While many business owners may have heard from their Edmonton bookkeeping company. How important it is to review their interim financial statements.
However, it is equally as important that business owners understand how to ensure these interim financial statements are as accurate as possible.
So that when they do use them to make guided financial decisions in their business. They will be making good decisions, that can help them grow their business.
One of the first things that business owners should keep in mind, is that their accounts payable aging summary. Is for business owners to record all of the suppliers that they have in their business.
Supplying them with either direct expenses. That they need in order to produce the products and services for their business.
Or for their overhead expenses. That they needs to operate their business. Such as utility bills, rent or mortgage of their office space. And office supplies for example.
What this means, is any corporate expenses should not go in this account. Because they will have their own separate account for corporate, taxes, and even shareholder related amounts.
When business owners keep this separate. They will be able to understand how much money they owe in their business.
And when compared to their other interim financial statements. Such as their balance sheet, or income statement.
Entrepreneurs will be able to tell if they have enough money in their business to pay their suppliers. And if they do, how much money they have left over for other things. Such as running payroll, purchasing assets in their business.
By keeping business and corporate expenses separate. Edmonton bookkeeping says entrepreneurs also ensure that they can pull a separate report to understand how much they owe Canada revenue agency, or the Alberta government. So that they can understand what is going on corporately as well.
However, just keeping these reports separate is not enough for entrepreneurs to make better financial decisions. They also need to be able to correct any mistakes they see on their accounts payable aging summary.
So that when they do use them to make financial decisions. They will not make decisions that will look correct, but put their business at risk financially.
One of the first things that Edmonton bookkeeping recommends entrepreneurs look for on their accounts payable aging summary. That typically indicates an error. Our whole, round numbers.
As suppliers and add GST to their invoices, it typically makes any invoice that may have been around number. To have an odd amount of dollars, and cents.
If business owners see a completely rounded number on their accounts payable aging summary. This typically means that they have entered an estimate. Instead of an invoice, that may end up being more or even less than how much an entrepreneur owes.
So whenever they see around number. They should look in their invoices, to see if they actually have a different amount that they owe that supplier.
By learning how to read their accounts payable aging summary. As well as ensure its accurate by avoiding putting corporate amounts into this report. And reviewing it for errors. Can help entrepreneurs ensure that this report is as accurate as possible at all times.
Why did you choose to offer Edmonton Bookkeeping services?
One mistake that business owners often make when they are new in business according to Edmonton bookkeeping. Is thinking that they will be able to make good and informed financial decisions in their business. Simply by looking at their bank account.
And while the bank account will be able to show them exactly how much money they have in their business at that moment. The bank account will not show them, is how much money they have, when things like checks clear. And when electronic fund transfers go through two people that they are paying.
This is why so important for entrepreneurs to learn how to read their interim financial statements. Because not only will they be able to see how much money they have in their business taking into consideration all the payments that they have made.
They will also be able to see how much money they owe in their business. So that when comparing that against their income statement. They will be able to see if they have enough money to pay their suppliers.
Or if they need to increase pricing, cut expenses. Or if they have to engage in some revenue-generating activities to have more money to pay their suppliers.
However, it is not just enough for business owners to be able to read and understand their interim financial statements. Especially their accounts payable aging summary. It is also necessary for business owners to be able to review them quickly, to correct any mistakes that might exist on them.
If there are any mistakes on their accounts payable aging summary. They may think that they owe way more money than they do. Or that they might not always much as they do. Which could cause them to spend more money than they can afford to.
One of the first things that Edmonton bookkeeping recommends entrepreneurs learn how to do. Is look for amounts that are over ninety days due the reason why, because unless a business is in financial peril. There should not be any expenses over ninety days owing.
However, if there is its typically because an entrepreneur has accidentally entered an invoice twice. Perhaps they received paper and an electronic copy. And did not catch the error when they were initially entering it into their accounting software.
As an entrepreneur paid the invoice. The amount that they paid was applied to one of the invoices. Causing the other one to remain in the system, showing that they still owed money that supplier. And that it is extremely overdue.
By learning how to review the report for errors that can be easily caught. Can help ensure that they are AP report is not only more accurate. But that it can help them make better and more informed financial decisions in their business.
The more business owners use this report to make decisions. And the more often they can verify its accurate says Edmonton bookkeeping.
Means the more often business owners will be of the make better financial choices, that can help them significantly in their business. Not just avoid making the wrong decision. But can help them grow their business as well.