One very important thing that small business owners can do in their business to ensure that they are staying on top of all of the payments in their business says Edmonton bookkeeping, is by understanding what accounts payable is, and how to keep it organized in their business so that they have a clear picture of what bills they owe in their business so that they can pay them accurately and on time. By doing this, entrepreneurs can ensure that there balance sheet is accurate, which will help them make financial decisions in their business any time they need to.
Any time a business owner ask a purchase with the business and does not pay immediately, they are essentially purchasing on credit and as a result, the entrepreneur and the seller enter into a creditor and debtor relationship until the entrepreneur pays the bill. As soon as they make the purchase and do not pay immediately, this becomes and accounts payable on their balance sheet. All of the bills that they received in their business should be entered into their accounting software like QuickBooks so that when they look at their balance sheet, entrepreneurs can understand that the liability section represents all of the invoices that they owe says Edmonton bookkeeping.
Since entrepreneurs are making these purchases essentially on credit, they are considered a short-term debt, that will stay in the liability section of their balance sheet for the life of the debt. Unlike other loans like long-term loans from the bank, or for asset purchases like vehicles, these two amounts that business owners owe should not appear on the same place on the balance sheet.
Once an entrepreneur has ensured the accuracy of the amount owed, they can make payments to all of the companies that they owe money to. Edmonton bookkeeping says that when an entrepreneur does this, they should be keeping track of how it looks in their accounting software to ensure that they have not only made the payments properly, but they also tracked them properly as well. When an entrepreneur makes payments to their vendors, they should ensure that the total amount that they have paid, it decreases the total amounts of accounts payable in the liability section of their balance sheet. That total amount that their accounts payable section decreases, should be the same amount that their cash decreases in the asset section of their balance sheet. Essentially, an entrepreneur wants to verify that all of the amounts that they pay to vendors is reflected both by lessening the amount that they owe, but also decreasing the amount of cash they have available by the same amount.
By staying organized this way, business owners can ensure that they are ensuring the accuracy of the payments that they make, which can help them ensure that there making accurate payments, and that is reflected properly in their balance sheet. As they review the report to make financial decisions, they have already done the work to ensure its accuracy, they can use the information confidently to make financial decisions in their business.
Edmonton Bookkeeping | Developing Organized Accounts Payable Method
If entrepreneurs do not have an organized method of receiving invoices in their business, Edmonton bookkeeping says that they may get behind on making payments, or even make double payments. It is extremely important that business owners learn early on in their business, how to track invoices that they receive in their business so that they can ensure the amount that their accounting software says they owe is accurate so that they can confidently pay the bills that they owe.
It may be less important for entrepreneurs to have an organized system while they are the only person working in their business, but having a system in place can help entrepreneurs stay organized as they grow, and this can be vital to ensuring the accuracy of the invoices that are entered into their QuickBooks software. By using the three-way matching system when they make purchases, and receive products can help an entrepreneur ensure that they have accurate invoices. In order to implement this system, an entrepreneur needs to understand what a purchase order, receiving report and invoices are.
Anytime an entrepreneur makes a purchase, and they do not receive the product or pay for the product on the spot, a purchase order should be generated. It should include a reference number that a business owner can use to keep track of the purchase with the vendor. It also includes a variety of important details such as what is being purchased, what quantities, and the purchase amount. A purchase order to have a wide variety of details on the report, depending on the products, the vendor or even the industry.
As the entrepreneur starts to receive products in their business from their vendor, Edmonton bookkeeping says they should receive a receiving report indicating what products have been shipped. The reason why this is important to use and compared to the purchase order is to verify that all of the products that were ordered or received. Partial orders will require multiple receiving reports. By matching the purchase order with the receiving reports, an entrepreneur can ensure that they have received everything that they are expecting.
Finally, when an entrepreneur receives all parts of their order, they will receive the invoice. This is going to show all of the products that were ordered along with the prices and the amount that an entrepreneur owes. The invoice might include additional charges like shipping and taxes. An entrepreneur should compare the invoice to what was received as well as what was ordered, and verify that the prices are all that the entrepreneur is expecting to pay.
By ensuring that an entrepreneur is using all of these reports to receive products, to verify the accuracy of the invoice, can help ensure that they are receiving everything that they ordered, and they are being billed for everything that they expect. This becomes extremely important in businesses that have different employees making purchases, receiving orders, and entering invoices into QuickBooks. Developing the system can ensure the accuracy of the information that is being entered into QuickBooks in order for a business owner to pay.