Is my Accounts Receivable Balance Too High?

I don’t know. We’ve never met, but I will help you answer the question. Here are 3 signs your AR balance is too high:

1. You are not able to pay your bills on time.

• This may sound like Captain Obvious but it is common for owners to assume they need to sell more. When the cash flow problem is hiding in the accounts receivable balance. Selling more may actually create a bigger problem.
• Whether your AR balance is $1,000 or $1,000,000, the actual number is relative to the rest of your business finances. The key is managing your AR to where you are able to collect the money you need on time to pay your bills.
• If you cannot pay your bills on time, then yes…it is highly likely your AR balance is too high.

2. Accounts receivable balance continues to increase.

Usually the accounts receivable balance fluctuates based on your sales. So it is natural for it to increase during your busy season and drop during your slow season. If your balance continues to increase even though your sales have declined, your AR balance may be too high.

3. Your accounts receivable report is unhealthy.

• More than 25% of your accounts receivable balance is owed by one customer
• More than 50% of your AR balance is past due

If you are concerned about your AR balance, trust your gut and dive a little deeper.

If you want to see what a healthy Accounts receivable reports looks like, check out the next video.

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