What Makes Statement of Account Important for Your Clients
A statement of account or account statement is an important piece of document that is issued by your clients to the opposite party and it features all the transactions that have taken place during a specific time period, usually a month. It is through the statement of account that your client will learn about any outstanding amount which can be sent to the opposite party as a reminder for payment of dues.
These days, you and multiple professional accounting practices in the UK handle this important accounting task on behalf of their clients. Also, multiple accounting software have been designed to help you in this task. Using accounting software, it has become much easier for you to keep track of financial transactions and to send statements of accounts in a professional format and in a speedy manner. However, incorporating and operating such accounting software requires training and experience, which you may need to gain. To avail yourself of the advantages of accounting software and streamlining of statements of accounts, you can get the outsourced year-end service of a professional accounting service provider.
Let’s understand the importance and workings of the statement of accounts a little deeper.
What is a Statement of Account?
A statement of account is a summary produced by you using accounting software on behalf of your client. This statement is then sent to the opposite party, providing it with all the information regarding outstanding transactions within a specified period.
The statement of account can feature all the transactions made during the specified period, but it is popularly used to show only outstanding transactions to remind the opposite party about the dues. If the balance at the end of the statement is not zero, it will automatically remind the user about any outstanding payments.
Is the Invoice and Statement of Account the Same?
No, it’s not. The statement of account acts as a report that contains the history of financial transactions done during a specified period between two businesses. On the other hand, an invoice is a bill for a single transaction. An account statement contains all the financial transactions, such as invoice amount, payment received, and refunds. With all the transactions listed, you can easily identify missed payments, thus acting as a payment reminder.
To further elaborate, the invoice performs the following functions:
- Describes the items purchased and the cost per unit.
- Adds taxes.
- Shows the total amount owing.
- Shows invoice payment terms and payment details.
On the other hand, a statement of account contains:
- Lists all previous invoice amounts, with invoice numbers and dates, as individual line items.
- Lists all the transactions that took place in a defined period.
- Payments or credits are laid out as individual line items.
- Displays any outstanding balances.
- Cost buckets.
Why is Statement of Account Important?
A statement of account is an important tool for your clients to remind those who still need to pay. It also allows your client to track expenditures, check for double payments, and monitor missed payments, which can help save a lot of money on late fees. This is important because client payments boost a vendor’s cash flow, enabling the business owner to invest in essential resources.
What Goes into the Statement of Accounts?
Statement of accounts can be prepared using various templates but a typical one will show the vendor and client business information, date of issue, statement number, client’s account ID, balance from the previous period (from the last statement of account issued), and all transactions.
In one line will be dedicated to each transaction, whether it is an invoice, payment, or credit. An optional payment slip can also be included. Business information provided includes the vendor’s business name and client name, the vendor and customer’s physical address, phone number, and email.
Types of Account Statements
Three key types of account statements together provide an accurate picture of your client’s business health. These types are as follows:
Balance Sheet: It shows the balance between assets, liabilities, and equity of your client’s business, thus helping you determine its financial health.
Profit and Loss Statement: The income statement shows the difference between income and expenditure, known as net income.
Cash Flow Statement: This statement shows how much cash enters and leaves your client’s business during a set period.
Template for Statement of Account
A statement of accounts varies by business and the information your clients choose to include. You will find all kinds of templates available in accounting software like FreshBooks; here is one example:
Conclusion
A statement of accounts shows all transactions and payments between clients and customers during a specific period. To settle dues shows your clients’ professionalism and transparency in business practices. Hence, your client would appreciate it if you provided the best statement of accounts using the latest accounting software. This blog aims to help you understand the statement of accounts in detail, enabling you to better serve your clients.
If you’re overwhelmed with multiple accounting tasks, reducing your time for account statements, consider outsourcing for support. In that case, we suggest using Corient’s outsourced year-end services, a professional accounting provider based in the UK. We have experience handling statements of accounts and are eager to provide the same service to you. For more details about our services or to explain your exclusive requirements, please share them using our website contact form.