just a quote to Milli Vanilli-- "Girl, you know it's
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