It is not just enough for business owners to learn how to read their own interim financial statements says Edmonton bookkeeping. But it is important that they know how to look for and fix mistakes.
If entrepreneurs simply use the interim financial statements to make business decisions. But they are not first fixing errors that may be on them. The decisions they make may not be the best ones for their business.
And while the financial statements they receive from their accountant at the end of the year. Our generally extremely accurate.
The interim financial statements they pull from their own accounting software each month. Are less likely to be accurate. Because there is no one fixing those errors.
The first thing that business owners should do when they are reviewing their accounts payable aging summary. Is see if there are any whole, round numbers on the report.
While round numbers are not necessarily an indication that it is a mistake. But it is frequently an estimate, that an entrepreneur has entered into the software. And has not yet updated with the final invoice amount.
Especially as tax like GST gets applied to the invoice. Invoices that are round numbers are less probable to be the actual number that an entrepreneur owes.
Therefore, Edmonton bookkeeping says that if entrepreneurs see that there is a whole number on their accounts payable aging summary. They should review that invoice. To verify what the number should actually be in their accounting software.
The next thing that business owners should keep in mind. Is that if they have any negative numbers on their accounts payable aging summary. That can indicate an error as well.
A negative number actually indicates that an entrepreneurs has paid a deposit, or prepaid something. And if an entrepreneur sees that there is a negative number. They should be able to tell very quickly if that is a deposit or not.
If it is not a deposit. Typically what causes this issue. Is if an entrepreneur has entered the payment for an invoice. But has missed entering the invoice itself.
This is why is very important for entrepreneurs to look at their report, and ask themselves any time they see a negative number. Is this something that they have in fact prepaid. And if the answer is no, it is an error to be fixed.
However, business owners might see the negative number followed by a positive number of the same amount. And for the same supplier.
When this is what they see, what it indicates. As of the business owner has entered the invoice. And they have entered the payment. But they have not applied the payment against the invoice.
A going into their accounting software and applying that payment against the invoice. Will cause the negative number to disappear from the report.
With how important the accounts payable aging summary is to the business decisions that an entrepreneur will make. Edmonton bookkeeping says business owners should learn to look for the most commonly found errors on this report. So that they can ensure that it is accurate.
How is Edmonton Bookkeeping this hard to keep up with?
When the most important things that business owners can do with their interim financial statements says Edmonton bookkeeping. Is troubleshoot for errors.
While many business owners may realize how important it is to use their interim financial statements. In order to make more informed financial decisions.
However, if they are not fixing mistakes first. They can use those financial statements, but it may not help them make a better business decision.
And since half of all entrepreneurs in Canada fail. And the second most common reason these failed entrepreneurs say they were not successful. Is because they ran out of money.
By learning not only how to read interim financial statements like their accounts payable aging summary. But fix mistakes that are on them. Prior to using those statements.
Can help entrepreneurs make better financial decisions. That can help them avoid running out of money. And have the same fate that causes so many other businesses to not succeed.
It is very important that entrepreneurs are looking at amounts that are ninety days past due. Because of how often this indicates that there is a mistake.
The first thing that a business owner should do, is look to see if they have in fact missed making a payment. And if they have, Edmonton bookkeeping says they need to make it as quickly as possible.
However, if their payments are up-to-date according to the entrepreneurs records. The reason why they might have an invoice in the ninety days past due category. Is because they have accidentally entered an invoice twice.
This commonly happens when business owners receive a paper invoice as well as an electronic invoice. And they do not catch it when they enter it twice.
When they go to pay their invoice. Edmonton bookkeeping says they pliant on one of the outstanding invoices. But not the other. Which creates the overdue invoice. That persists on the summary.
However, it is not just a duplicate entered invoice that causes this. If an entrepreneur has entered to the incorrect amount for the invoice. Such as a larger number than what they actually owe.
What will happen says Edmonton bookkeeping. Is when they go to pay that invoice, they will enter the amount that they have paid. Which matches the amount on the invoice on their paper records. But it will leave an amount left owing in their accounting software.
By noticing this in their ninety days past due category. Can help entrepreneurs review their records, and fix the mistake so that it does not end up impacting the accuracy of their accounts payable aging summary.
Learning how to review and fix these statements. Is extremely important. Especially as entrepreneurs can use this statement. To help understand their expenses. To see if they are pricing their product properly. Or if they need to minimize these expenses to earn a profit.