The reason why business owners should review their interim financial statements before making business decisions says Edmonton bookkeeping.
Is so that they can understand how much money they have in their business to make those decisions. And if they do not, can help them create a plan on how they are going to be met money into their business. So that they can do what they need financially.
Therefore, it is very important that business owners learn how to read all of their interim financial statements. As well as review them for errors. So that they can be accurate when an entrepreneur needs to make an important decision.
While there are different interim financial statements for entrepreneurs to learn about. The accounts payable aging summary. Is to help entrepreneurs understand how much money they owe the suppliers in their business.
When they are first setting up their accounting. Edmonton bookkeeping says they need to ensure that they do not accidentally incorporate the expenses of their corporation into their accounts payable report.
The corporate expenses should go into a separate account. Including both federal and provincial taxes, payroll taxes, GST, and even shareholder loan amounts.
This way, when an entrepreneur pulls their accounts payable aging summary. They will be able to see how much money they owe their suppliers at any given time.
And then pull separate reports to see how much they owe the government in taxes, and how much they are owed by their company in shareholder loans.
The next thing that business owners need to learn when it comes to their accounts payable aging summary. Is how the information is organized. So that they can read it.
The first column that business owners will see is a list of all of the businesses that they owe money to. And in the second column, that is all of the money that the entrepreneur owes those suppliers for the current month.
The third column, are invoices that are up to thirty days past due, followed by the fourth column that shows invoices that are up to sixty days past due. Is for invoices up to ninety days. And shows anything that is over ninety days overdue.
This sixth column is one that entrepreneurs should pay special attention to. First, because they should not have any invoices that are being unpaid for that long.
And if it is an invoice that they actually owe, a business owner should pay it immediately. However, if after looking through their invoices. If they discover that they do not actually owe this amount. They can fix the mistake that caused it to be on the report in the first place.
One of the most common reasons why this mistake occurs. Is because an invoice was accidentally entered it twice into the accounting software. Typically, because the business received a paper copy. And it was entered into the accounting software.
Then later on, the business will get an emailed copy of that invoice. And if the counting is done by more than one person. Or if a business owner is not paying attention. Edmonton bookkeeping says they can easily enter the second invoice.
When the business owner goes to pay that invoice. The payment gets applied on one of the ones that was entered. Leaving the second one to main on they summary, as an outstanding amount.
Learning how to read the accounts payable aging summary is very important. Especially so that business owners can use that report any time they need in their business. To make more informed financial decisions.
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The reason why mistakes occur on accounts payable reports says Edmonton bookkeeping. Is because a lot of data entry is done by people. And that human error factor. Means that business owners should get into the habit of reviewing these reports for errors on a regular basis.
While there are accounting software programs that allow entrepreneurs to automate a lot of processes. They still need to get into the habit of reviewing their interim financial statements. Especially their accounts payable aging summary on a regular basis.
This report shows how much money they owe their suppliers. And if they are not paying attention to this report, they might end up behind in payments.
Another reason why this report is so important. Is so that an entrepreneur can understand how much money they are making on a project. And verify if their pricing is accurate. And is allowing them to turn a profit.
If they are not turning a profit, they should either minimize their expenses. Or increase their prices or both. But it will take reviewing and accurate accounts payable aging summary. In order to ensure they can make these important decisions in their business.
One mistake that business owners often make. Is that they do not and up entering the invoices that they receive regularly. Often, they enter the invoice when they enter the payment. And not only does this end up with an account payable aging summary that does not reflect how much money they owe their suppliers.
But it also ends up with expenses that are not showing up in the month that they occurred. Which can make it very difficult for business owner to look at their expenses for a specific timeframe. And see if those expenses are reasonable or not.
Other than entering the invoices as soon as they are received. Edmonton bookkeeping says business owners also need to know what to look for when they scan this report. To ensure that there are no mistakes on it.
Negative numbers often indicate a deposit has been made. However if a business owner has not paid a deposit says Edmonton bookkeeping. This often is entering a payment, before an entrepreneur has entered the invoice.
By entering the invoice that goes with that payment. The negative number can fall off the accounts payable aging summary. And ensure that the report is accurate.
If entrepreneurs see a positive and negative number for the same amount for the same supplier. This often indicates that while the entrepreneur has entered both into the accounting software. They have not applied the payment against that specific invoice.
By booking the payment against the invoice directly. Can cause the negative number to be dropped from the report. And have more accurate final total.
Ensuring the accuracy of their accounts payable aging summary. Is important to the integrity of the entrepreneurs financial decisions that they will be making in their business.