A statement of account is the documentation of transactions between your small business and your clients within a specific time frame. This document is a full overview of the business completed between you and a customer, typically within a monthly period.
So how should small businesses create and utilize statements of accounts?
Accounting 101 for small businessesSmall business owners need to understand the basics of accounting to make informed business decisions, manage cash flow, and ensure the long-term sucess of their business
Invoices and statements of accounts are not the same thing. A statement of account is a complete record of transactions between a company and a client within a monthly period, and contains a list of all invoices created within that period.
While a sales invoice is a bill for one transaction only, a statement of account refers to a complete list of all invoices attached to that client within a stated period. This document is handy for both small businesses and their clients, as it shows the monthly transaction history and account activity between the two, in one place.
Creating invoices through Excel sheets can increase the risk of mistakes, which can reflect poorly on your business and the subsequent account statement. In order to mitigate this risk, it's best to use accounting software that will automatically update and organize client transactions. Keeping proper invoice documentation will make the process of creating statements of accounts effortless.
A statement of account reflects the ongoing transactional relationship between your business and your clients. This financial overview is vital for both the company and the client, as it illustrates the overall working relationship between the parties.
The main reason behind creating this statement is to show the outstanding amount, if any, a client may owe to your small business. Similar to a bank statement, this document illustrates the customer’s transactions on a monthly basis.
A statement of account might look like a monthly statement issued to a client. Typically, companies issue monthly statements to their clients with up-to-date transactions, often as a PDF file sent via email.
Sending off a statement of account to a client at the end of the month is a good way to point out if they have any overdue accounts. Accounts receivable is the money owed to a business by the client, which can be found in these statements.
If a customer’s statement displays a zero balance then they are up to date on all payments. Typically, customers who have zero balances do not need to be sent this document unless they specifically request it. However, customer statements are still used internally within a business to keep track of financial reports and transactional history when managing customer relations and in case of disputes .
If your small business offers customers the ability to make purchases on credit, these statements should always be sent out to the clients at the end of the month to bring awareness to any overdue credit and outstanding payments.
