When business owners do not completely understand what accounts payable are, and how it is tracked in their accounting software, Edmonton bookkeeping says puts their business at a disadvantage force keeping their payments organized. I understanding what accounts payable are, and how it looks in their business financial statements, can help entrepreneurs keep their payments organized. Intuitís, the makers of the accounting software QuickBooks surveyed small businesses and tested them on basic business financial literacy questions such as how to improve cash flow in their business, and what is the role of the balance sheet. 82% of all respondents scored less than 70% on this quiz. Indicating how important it is to help entrepreneurs understand business finances.
The first thing that can help entrepreneurs is understanding what accounts payable are. Edmonton bookkeeping says that any time an entrepreneur makes a purchase but does not pay for it immediately, this is tracked in their business financial statements as accounts payable. It is essentially a business owner purchasing things on credit, this short-term debt is then considered and accounts payable to the business, and it will show up in the balance sheet under the liability section.
Because the amount that an entrepreneur owes any vendors, appears as a liability to the business, entrepreneurs should understand that this short-term debt should not be considered the same thing as a longer-term loan. Such as the loans from their bank or financial institution, or loans to make asset purchases like vehicles. Keeping these amounts separate, can help entrepreneurs understand that the liability of the business includes these short-term debts that need to be kept track of, and paid off.
Because the bills of business are considered a liability, an entrepreneur should also understand how it looks in their balance sheet when they make those bill payments. As they disburse payments, it is going to decrease the amount that they owe in their account payable section. By keeping track of how much this is, entrepreneurs should also look on their balance sheets on the top of the page under the assets, and take a look at how their cash is affected. As they make payments, the cash that they have in their business decreases, an entrepreneur should be verifying that the cash is decreasing the same amount as their accounts payable does.
Business owners should understand that anything that they purchase, in order to pay later can be considered an account payable, and listed in their liabilities. Whether it is an entrepreneur purchasing raw materials to make their product with, or if they are purchasing business supplies, or even if it is things like utility bills, phone bills and Internet bills.
By understanding what accounts payable is, and how they are tracked in their accounting software, is owners can understand how it looks, and how to ensure that they are staying accurate with the information that they enter so that their balance sheet can be an accurate reflection of the finances of their business at all times.
Edmonton Bookkeeping | Helping Entrepreneurs Understand Accounts Payable
It is extremely necessary that entrepreneurs stay very organized when receiving invoices so that they can enter it into their accounting software promptly and accurately says Edmonton bookkeeping. Ensuring that they are entering the invoices correctly into QuickBooks, can help ensure that business owners are confident that all of the accounts are payable that their balance sheet shows is an accurate reflection of the money that they do owe. In order to achieve this, businesses should implement a system that matches up purchase orders to receiving reports and invoices, to ensure the accuracy of the invoices that are received.
When a business makes a purchase from their vendor, the vendor should send a purchase order. Not only is this a way to track the order in the companyís system, but it is most importantly going to have a list of all of the items that an entrepreneurís purchasing. I will have descriptions, quantities as well as a unit price. There may be a variety of other items included in the purchase order says Edmonton bookkeeping, depending on what the company is, what product they sell, and industry standards.
Once an entrepreneur starts receiving the product from their purchase, they should also receive at the same time receiving the report. This is going to indicate the products that have been shipped, and what products an entrepreneur should receive. They need to compare this receiving report to the purchase order, to ensure that all items were received. Partial orders will necessitate multiple receiving reports. It is important that not the owner keeps the purchase order so that they can ensure that everything that they received is everything that they expected to receive.
Once all the products have been received, a business owner should expect to receive an invoice from their vendor. This is going to indicate how much money that the business owner owes them, and will have a list of all of the items that they have purchased, the price for each, and have any additional charges like shipping or taxes. A business owner should verify that all of the products on the invoice match what was received, and matches the price indicated on the purchase order. By doing this, entrepreneurs can be very confident entering in that invoice into their accounting software.
By being very organized and how they keep track of all of their payments, can help an entrepreneur ensure that the invoices that they have entered are correct so that they can verify the accounts payable that shows up on their balance sheet is legitimate. By keeping track of everything, entrepreneurs can ensure that whenever they pull a balance sheet in order to check the finances of their business, it will be up to date, so that they can make informed financial decisions in their business. This system it can also be extremely helpful when entrepreneurs start growing and having multiple employees looking after different aspects of the business, this system can ensure that the matter who orders, receives products, or enters invoices can ensure the accuracy of this information for the entrepreneur.