Business owners are facing significant challenges when they first open their business says Edmonton bookkeeping. Not only are they typically learning how to run a business for the first time.
But they are doing that while they are running a business. And they need to learn how to overcome mistakes. And fix problems quickly, so that they do not negatively impact their business as they learn.
Because of this challenge, industry Canada has discovered that half of all Canadian entrepreneurs fail in business within about five years.
What they also discovered, was that one of the most common reasons why Canadian entrepreneurs were not succeeding. Is that they were running out of money, which is a problem that 29% of all failed entrepreneurs encountered in their business.
One of the reasons why business owners run out of money, is because they are not understanding their business finances. Either by not reviewing their interim financial statements. Or not understanding what those reports are telling them.
One of those interim financial statements that is very necessary for business owner to learn how to read. Is the accounts payable aging summary. This is a report of all of the money that an entrepreneur owes money to their business.
If this report is not accurate. Or if business owners are not looking at this report. Have an extremely high risk of spending more money than they have to spend.
And not even being aware that they are spending more money than they can afford to. Because they are not either looking at this report. Or they are looking at the report and it is not accurate.
One of the most important things that a business owner can do to ensure accuracy of this report says Edmonton bookkeeping. Is that they should enter their expenses upon receipt of the invoice. Instead of as they pay their suppliers.
Although it seems to make sense for business owners to enter invoices as soon they receive them. Many business owners run out of time to do everything.
And think that if they are entering their expenses as they pay them off. It will show that they are staying well on top of their expenses.
And while they are accurate and thinking it is going to look better. It will not actually reflect the amount of money that they do owe. And it makes it harder for them to track the amount of money that they owe.
And when they pull this report, it will not show how much money that they owe their suppliers. And it could think that business owners can spend more money than they actually should be.
What this will also do to cause problems. Is that they will have no idea if their pricing is accurate, or if they are covering their expenses with their pricing.
And when this is the case, business owners might not actually be turning a profit with every sale. And could be losing money, and not even know it says Edmonton bookkeeping.
Understanding how to enter invoices correctly and in a timely fashion. Is the first step to having an accurate and up-to-date accounts payable aging summary. So that business owners know how much money they owe.
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The accounts payable report is extremely important says Edmonton bookkeeping. Because it will help an entrepreneur understand how much money they owe their suppliers. As well as if they are pricing their products and services in a way that allow them to cover their expenses.
Once a business owner is in the habit of entering all of their invoices when they receive them. And they are reviewing their accounts payable summary on a regular basis. They can start to learn what to look for. To ensure the accuracy of this report.
The first thing that Edmonton bookkeeping recommends entrepreneurs do, is look at any amounts over ninety days due.
The reason why, is because it often represents an invoice that was entered twice. Or it was entered incorrectly, or an entrepreneur is not paying it for a specific reason.
If an entrepreneur has entered the invoice twice or made a mistake while entering the invoice. Such as entering a much larger total than the invoice was for. By reviewing these amounts, verifying the accuracy of the invoices. And fixing the mistakes in their accounting software.
Can help ensure that they remove these overdue amounts from their accounts payable aging summary. So that the total amount that they are owing is more accurate. And actually reflect money that they do owe suppliers.
The next thing that Edmonton bookkeeping recommends entrepreneurs look for. Our negative numbers in their accounts payable aging summary.
Negative numbers typically indicate that a business owner has paid a deposit. And while this is a common explanation for why there is a negative number. Business owners should verify first of all, that they have paid a deposit.
And if they have paid a deposit, that they and up entering the invoice. So that this negative number will fall off the summary when the business owner receives that invoice.
Many entrepreneurs forget to enter the invoice on something that they have paid a deposit on. Because they know that they have prepaid it. So this is very important that all entrepreneurs remember to enter all invoices. Even if they have already paid the bill.
However, if a business owner sees that there is a negative number, but also a positive number for the same supplier and in the exact same amount.
This typically indicates that a business owner has entered a payment, but did not correctly apply that payment against the invoice in their accounting software.
By learning what a negative and a positive number together means. Can help entrepreneurs ensure the accuracy of their accounts payable aging summary.
The more accurate their accounts payable aging summary is. And the more often they are reviewing it. Can help entrepreneurs make more informed financial decisions.
Such as if they have the finances to be able to pay invoices, run payroll or purchase assets. And help them determine if they are pricing their products adequately. And even if they need to minimize expenses. In order to turn more of a profit in their business.