Running a business in the skilled trades—whether you're a contractor, electrician, plumber, or landscaper—means you're constantly juggling jobs, managing customers, and keeping up with suppliers. With so much going on, it's easy to lose track of your cash flow. But if you’re not staying on top of your accounts payable (AP) and accounts receivable (AR), you could be putting your business at serious financial risk.
Let’s break down why tracking AP and AR is essential for your success and how it can help you stay profitable, avoid cash flow crises, and grow your business.
What Are Accounts Payable and Receivable?
Accounts Payable (AP): The money your business owes to suppliers, subcontractors, and vendors. This includes materials, equipment rentals, or any services you've received but haven’t paid for yet.
Accounts Receivable (AR): The money customers owe you for work you've completed. If you’ve sent out an invoice and are waiting to get paid, that’s an account receivable.
Tracking both is key to knowing where your money is going and when it’s coming in.
The Dangers of Poor AP and AR Management
Many skilled trades entrepreneurs focus on getting the job done but struggle to keep their books organized. Here’s what happens when you neglect AP and AR:
Cash Flow Problems – If you don’t track when customer payments are due and when you need to pay suppliers, you could run into a situation where you don’t have enough cash on hand to cover payroll, materials, or overhead costs.
Late Payments to Suppliers – Missing payments can lead to late fees, damaged relationships with vendors, or even losing access to crucial materials. If your suppliers cut you off, your projects grind to a halt.
Unpaid Invoices Add Up – If you’re not actively following up on unpaid invoices, you could be leaving thousands of dollars on the table. Clients who take their time paying (or conveniently "forget") can choke your cash flow.
Tax Nightmares – Without accurate records of what you owe and what you're owed, tax season can be a nightmare. You might miss deductions or fail to report income correctly, leading to penalties or audits.
Business Growth Stalls – If you’re constantly in a financial guessing game, you can’t invest in hiring more help, upgrading tools, or expanding your business.
How Tracking AP and AR Helps Your Business Thrive
When you actively manage your accounts payable and receivable, you get a clear financial picture of your business. Here’s how it benefits you:
1. Keeps Your Cash Flow Strong
Tracking AP and AR ensures you know exactly when money is coming in and going out. This helps you plan for expenses and avoid unexpected shortages.
2. Builds Strong Vendor Relationships
Paying your suppliers on time (or even early) strengthens trust and can lead to better deals, discounts, or priority service when you need materials fast.
3. Helps You Get Paid Faster
By staying on top of your invoices, sending reminders, and having a system in place to follow up with clients, you reduce the risk of overdue payments and keep cash moving in your business.
4. Saves You from Legal and Tax Headaches
Having organized records of what you owe and what’s owed to you keeps your books clean and makes tax time way less stressful. If there’s ever a dispute over payments, solid records can protect you.
5. Allows You to Plan for Growth
When you have a clear financial picture, you can confidently decide when to hire, invest in new equipment, or take on bigger projects. You’re not just surviving—you’re thriving.
How to Stay on Top of AP and AR
✅ Use QuickBooks Online (or another bookkeeping tool) – A cloud-based system makes it easy to track invoices, set reminders, and automate reports.
✅ Send invoices immediately – The faster you bill your clients, the sooner you get paid.
✅ Set payment terms clearly – Net 30? Due upon receipt? Make sure clients know when you expect payment.
✅ Follow up on unpaid invoices – Don’t let overdue payments slip through the cracks. Send reminders or charge late fees if necessary.
✅ Schedule regular bookkeeping check-ins – Set aside time weekly or biweekly to review your AP and AR so nothing falls behind.
Don’t Let Unpaid Invoices and Late Payments Hurt Your Business
If keeping track of your finances feels overwhelming, I can help. As a bookkeeper specializing in solo tradesmen and small crews in Raleigh, NC, I’ll make sure your accounts payable and receivable are managed properly so you can focus on the work that matters most.
💰 Stop chasing payments and start taking control of your cash flow today!
📅 Book a free consultation and let’s get your business finances in order.
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