Since the learning curve that business owners face is extremely steep says Edmonton bookkeeping. They recommends that entrepreneurs learn about interim financial statements early on.
This can help entrepreneurs understand their business finances on a deeper level. That will allow them to fix mistakes, and make more informed financial decisions quickly.
Since 15% of entrepreneurs fail in the first year. And half fail eventually. And the second most common reason why entrepreneurs fail in business. Is because they run out of money.
Learning how to make more informed financial decisions. Can help many entrepreneurs overcome this obstacle that many business owners face.
One of the first questions that many business owners ask their Edmonton bookkeeping company. Is what is an account payable or AP aging summary?
This essentially is a list of all of the suppliers that an entrepreneur owes money to. This is for direct expenses, as well as overhead expenses. But should never include any corporate amounts that they owe.
When entrepreneurs are looking at their account payable aging summary, they will notice that a list of all of their suppliers will be on the left-hand side of the page. And total of how much money they owe each supplier on the far right.
The middle columns indicate how current those invoices are. And business owners need to pay attention closely to the one that says ninety days plus past due.
The reason why business owners need to pay close attention to this category. Is because it often indicates an error. That a business owner may have made during entering their invoices or payments into their accounting software.
For example, a business owner may have accidentally entered an invoice twice. Which is common for new entrepreneurs says Edmonton bookkeeping. When they receive an electronic copy as well as a paper copy from their supplier.
When they enter the payment, the payment is applied on only one of the invoices. Causing the other one to not get paid, and show up in the accounts payable report.
By the time it has been there for a few months, it is hit the ninety days past due column. Where it is a huge red flag to business owners that there is a mistake.
An entrepreneur simply has to go back into their accounting software and find that duplicate invoice to avoid it out. In order to fix the mistake.
Another reason why business owners may find an invoice in ninety days overdue. Is when the entrepreneur manually entered that invoice. They entered the incorrect amount, much larger than the amount the invoice was for.
When they enter the payment for that invoice. And ten bookkeeping says that they enter the correct amount. And not notice that there is an amount left owing, which will appear on their accounts payable aging summary as amounts that they still all that supplier.
By paying close attention to the ninety days past due column on their accounts payable aging summary. Business owners can catch mistakes quickly. And ensure the accuracy of that report. For making financial decisions in their business.
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Even if an entrepreneur understands what their accounts payable aging summary is says Edmonton bookkeeping. They still might struggle with understanding how to read it. As well as how to fix any errors that may show up on the report.
One question that entrepreneurs often have for their Edmonton bookkeeping company. Is what should they do if they see and negative number on their accounts payable aging summary?
While a negative number typically indicate that a business owner has prepaid something. If an entrepreneur can verify that they have not paid a deposit. Then this indicates a mistake.
The most common mistake is that an entrepreneur has failed to enter the invoice. And yet has entered to the payment, making it look like there has been a prepayment on something that has not been invoiced yet.
This is why business owners should always ask themselves when they see a negative number if they have put a deposit down. And if not, they can look for the error.
However, business owners should be very aware if they see and negative number, followed by a positive number in the same amount. And for the same supplier.
With this typically indicates according to Edmonton bookkeeping. Is that an entrepreneur has properly entered the invoice. And entered the payment. But did not apply the payment against that invoice specifically.
All they have to do to fix this mistake. Is to go into their accounting software, and apply the payment correctly. And that negative number will disappear.
Another question that entrepreneurs often have about their accounts payable aging summary. Is are round numbers an indication of an air as well?
By the time a company has added all of their products and services together and applied tax. They typically will not have a completely rounded number as their invoice total.
The reason why around number might occur in the accounts payable aging summary. Is because an entrepreneur has put in an estimate. But then did not fix that estimate when they got the invoice.
Although in some rare cases, a business may truly have around number that is not an indication of an error. But any time a business owner sees this. Should trigger them to verify that number. Just in case it is incorrect.
And while the last questions that business owners have when they are looking at their accounts payable aging summary. Is this place where they should have their corporate expenses as well?
This is a great question, because many business owners think that all expenses for their business and corporation belong in this report but that is not true.
The federal tax, provincial tax, and even things like there shareholder loans. All belong in their own account. So that business owners can pull their accounts payable aging summary. And understand the expenses of their business alone.
But then be able to pull separate accounts, to see how much tax they owe, how much GST, payroll, and even how much shareholder loans they have accrued.
Any other questions that business owners have about reading or correcting their accounts payable aging summary. They can contact their Edmonton bookkeeping company, and have them walk them through any other problems that they might have. To ensure the accuracy of this report.