Since many entrepreneurs often struggle to understand their business finances, Edmonton bookkeeping says that business owners should learn early on in their business not only what accounts payable is in their business, but how it looks on their balance sheets. Since balance sheets are an important tool that entrepreneurs need to use in their business in order to understand the financial health of their business so that they can make financial decisions, helping entrepreneurs have up-to-date accounts payable, is a vital part of their business.
The first thing that entrepreneurs should learn is what an account payable is in their business. Edmonton bookkeeping says that it is a liability that an entrepreneur owes a vendor for any purchase that they make. Regardless of what good or service that is, any purchase that an entrepreneur makes that is not paid right away. This can include physical goods like if an entrepreneur orders stationery supplies, but it can also include things such as phone bills, cable bills, and even utility bills. Entrepreneur receives the service and receives the bill at a later date.
Since the accounts payable is counted as a liability to the business, entrepreneurs should understand that it will show up on the balance sheet. The balance sheets of the business include a list of all of the assets, followed by a list of all the liabilities, and of the equity in the business at the bottom of the statement. Business owners use this sheet in order to assess the financial health of their business any time the right to make a financial decision. Whether it is running payroll, or deciding to purchase an asset, entrepreneurs can subtract the liabilities from the assets in order to ascertain the financial health of their business. When the accounts payable is kept up-to-date and accurate by the entrepreneur, there ensures the accuracy of that balance sheet, which will be important for entrepreneurs when they use it to make financial decisions.
Entrepreneurs should also keep in mind that accounts payable are essentially short-term loans, and as such should stay separate from larger and longer-term loans such as loans for assets like vehicles, buildings, or loans from a financial institution.
Edmonton bookkeeping says that as an entrepreneur enters invoices the accounting software, they should see the accounts payable section of the liabilities increase. As they make payments on bills that they owe, they should see that the liabilities are decreased by the amount that they pay. However, entrepreneurs need to keep in mind that since they will be making payments on bills out of cash in their business, they should verify that the cash in the asset section of their balance sheet also decreases by the same amount.
By helping entrepreneurs understand what accounts payable are, and how they appear on the balance sheet, can help business owners keep their finances more up-to-date and accurate So that they can be confident in using those balance sheets to make financial decisions in their business.
Edmonton Bookkeeping | How To Keep Track Of Accounts Payable
In order to help business owners keep their financial records accurateís, Edmonton bookkeeping recommends developing a system for receiving invoices in their business, that not only can ensure the accuracy of their orders, also ensure the accuracy of the invoice. When entrepreneurs do this, they can be confident that whatever invoices they are entering into their accounting software are correct, and accurate, so that they can keep their balance sheets up-to-date and accurate So the information is updated whenever they need to look at the balance sheet in order to make financial decisions in their business.
The system that Edmonton bookkeeping recommends the adopts in their business, is called a three-way match system. This three-way matching system uses the purchase order, the receiving reports, and the invoice together to ensure the accuracy of all of the information. Business owners not only can ensure the accuracy of the invoice, that there keeping track of the purchase that they made, that they received all of the products that they ordered and the invoices at the prices that were quoted.
When an entrepreneur looks at the purchase order, there might be a lot of information on its, but the most important information they need to verify is on the report, is the items that they have purchased, including a quantity and a unit number. This will help an entrepreneur keep track of everything that they ordered, as well as have a record of the price that they were quoted. Other information that might be on the purchase order includes a number that can be used to reference the order with, the date the order was received, the shipping method and contact information. Depending on the company and the industry, there might be a lot of different information that is kept track of on the purchase order.
An entrepreneur needs to ensure that there keeping the purchase order and when they start receiving the products, an entrepreneur will also receive a receiving report along with products from their vendor. A business owner needs to be comparing the products that they received to the receiving report and the purchase order. The purchase order will help an entrepreneur understand if they received all of the products that they have ordered. If it comes in one shipment, it is very easy job. However, Edmonton bookkeeping says that if partial orders have been sent, an entrepreneur might receive several receiving reports. Keeping these reports together with the purchase order can help an entrepreneur stay organized when receiving their order.
Once an entrepreneur has received all of the products, they will also get an invoice from their vendor, and business owner should be checking the invoice against the receiving report to ensure that all of the items that they received are accounted for on the invoice, and compare it to the purchase order to ensure that the amount that they are being invoiced matches the prices that they were quoted.
By utilizing this organized system, entrepreneurs can ensure that as soon as they receive the invoice, they can verify its accuracy so it can be entered into their accounting software right away. Doing this, they can ensure that their balance sheets stay up-to-date on an ongoing basis so that entrepreneurs can use them any time they need to make financial decisions in their business.