By developing and accounts payable system in their business, Edmonton bookkeeping says that business owners can state-organized, which will help them make timely and accurate payments to the vendors that they owe money to. It is very important that entrepreneurs learn how to do this early on in their business, especially since many business owners struggle with basic business financial literacy. Intimate, who are the makers of accounting software QuickBooks surveyed several small business owners in order to determine their business financial literacy. They ask these entrepreneurs questions like what is the role of the balance sheet, and how can they improve cash flow. 82% of all of the small business owners that answer to the quiz, scored less than 70% on the test.
The first thing that is going to help an entrepreneur ensure they have an organized accounts payable system, is first by understanding what accounts payable are. Any time an entrepreneur owes money in their business, that is considered an account payable. The entrepreneur will make a purchase with their vendor, and not pay that vendor immediately. As a result, the business owner has credits with that vendor and enters into a creditor/debtor relationship. His relationship exists this way until the buyer pays the invoice.
Since the account payable is considered a liability for the business, an entrepreneur should also understand how it appears on their financial statements. When an entrepreneur looks at their balance sheet, they will see three sections. Edmonton bookkeeping says the per section is the assets of the business, the second section is the liabilities of the business, and the bottom section is the equity in the business. The accounts payable will appear in the liability section. Because these purchases are considered short-term debts that are going to stay short-term for the entire life of the debt, it will appear in the liabilities, and separate from the longer-term loans that a business owner might have, such as bank loans, or asset purchase loans.
It is also very important that an entrepreneur understands as they enter in an invoice into their accounting software, it is going to increase the liability on their balance sheet. They should be checking to ensure that there entering payments properly, by checking the amount that they have entered as an invoice, to ensure that the accounts payable section has increased that same amount. As they make a payment, the entrepreneur should also understand that the entire amount of the payments that they have dispersed, should decrease the liability in their accounts payable section. Also, Edmonton bookkeeping says that business owners should also ensure that the cash in their assets section also decreases by the same amount. This way, an entrepreneur can be certain that payments are being tracked properly in their business.
By being very aware of what accounts payable are, and how it looks in the financial statements of the business, can help an entrepreneur ensure the accuracy of the information in their balance sheet, which is going to significantly benefit them as they pull those reports in order to make financial decisions in their business.
Edmonton Bookkeeping | Developing An Accurate Accounts Payable System
Developing an organized account payable system can help entrepreneurs not only ensure the accuracy of the amount that they owe their vendors says Edmonton bookkeeping, but help entrepreneurs pay their invoices in a timely manner, and a stress-free way. Learning how to track invoices in their accounting software properly, to avoid mistakes, and verify the accuracy of the invoices is extremely important to ensuring business owners are keeping track of the amount that they owe their vendors. While this is very important to business owners no matter what size of the business they own, this becomes extremely vital as the business grows, and an entrepreneur may have several employees working in their business, having a different person make orders, receive shipments, and enter payments.
The first part of this system that an entrepreneur should be aware of, is the purchase order. Edmonton bookkeeping says that a purchase order is prepared by the vendor to communicate clearly what is being ordered. It should include a quantity, a description of the item, and the unit number. It also has a reference number, the date that it was prepared, and ship method. Other items might be included on the purchase order as needed by the business or depending on the industry.
The next report that entrepreneurs should be familiar with is the receiving report says Edmonton bookkeeping. This is going to accompany the products once they have been sent out from the vendor. This will match the information on the purchase order, except all of the products that will be listed on the receiving report should match everything that has been sent. If only a partial order has been received, entrepreneurs need to wait to get more products and receive another receiving report. Once all of the products that have been ordered have been received, and are accounted for on the receiving port, that can help an entrepreneur ensure all of the items that were ordered they received on their end.
Once all of the products had been sent and received properly, an entrepreneur will get the invoice. This should have a final amount of all of the products that they ordered, and the amount that they owe. The invoice should be compared to the receiving report as well as the purchase order to verify that all products that are on the invoice were received, and for the prices that were indicated on the purchase order. Once an entrepreneur has verified this, Edmonton bookkeeping says they can enter that invoice into their accounting software.
By utilizing this you a matching system, entrepreneurs can ensure that what they ordered was received and also invoice to properly, and it extremely helpful when there are employees during each of these individual tasks. Developing a great bookkeeping system for their business can help ensure that entrepreneurs are receiving being invoiced for what they require, is that when they enter those invoices, they can be confident that it is accurate, which will help them make payments to those vendors.