What Is the Statement of Account?

As a freelance contractor or small business owner, it's critical to provide each of your clients with an accurate, up-to-date statement of account regularly.

Also known as an account statement, this document details all the financial transactions between two businesses within a given time frame. The statement of account provides transparency and clarity for both parties regarding any unfulfilled monetary obligations, like unpaid invoices.

The statement of account is issued by a vendor (your business) to the client, usually on a monthly basis, and is generally delivered via email in PDF format. Skynova offers accounting software to make the process faster and easier, saving you valuable time and energy.

Understanding account statements is essential for accurate small business bookkeeping. In this article, we explain the importance of the statement of account and how to create one.

Why Is the Statement of Account Important?

A statement of account is a comprehensive report detailing all financial transactions between a vendor (you) and client in a defined time period (usually one month).

Don't confuse a statement of account with an invoice, though. An invoice is a type of account document that you issue directly to your client, billing them for a specific one-time transaction. You provide a good or service on a set date and issue an invoice to collect payment for it.

An account statement is far more comprehensive. It's similar to the financial statement you would get from a financial institution like a bank at the end of the month. Your bank account statement provides a detailed overview of every incoming and outgoing transaction, summarizing your account activity.

The statement of account is a similar concept. It will include:

  • Every sales invoice issued by the vendor to the client within the given time period listed (whether paid or not).
  • Corresponding payments for the invoices received by the vendor from the client
  • Refunds issued by the vendor to the client
  • Any money the client still owes the vendor

Here's how this document can help you with your small business accounting:

Determine Payment Balances

The statement of account helps quickly determine payment balances for a vendor or customer's account. If the statement of account has a zero balance, all financial obligations between the vendor and client have been taken care of. If not, there is an outstanding balance, and that total amount needs to be paid.

Payment Reminders

Sending a statement of account to your client every month can serve as a valuable reminder regarding payments still owed. This is important because it helps you collect on past due invoices. It's also useful for your client, helping them avoid late fees due to unpaid invoices.

Avoid Payment Disputes

If you have clients you work with on a recurring basis (e.g., monthly or quarterly), sending a statement of account at the end of every given period creates greater transparency. Both you and your client will have a full record of all financial transactions within the defined time period and can address any possible concerns quickly, avoiding potential disputes.

Note that you may also receive a statement of account from business partners in relationships where you act as the client and they act as the vendor. This is also important, as it ensures you're keeping up with invoice payments and avoiding late fees. It also allows you to track your spending. Hang on to any account statements you receive. You may need them for bookkeeping or tax filing purposes - for example, when organizing your business expenses.

What Does a Statement of Account Include?

Each statement of account needs to be tailored to the specific client it's issued to and the time period it's covering. However, the document will generally include a few basic points. We define the essential information every account statement you issue should cover below.

Contact Information

Add the contact information for the vendor and the client. This should include the client's and business's name, address, email address, and telephone number. You may want to assign a customer ID number or account number you can use regularly with recurring clients for added clarity. This can be especially handy if you have different clients with similar names.

Date Range

Statements of account cover all financial transactions within a certain time frame. It's critical that you define what period the statement of account covers. Most vendors issue account statements on a monthly basis. So, for example, you might include the time frame as "January 1-31, 2021." Note that this is an inclusive range, counting days 1 and 31.

Statement Number and Account Number

Every statement of account you issue should have a unique identification number. This avoids confusion and makes it easy to track down and refer to old account statements as needed. If you have to discuss the document with a client, for example, you can clarify which account statements you're referring to with the identification number.

Including a unique statement number also helps with accounting and bookkeeping at the end of the quarter or year. You can quickly track down which invoices were issued in which time period using the account statement, allowing you to quickly pinpoint outstanding payments. If you outsource your bookkeeping or tax filing, your bookkeeper or tax filer will likewise find this paperwork handy.

Balance Due

The balance due refers to any money the client owes from this account statement period. You should also note the previous balance from the last statement of account. This gives your client a full overview of how much money is owed and in what context. Go ahead and note the due date, too, for clarity.

All Financial Transactions

Next, input all the transactions between your business and the client's business within the statement of account's defined pay period. This includes invoices, sales, refunds, payments, debits, and credit notes. Each transaction should be put on its own line, ensuring easy reading and avoiding confusion. For invoices, be sure to note invoice numbers and invoice amounts.

To streamline this process, keep track of all your invoicing on a rolling basis. Skynova's accounting software provides useful invoice templates that you can adapt to efficiently create and send invoices directly to clients. The Skynova system further allows you to store all this valuable paperwork in one place.

How Do You Write and Send a Statement of Account?

Now you know what information goes into a statement of account - but just how do you write and send one? The easiest and fastest way to get the job done is to use a statement of account template.

Why use a template? Remember, you have to send a statement of account to every client on a monthly basis. This is best practice for small business accounting. Depending on how many clients you have, that can result in a lot of paperwork. Using a readymade template alleviates the administrative burden, giving you more time to focus on your core business competencies.

Skynova offers comprehensive templates you can use to manage your small business accounting. This makes the job easier and faster. You can also use Skynova accounting software to send paperwork directly to clients, cutting out the need for extra emails. Finally, keeping all of your small business paperwork in one place with Skynova will streamline your financial documentation, simplifying matters like end-of-quarter bookkeeping and annual tax filing.

Let Skynova Help You With Your Small Business Bookkeeping

Skynova's accounting software is designed to support your small business's success. We offer a simple, straightforward system to create, manage, and organize critical financial paperwork like income statements and balance sheets. Check out our full suite of available Skynova products and see how our offerings can help organize your financial information and streamline your business operations.

Notice to the Reader

The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always consult with a professional for specific advice regarding accounting best practices.