The article below outlines the Accounts Receivable on Thrive15.com, one of the most affordable business schools in Florida, with Clay Clark & Caleb Taylor. You don't have to pay $20,000 per year for business education, you can learn from the best for $50 per month!
Caleb Taylor: Clay, it's wonderful to see you back here again.
Clay Clark: I would do anything for love but I won't do that. Meatloaf.
Caleb Taylor: That's good. On that note actually, let's talk about accounting and the financial planning. Then we're going to specifically dive into this topic of defining the accounts receivable. As you guys have seen I think, we're defining a lot of these terms in a quick, five-minute burst. We're doing that to make sure sure that 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, how that was embarrassing for her and ultimately led to the failure of the business deal.
Clay Clark: If you're a pastor or you're a counselor and you watch this, you'll see half of marriages are destroyed through financial issues, through infidelity, through whatever. You become almost, if you're not careful, numb to the marital problems because you see it so much. As a business coach, I see this all the time. I see people have no idea about these financial terms. They're an absolute expert in their skill, whether it be dentistry, roof-building or whatever. They don't know anything about these accounting terms. We're going to get into this. We're going to define these things so you can have a mastery over it and a power.
When you have a mastery over a word, that gives you power. You can now meet with a banker and confidently lead the way. Sometimes just learning a new word can open up a whole new thing. It's like a golden key to unlock all these possibilities, just one new word. It's unbelievable. We want to make sure to learn these words, master these words, so we can have success and live at our peak.
Caleb Taylor: We're trying to give you that golden key. Here it is. The definition that we're talking about is accounts receivable. 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. Make that really simple for us to understand.
Clay Clark: If you own a business, people owe you money,you've already given them service. they owe you money, you've already given them the product but they owe you money, that is an accounts receivable. I'm a biggest or the worst.
Caleb Taylor: Right. Everything's the extreme.
Clay Clark: Right. I'm the extreme but let me try to keep it moderated for a minute, 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. Your Uncle Darrell can't come in and he's like, "Hey, can I get some cake?" You're like, "Yeah, uncle Darrell. Do you have any cash?" "I don't have any cash." "We'll put it on your tab." You do that a lot, you'll go out of business. It literally happens all the time.
I see manufacturing companies that literally are shipping products. Then the customer says, "We'll pay you in 60 days." They're waiting and waiting and waiting. I've had people that I know very closely who have been waiting on checks from the government. They never came in. The government decided to cancel that contract and say, "We're not going to pay that thing any more because we've changed our mind." This stuff happens.
Caleb Taylor: You have to become clear. You have to understand this topic really well to apply it to your business, right?
Clay Clark: 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 on the screen. Put that up there because you 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.
Caleb Taylor: What if I don't enjoy doing that? What if I just want to make the cakes and that's it? I don't like doing this.
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Clay Clark: 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 ago there was a guy I was working with. I'll change his gender. Let's say it was a lady. I'll change his place. Let's say it was Wyoming.
Caleb Taylor: That tricked us. Now I think it was a woman.
Clay Clark: I worked with a woman in Wyoming. Her name was Purple. Anyway, we found out that she had not collected her accounts receivable for over a year.
Caleb Taylor: Wow.
Clay Clark: She was $60,000 of money owed to her. By the way, I set up a ridiculous marketing program. This lady in Wyoming was getting a ton of business. Every time she would get a new client, she would go farther in debt. She only found out that she was out of cash when she overdrew on one of her accounts.
Caleb Taylor: Understanding the accounts receivable is important. You've got to apply that to your business today.
Clay Clark: Absolutely. Just to quote, "Girl, you know it's true."