In order for entrepreneurs to be able to read and understand the information on their accounts payable aging summary says Edmonton bookkeeping. They should learn not only how the information is oriented on the report. But what to look for to catch mistakes that are likely to happen on the report.
The king at the accounts payable aging summary, there will be a list of all suppliers that an entrepreneur owes money to. And in the subsequent columns to the right, how much money and entrepreneur owes them.
The columns progressed to the right, indicating how long those invoices have been outstanding for. The final column shows invoices that are outstanding for over ninety days. And the column after that, showing the amount they entrepreneur owes in total to that supplier.
This is very important to understand. Because by looking at this, compared to their other interim financial statements. Such as the financial statements, and the balance sheets.
An entrepreneur should be able to figure out the financial health of their business. And if they have the finances to be able to do things like run payroll, pay bills or make purchases.
However, Edmonton bookkeeping says there are common errors that can occur on this report. That may impact an entrepreneur’s ability to use it to make financial decisions.
Therefore, before business owner looks at the information, and starts making decisions on it. Business owners should be able to review it for errors.
One of the first things that business owners should look for when reviewing for errors. Is if there are any amounts in the ninety days past due column of the report.
The reason why this is most likely a mistake. Is because unless an entrepreneur is in serious financial trouble. There should not be any expenses outstanding for that long. If there is, they should pay those suppliers immediately. In order to maintain a positive relationship with them.
However, if an entrepreneur does not have any invoices outstanding that long. The typical problem that this points to. Is that an invoice has accidentally been entered twice.
That often happens when the supplier drops off a paper copy of the invoice. And then emails it as well. And if an entrepreneur is not paying attention. They can very easily enter that double into their system.
Or, another reason why they might have an amount in the past due column. Is that they have not entered the invoice twice. But entered it incorrectly, and for a larger amount than the original invoice.
That way, the business owner will have entered the payment. But it would look like there is still a balance owing on the invoice says Edmonton bookkeeping.
So why reviewing invoices that are owing past ninety days. And then looking at the actual invoices to verify.
Can help entrepreneurs fix mistakes that might occur on their accounts payable aging summary. So that they can make the report more accurate.
If you want to find the Edmonton Bookkeeping you need, call us.
Even though many business owners may understand how important reviewing their interim financial statements is says Edmonton bookkeeping.
If they are not fixing mistakes, or even looking for mistakes on these statements. They may be making poor financial decisions even though there looking at their interim financial statements.
Mistakes and errors occur frequently. And because of that, an entrepreneur needs to look over there statements for mistakes. Before using them to make decisions.
If they end up making a decision with one or more significant error on the statement. They could end up spending more money than they have, and running out of money. Which is actually the second most common reason why entrepreneurs in Canada fail.
However, many business owners are not sure what they need to be looking for. In order to fix mistakes, and so they simply hope that there are no mistakes when they will these reports.
However, it can be quite easy. When business owners know what to look for. The first type of number that they should be looking for when reviewing their accounts payable aging summary. Is any number that is negative.
A negative number typically indicates that a business owner has prepaid for something. Therefore it should be very easy for business owners to verify if this is the case.
If it is the case, Edmonton bookkeeping cautions business owners to be very careful when it comes to entering the invoice. Because many business owners forget to enter the invoice. Thinking that it is unnecessary to enter, because they have already prepaid it.
However this is not true. It is still very important for entrepreneurs to enter the invoice. So that it can be applied to the negative number in the accounts payable aging summary. And disappear off the report.
Although, if a business owner has not prepaid something. The reason why a negative number might show. Is because they have entered the payment. But they forgot to enter the invoice. And so it looks like a deposit, when it actually is an invoice that has been paid.
This is why it is so important for business owners to review the report. Because it can easily have inaccuracies. That could potentially be fixed quite quickly.
Another reason why business owners should look for negative numbers. Is because sometimes it means that an entrepreneur has not applied the payment correctly.
For example, if business owners see a negative number, followed by a positive number for the exact same amount for one supplier.
This typically means that the entrepreneur has input the invoice. And input the payment, but has not applied payment against the invoice yet.
By looking for negative numbers, business owners can ensure they are fixing any mistakes. So that they can ensure the accuracy of the information on the report.
Now it is not only important for business owners to do this once a month says Edmonton bookkeeping. The recommendation is for entrepreneurs to do this every single time they pull the report. And to always be in the habit of verifying the accuracy of the information.