It is very important for entrepreneurs to be able to make financial decisions using much information as possible says Edmonton bookkeeping. Which is why learning how to read interim financial statements is necessary.
Business owners often make mistakes, by thinking that they can understand how much money they have to work with by looking at their bank account. And while their bank account is going to show them how much money they have in their bank at that moment.
What it will not take into consideration. Is the amount of payments that an entrepreneur will have coming out of their account. Either through checks, or electronic fund transfers.
Also, what looking at the bank account alone will not tell an entrepreneur. Is how much money they owe their suppliers. So by looking at their accounts payable aging summary, against their balance sheets.
Can help business owners understand how much money they have in their business, how many payments they have coming out of their account. And how much money they already owe.
This can help them make more informed financial decisions. That can help them significantly avoid making decisions that would cause them to run out of money in their business.
The first thing that business owners need to know how to do however. Is how to read their account payable aging summary.
The right to see that this statement is oriented horizontally on a sheet of paper, with several columns. The far left column will show all of their suppliers. And the column immediately to the right will show all of the money that they currently owe the supplier, but are not past due yet.
As the columns moved towards the right, they represent invoices that are past due for longer, ending with the column that represents invoices that are over ninety days past due. And then a column that totals all of the amount.
Ideally, Edmonton bookkeeping says business owners will not have invoices that are past due. But if they do, they should never be over ninety days past due. Especially if they hope to have a working relationship with their supplier.
This is why, anytime a business owner does see that there is an amount in that ninety day plus column. They should question it. There are a few reasons why an amount here indicates that they have made an error. And not that they have not paid their supplier on time.
One of the first reasons why business owners will have an amount in this column by mistake. Is because an invoice was accidentally entered twice. This commonly happens if a supplier gives the business of paper invoice. And then sends one later through email.
The business owner could enter it twice, making the mistake of thinking that it was not already received. And when they pay that invoice, only one of them gets the total recorded. And the other just sits on the summary, making it look like the business owner owes more money.
Therefore, knowing how to read the accounts payable aging summary. And what to look for in terms of mistakes. Can help a business owner keep that report accurate according to Edmonton bookkeeping. So that they can use it to make more informed decisions, financially in their business.
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It is not just enough for a business owner to learn how to read to their accounts payable aging summary says Edmonton bookkeeping. But they need to learn how to read all the rest of their interim financial statements. Such as their income statement, and balance sheet.
This will help an entrepreneur understand the entire financial picture of their business. Not just how much money is in their bank account. But also how much money they are bringing in in payments. And how much money they owe.
We looking at all these reports prior to spending money or making financial decisions. Can help entrepreneurs make more informed decisions. Such as if they can run payroll, pay themselves or even purchase assets they need.
However, when learning how to read their accounts payable aging summary. Business owners should also learn how to look for and fix mistakes.
By fixing mistakes, business owners can preserve the integrity of the information on these reports. And ensure that the decisions that they do make. Will be informed decisions. That can help them grow their business, set their pricing accurately. And learn when they need to generate more revenue in their business.
One of the first things that Edmonton bookkeeping suggests entrepreneurs look for when they are reviewing their accounts payable aging summary. Is negative numbers.
Negative numbers indicates that a deposit has been made. And while new business owners may make more deposits than is owners that a been around for a while. They can usually tell right away, if that amount is something that they have prepaid or not.
If they have prepaid, Edmonton bookkeeping says business owners need to be very mindful of entering the invoice when they receive it. Even though the invoice is going to show that they owe zero dollars.
If they do not enter the invoice, it will not zero out the negative number on the aging summary. And can end up altering the total, making it difficult for an entrepreneur to understand how much they owe their suppliers.
However, if a business owner did not pay a deposit. Then this will indicate an error. And the error that it will indicate, is typically that the entrepreneurs forgot or did not enter the invoice. But then entered the payment that they made to that business.
Therefore, when they see a negative number. They just have to verify that it was a deposit or not. And if it is not a deposit. They should find the invoice, entrance and correct this statement.
Learning what to look for when correcting the accounts payable aging summary. Can help business owners have the most accurate information on this report.
So that when they compare it to their balance sheet and income statement. They will be able to understand how much money they have in their business compared to how much money they owe. And be able to decide how to spend their money from their.