It is extremely important that entrepreneurs ensure the accuracy of the accounts payable that they receive so that they can verify the balance sheet is up-to-date on a regular basis says Edmonton bookkeeping. This is especially important to do early on in their entrepreneurship, especially since many entrepreneurs struggle with basic business financial literacy. Intuitís, who are the makers of the accounting software called QuickBooks surveys several small entrepreneurs, in order to test them on their financial literacy. The company asks these entrepreneurs questions such as what is the role of the balance sheet, how to improve the cash flow in their business, and what are accruals. It was very surprising to see that the majority of the respondents, 82% scored less than 70% on their financial literacy quiz.
The faster that entrepreneurs can understand what accounts payable are, and how that affects their balance sheet, and why that is important, can help business owners ensure the accuracy of their accounts payable, and that can help them make better financial decisions earlier on in their entrepreneurship. The first thing that entrepreneurs need to understand is what is an account payable. Edmonton bookkeeping says that this is an invoice that an entrepreneur gets after they make a purchase in their business, but does not pay immediately. It technically counts as a liability to the business, and although it should be considered separate from other liabilities like loans for assets or bank loans, they have still considered a liability to the business.
How an account payable will show up in the interim financial statements of the business says Edmonton bookkeeping is on the balance sheets. Entrepreneurs should understand that the balance sheet is a report that shows all of the assets as well as the liabilities of the business. An entrepreneur should be reviewing this financial statement any time they are going to make financial decisions in their business. By comparing the liabilities to their assets, they can get a clear picture of the financial health of their business. When the make of financial decision in their business, they will reference their balance sheet first, in order to make the determination of whether they can afford that are not. For example, if an entrepreneur checks their balance sheet in order to find out if they can run payroll or not, they may discover that they do not have enough cash in their business, and therefore they engage in some Accounts Receivable in order to generate money into their business so they can afford to run payroll. Edmonton bookkeeping says that if they do not do that double-check system ahead of time, entrepreneurs could risk running payroll, and then bouncing those payments.
When entrepreneurs learn what accounts payable are, and how important it is to their balustrade, they can ensure that there actually entering in invoices into their accounting software, so they can end up with an accurate balance sheet often in their business.
Edmonton Bookkeeping | Ensuring The Accuracy Of Accounts Payableís
One of the ways that entrepreneurs can ensure the accuracy of their accounts payable, is by using what is called a three-way match system says Edmonton bookkeeping. This is a well-run account payable process, that can help entrepreneurs keep track of all of the purchases that they make, verify that they received everything they expect, and ensure the accuracy of their invoice. When they are able to quickly ensure the accuracy of their invoice, there is no delay in entering it into their accounting software, which will end up with them having the most up-to-date balance sheets possible, and able to process all of those invoices in a timely manner, so they can avoid paying invoices late, or missing making the payments altogether.
By using this three-way match system, entrepreneurs need to use their purchase order that they received when they make up the purchase, the receiving report that they receive when that order arrives in their business, as well as the invoice that they receive when all the products have been delivered. First, an entrepreneur should understand what the purchase order says Edmonton bookkeeping. This is a list of all of the things that an entrepreneur orders from that company from their vendor. Depending on the industry and the product, the information on the purchase order might vary, but an entrepreneur should ensure that it at the very least contains a list of all of the items that they have purchased, the quantity as well as the unit price for each of those items. They must keep this on file, and have it on hand when they start receiving the products.
When the entrepreneur starts receiving those products, Edmonton bookkeeping says that they will also get a receiving report that should detail all of the products there are included in the shipment. It should look very similar to the purchase order, and an entrepreneur should match the items on the receiving report to the purchase order, to ensure that all the items that are expected are being received. If a vendor has sent out the products is a partial order, an entrepreneur will be receiving their items through multiple shipments, and it will necessitate having several receiving reports. By comparing the receiving reports to the purchase order, entrepreneurs can ensure that they receive everything that they expect.
When they receive everything that they expect, the vendor will send them an invoice says Edmonton bookkeeping. This is going to help an entrepreneur compare the products that are on the invoice to what they received, and then compare the price that is on the invoice to what was listed on the purchase order. This should help an entrepreneur verify the accuracy of that invoice as soon as it is received. This is exceptionally important if multiple people are making the purchase, receiving the reports and entering the invoice into the accounting software. Also, when entrepreneurs have multiple employees, they should be ensuring that a different employee handles each different area because it can help cut down on the fraud of a purchaser purchasing things for themselves, receiving them and keeping it for themselves and then submitting the invoice to be p entered into the system. By doing this, entrepreneurs not only can ensure the accuracy of their invoices, so that they can process them in a timely fashion, they can also ensure the accuracy of their balance sheets, and verify that no extra purchases have been made.