Many entrepreneurs might understand how important it is to learn how to read their interim financial statements says Edmonton bookkeeping. However, as much as they might know how to read the information on these reports. They may not know how to ensure the accuracy of the information.
However, learning how to fix the mistakes that might be occurring on their interim financial statements. Is just as important as learning what the reports say. Because with mistakes on the reports. Business owners may not end up making the best financial decision they can.
Which would cause them to make decisions, or spend money in a way that might not be optimum for their business. And since 29% of all failed entrepreneurs in Canada. Say that the reason why they failed was because they ran out of money.
Learning how to fix mistakes on interim financial statements. Can help them make better decisions. That will help them avoid running out of money in their business.
One of the most important interim financial statements they need to learn how to fix mistakes on. Is the accounts payable aging summary says Edmonton bookkeeping.
This statement represents all of this suppliers that they have in their business. And how much money the is this owes them. By looking at the grand total on this report. An entrepreneurs will be able to figure out how much money they owe suppliers.
And comparing that to how much money they have to work with, and figure out the financial state of their business fairly easily.
One of the most important things that business owners need to keep in mind when looking at this report. As well as entering expenses into their accounting software.
Is that it is for business expenses only. That is direct expenses and overhead expenses. That they have incurred through running their business, and selling their products and services.
Any corporate expenses such as corporate taxes, federal and provincial tax including GST and payroll for example. Should not exist on this report. They belong in another report, that can help an entrepreneur understand how much they owe for their corporation.
Therefore, when an entrepreneur looks at their accounts payable aging summary. The first column all the way to the left, is going to show a list of all those suppliers that they currently owe money to. And besides that, will be a list of all of the amounts that they owe those suppliers for the current period.
As each column progresses to the right, they will indicate amounts that they owe those suppliers. For increasingly later dates that they owe the supplier that money for. Ultimately, at the very end will be a final column of all of the money that an entrepreneur owes each supplier.
And at the very bottom, a grand total of the amount of money that the entrepreneur owes all suppliers. This entire amount can help entrepreneurs understand the financial state of their business.
So that when entrepreneurs use this along with the other interim financial statements. They will be able to be more informed about what is going on in their business says Edmonton bookkeeping.
And not only can help them make more informed financial decisions. Can also help them understand if their pricing is accurate. If they need to generate more revenue in their business.
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There are many different things that entrepreneurs should keep in mind when they are learning to take care of their business finances says Edmonton bookkeeping. And one of those things is learning how to read and correct information on their interim financial statements.
The interim financial statements that they have to review are. The income statement, the balance sheets, and the accounts payable aging summary.
This accounts payable aging summary will help entrepreneurs understand how much money they owe each supplier. And how much money they owe total. So that they can understand how much money they are making on each project, and in each quarter of their business.
And it can help them understand if they are pricing their products and services correctly. Or help them understand how many more transactions they need in their business to be profitable.
However, it is not just enough for business owners to learn how to read this report. It is also important for entrepreneurs to be able to understand how to fix mistakes that could appear on the report. So that they can ensure its accuracy to help them make better decisions.
One of the first things that Edmonton bookkeeping recommends. Is scanning the entire report, looking for amounts that are over ninety days past due. The reason why it is important to do this. Is because amounts over ninety days past due are typically mistakes.
Unless a business owner is in extreme financial distress. There should not be any expenses overdue that amount of days. Therefore, it is a good indication that there has been a mistake made.
The mistake typically is that the invoice has been entered twice. Or entered with an incorrect amount, usually due to human error.
By reviewing the invoice, and correcting it. Can eliminate that amount on the accounts payable aging summary. Ensuring the accuracy of the information overall.
The next thing that business owners should look for, or any around numbers. And while round numbers do not indicate a mistake all of the time. These are typically estimates. Because once sales-tax is added to invoices. They typically do not equal an exact round number.
By looking up any invoices that are an exact round number. And correcting them if necessary. Can help ensure the overall accuracy of the AP aging report.
Now it is not just important that an entrepreneur is scanning their accounts payable aging summary for these mistakes. But they need to get into the habit of doing them every time they pull the reports.
Because this will allow them to stay on top of any mistakes. And know when the last time they saw and error-free statement was. So that they can troubleshoot mistakes easier.
With how important their accounts payable aging summary is says Edmonton bookkeeping. Business owners should learn this skill right away in their business.