If business owners are going to be able to understand their finances, they need to be aware of their interim financial statements according to Edmonton bookkeeping. Because these are the documents that are going to be able to help them understand how much money they are making. And how much money they owe. When it comes to understanding how much money they owe to their suppliers. Business owners should be aware of what and accounts payable aging summary is. Not only do they need to be able to read the information on this summary. They also need to be aware of how to enter the information correctly. So that it accurately reflects their finances. So that they do not accidentally spend money that should be spent on paying suppliers.
One of the first mistakes that many new entrepreneurs make. Is that they enter their expenses upon making the payment. And not when they first receive the invoice. This is a dangerous business plan does according to Edmonton bookkeeping. Because business owners will not know how much money they owe, until it comes into their business. Not only will that make it difficult for them to pull the Accounts Payable report. And see how much money they owe at any given time. It will also create problems, then the invoices are not entered in the month or the quarter that they occurred. By entering expenses upon receipt of invoice. Will help ensure that they know exactly how much their expenses were then a certain time.
When business owners look at their account payable summary. It will have a list of all of the businesses that they owe money to in the first column. Followed by a list of all of the money that a business owner owes those businesses. It is organized by how recent the invoice they received is. The first column should be invoices that are not past due, but for the current period. Column two is for invoices that were generated within one and thirty days. The columns continue out until business owners have a column of invoices that are owed over ninety days. And following that, a grand total of all of the money that the business owner owes at the end.
Once business owners understand how to read this summary. They will be better prepared to understand their expenses. As well as come up with a plan on how to pay those expenses. Especially when an entrepreneur is experiencing a cash crunch, they should look at their accounts payable summary. And start paying bills that have been outstanding the longest. And they should pay the smallest expenses. Just so that they do not have several different creditors calling them at the same time. And once they have those paid. The next thing they should do is create a payment plan on ensuring all of the suppliers that are left are getting some money on a regular basis.
Even if business owners cannot pay all of their invoices off. Edmonton bookkeeping says paying all of the suppliers bit of money at a time. Gives them reassurance that they will not be forgotten. And that the business owner is making attempts to pay.By understanding the accounts payable aging summary. Business owners can stay more on top of their bills. So that they can understand how much they owe and create a plan on how to pay.
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If entrepreneurs are not entering their expenses properly says Edmonton bookkeeping. They may not have any idea of how much money they owe. And that could result with them spending more money than they actually have to spend. In addition to that, if business owners are not staying on top of their accounts payable summary. They also might have many errors in the summary. That make it difficult to understand if they are profiting, or by how much.
When a business owner is learning how to read their accounts payable aging summary. Edmonton bookkeeping says they should be very concerned if they have amounts over ninety days due. Not only does this mean that they have not paid a supplier in several months. But often, amounts that are over ninety days due are fictitious expenses. Unless a business is in extreme financial difficulties there is no reason to have an invoice outstanding that long. More often than not, in this situation the problem is that the invoice was entered twice, or entered incorrectly. And it is not falling off the accounts payable summary because of that.
Business owners should look to see if the amounts that are over ninety days due are because of a duplicate invoice being entered. Or if the payment did not get applied properly. Which would result in this showing that it is still do. The next thing that business owners should look for when they are doing an initial review of their accounts payable aging summary. Is if there are any negative numbers on the report. Negative numbers typically indicate either a deposit or a fictitious expense. If a business owner looks at the aging summary, and notices there is a negative number. And they know that they did not pay a deposit. They should investigate why that number is showing on the report. If they have not paid a deposit, Edmonton bookkeeping says that it is most likely showing up on this report. Because the business owner did not apply the payment to the correct invoice. And it is showing up as though it was a deposit. All an entrepreneur has to do is go back into their accounting program. And apply the payment that they made to the correct invoice. To see the negative number disappear from the report.
Another error that business owners often make when they are new in business. Is that they think there accounts payable summary is for all payments that they have to make in their business and this is not accurate. The accounts payable summary should reflect all of the suppliers in their business. But other expenses such as Canada revenue agency, provincial taxes, GST and shareholder loans. Should belong in their own accounts and have a separate report. This way, when a business owner pulls the accounts payable report. It is easier to look at the numbers, and determine the expenses of the business only. While they can look up the expenses of the corporation and other reports.
When business owners understand all of the things to look for in their accounts payable summary. And how to read it. They will be much more prepared to read and understand the report. So that they know the expenses of their business.