When business owners start their new venture, Edmonton bookkeeping says that they should be able to understand what accounts payable are in their business, and how developing a system can help entrepreneurs stay organized in order to make payments accurately and promptly, and end up with accurate balance sheets. The reason why this is so important, is because of many entrepreneurs, while good at delivering the products and services that their business offers, they are less skilled at running a business. In fact, into it, who is the company that makes QuickBooks accounting software did a survey of small business owners, in order to test them on their basic business financial literacy. They ask questions such as how to improve cash flow in their business, and what the role of the balance sheet is. An overwhelming majority of respondents, 82% ended up scoring less than 70% on this quiz. This indicates that many entrepreneurs struggle with understanding business finances.
In order for entrepreneurs to stay on top of their accounts payable, they should first understand what accounts payable are. Edmonton bookkeeping says that any time an entrepreneur takes a purchase for their business but does not pay the amount immediately results in accounts payable on their financial statements. This essentially means that an entrepreneur purchases items on credit, and as a result the entrepreneur and their vendor enter into a creditor/debtor relationship until the entrepreneur pays their vendor completely and in full.
An entrepreneur should understand how their accounts payable looks in their financial statements. When an entrepreneur looks at their balance sheet, they should see that there is a section at the top called assets, and a section in the middle that is listed as liabilities. Since the amount that the entrepreneur owes all of their vectors is considered a liability, it should be listed here. Every time an entrepreneur makes a purchase, they should ensure that as it has entered into their accounting software, it should appear on the liability section of their balance sheets.
Edmonton bookkeeping says that business owners should also understand what happens as they make the payment, and how it appears on their balance sheet as well. When an entrepreneur is organizing their payment when they make their payments they should verify that the total amount of money that they are paying to vendors should be decreased in their accounts payable section of their balance sheet. They should also verify that the same amount that they have paid, should also be indicated in the balance sheet under the assets. The cash should decrease the same amount that their accounts payable decreased. By verifying this, entrepreneurs can ensure that not only have they made their payments accurately, but it is reflected properly in their balance sheet.
By understanding accounts payable, and understanding as well how it tracks in their financial statements, can help entrepreneurs verify that their accounts payable has been recorded properly, and as they make payments, the payments are made and tracked properly as well. By having accurate financial statements at all times in their business, business owners can be confident when they are using those statements in order to make financial decisions in their business.
Edmonton Bookkeeping | How To Track Accounts Payable
By staying organized from the start, can help entrepreneurs ensure the accuracy of their accounts payable says Edmonton bookkeeping. This can allow business owners to keep track of their finances in a less stressful manner, and have a clear view of all payables. This can help an entrepreneur pay all of their invoices on time, as well as avoid making errors such as double paying, or missing paying certain invoices.
In order to help stay organized, Edmonton bookkeeping recommends developing a system that ensures matching of the purchase order, the receiving report and the vendor’s invoice altogether, to ensure that what was ordered, was received. And what was received is invoiced correctly. In order to do this, entrepreneurs need to understand that when they make a purchase, they should receive a purchase order. They need to understand what this is, and that they should keep it. The purchase order will include among other things, a list of the items that have been purchased along with quality and unit prices. The purchase order should have a reference number on that, so that the business owner can track the order, and depending on the business and the industry, the purchase order might have a variety of other information on it.
As an entrepreneur starts receiving the product that they order, Edmonton bookkeeping says they will receive a receiving report along with be ordered. This will look very similar to the purchase order, and have the same information on it, indicating all of the parts that were shipped to with the order. It is very important that entrepreneurs compare what is received to the purchase order, to verify that everything that was ordered was received. Partial orders will have multiple receiving reports. The employee that receives the product should verify that all parts of the product that were ordered are received.
Once all parts of the order have been received, Edmonton bookkeeping says they will then get an invoice, often with the final shipment, or could be mailed or emailed to the business owner. When the invoices received, entrepreneurs should ensure that the products on the invoice are the same that was received. And the amount listed on the invoice is the amount indicated on the purchase order. After the business owner has verified all of those things, they can ensure the accuracy of the invoice and can enter it confidently into their accounting software.
When entrepreneurs stay this ordering and receiving protocol, they can ensure that all the invoices that they enter are accurate. It can also ensure that an entrepreneur is staying on top of entering all the invoices so that whenever they pull financial statements to look at, they can ensure all the information in the financial statement is accurate, they can confidently use that information to make financial decisions in their business.