It is extremely important that entrepreneurs understand how important it is to ensure the accuracy of their interim financial statements says Edmonton bookkeeping.
If they are not keeping these statements as accurate as possible. Even if they try to use them to make more informed and guided financial decisions. They could end up making decisions that could potentially be harmful for their business.
For example, while industry Canada says that half of all Canadian entrepreneurs fail in their business. The second most common reason why entrepreneurs fail. affecting 29% of all Canadian business owners who were not successful.
Is that they ran out of money in their business. How business owners can help avoid that problem for them. Is by making as informed financial decisions as possible in their business.
Business owners when they are new in their business. Often think that they are going to be able to look at their bank balance, in order to understand how much money they have in their business to use.
But what that does not show them, is all of the money that they have scheduled to come out using electronic fund transfers. As well as all of the checks that they have written says Edmonton bookkeeping. That are now waiting for customers to cash them.
What else the bank balance does not show. Is that entrepreneurs will have a lot of money outstanding to their customers. And even though they might have ten thousand or twenty thousand dollars in their business.
If they owe fifty or sixty thousand dollars to their suppliers. They should not be spending money on new assets for example. Which is why it is important to review the accounts payable aging summary.
This report will show business owners how much money they owe each of their suppliers. How long they have owed the money to their suppliers. And how much money in total they owe to everyone.
So when they compare that amount to their other interim financial statements. They will understand not only how much money they have in their business, but how much they owe in their business.
So that they can make informed decisions. About how to spend their money, without spending more money than they actually have says Edmonton bookkeeping.
However, it is not just enough for business owners to be able to look at their interim financial statements. Including their accounts payable aging summary. In order to understand the information on the report.
They needs to be able to scan the reports for mistakes that could occur on them. So that they can fix them, and ensure when they use those reports. They will be making better and more informed financial decisions in their business.
It is also important that business owners understand that they need to be reviewing these reports for mistakes. Every single time they hold the report. And they should be pulling the report every time they are about to make financial decision in their business.
By pulling these reports often. In scanning them for mistakes. Can help ensure the accuracy of their interim financial statements. So that they can use them to make the best financial decision possible for their business.
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Business owners may not realize how easy it is for mistakes to happen in bookkeeping, and Edmonton bookkeeping says by understanding this.
Business owners can be prepared to look for errors. Especially since interim financial statements have not been verified by an accountant. And are more likely to have mistakes on them.
Once an entrepreneur has learn how to look at their accounts payable ap aging summary. And understand the information that is on it, starting from the suppliers they have on the far left, with all of the financial information about what they owe to the right.
But understanding what to look for in terms of errors is as important. The first thing that Edmonton bookkeeping suggests entrepreneurs look for. Are any amounts over ninety days is due.
A business owner should not have any invoice that has been outstanding for more than ninety days. Unless they are in huge financial trouble.
If they look at this and they do owe that amount, they should pay their supplier immediately. But if they do not owe the money. The reason this is typically an error. Is because an entrepreneur has accidentally entered the invoice twice.
This often happens, if a supplier gives a paper copy of the invoice. As well as emails it. It can results in an entrepreneur accidentally entering it twice into their accounting software.
As they make a payment, the payment is applied to one invoice, where it cancels out of the report. But the second and incorrectly entered invoice.
Does not have any payments applied to it. And therefore it sits there. Making it look like an entrepreneur owes more money to that supplier than they do.
Another reason why an entrepreneur might have an amount that is ninety days past due as an error. Is because perhaps, when they were manually entering the invoice.
They accidentally hit a wrong button or two. And entered a larger amount as the invoice than it should have been.
Then, Edmonton bookkeeping says when they entered the payment on that invoice. They entered the correct invoice amount. And did not notice that there was a mistake, that left an amount owing on that invoice.
By fixing this error, can cause that amount that is left owing in the invoice get corrected, so that the accounts payable aging summary will not show an entrepreneur has more outstanding than they do.
Another mistake that business owners should be looking for. Our ground numbers. These typically indicate that an entrepreneur was given an estimate.
Because once the tax has been applied to an invoice, it is typically not around number any longer. If an entrepreneur sees this. They can look at the invoice to verify the amount. And fix it if it is in fact an error.
By understanding all of the different ways that there might be errors that can be easily found on their accounts payable aging summary. Help business owners have the most accurate accounts payable aging summary. So that they can make the best financial decisions for their business.