Learning how to read interim financial statements is important for all business owners according to Edmonton bookkeeping. Because that is how they will understand how much money they are making, and how much money they owe their suppliers.
However, many entrepreneurs not only are not reading their accounts payable aging summary regularly. But they are also making mistakes, that cause the report to not be accurate.
And when they have an appointment with their Edmonton bookkeeping company or their accountant. It ends up needing to be fixed or cleaned up. Before they are able to help the entrepreneur understand their finances.
One of the first mistakes that many entrepreneurs make. When it comes to their accounts payable aging summary. Is that they are only entering their expenses when they pay those expenses.
While this ends up making the accounts payable aging summary look great, because there is not a lot if anything outstanding on it. However this will not be helpful in showing an entrepreneur how much money they owe their suppliers.
And when they are trying to figure out if they can afford to do things like run payroll, or purchase assets. They will make that decision, without taking into consideration how much money they owe suppliers.
And business owners can very easily spend more money than they have. Getting into all sorts of financial trouble, including running out of money.
Therefore, a very simple thing that entrepreneurs can do. Is enter those invoices as soon as they receive them. So that their accounts payable aging summary can reflect all of the money that they currently owe.
The next thing that business owners should understand about their accounts payable aging summary. Is that it is for business expenses only. And corporate amounts should go into their own account.
This includes payments for GST, payroll taxes, provincial and federal taxes and even shareholder loans to name a few. Edmonton bookkeeping says that by keeping these separate.
Can help show an entrepreneur how much money they are making in their business. While allowing them to pull separate reports to see all of the other corporate expenses that they have.
Once an entrepreneur understands what expenses are listed in this summary. They will be able to start reviewing the summary, in order to catch and fix errors.
The first thing that business owners should be looking for are perfectly round numbers. Because while these are not always errors. They often indicate estimates, instead of actual invoices.
Therefore, if business owners see anything that is around number. It should cause them to question it. Because once there suppliers add tax to the invoices. They rarely equal at perfectly round number.
By finding the actual invoice, and entering that into their accounting software. It will be able to have more accurate representation of the money that they owe that supplier.
Learning how to read and accounts payable aging summary. As well as how to fix errors. Will allow business owners to understand how much money they owe their suppliers.
It will help not only budgeting their money. But also will help them figure out if they are pricing their products and services accurately.
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Many entrepreneurs put a lot of time and effort into ensuring the money that they are bringing into their business is accounted for accurately says Edmonton bookkeeping. But do not spend the same amount of time on their accounts payable.
The end result of this, is that they do not know how much money they owe their suppliers. And they often overspend, because they do not know how much money they have to send to their suppliers.
As well, they will be less likely to understand if they are pricing their products and services accurately. Or if they need to minimize expenses in order to make more money per transaction.
When business owners are reviewing the accounts payable summary. They should immediately look at the ninety days overdue column. And verify that those invoices are accurate.
The reason why they should be the first thing that entrepreneurs do. Is because when an invoice is overdue this long. It is often because of an error. And by fixing that air, can increase the accuracy of the entire report.
One of the most common reasons for an error of this kind appearing on the accounts payable aging summary. Is because an entrepreneur has accidentally entered the invoice twice.
Perhaps they received a paper copy and entered it. And then there supplier sent an email of the invoice and the entered it again.
Or, Edmonton bookkeeping says they may have entered the invoice, and then discovered a problem with the products they received. And as a result, are not going to end up paying that invoice. But they also do not delete it from the accounting software.
This will end up with an invoice that continues to show up on the report showing its do. But the entrepreneur has no intention of paying that invoice. By looking at amounts that are over ninety days do. Can help entrepreneurs fix those problems.
The next thing that business owners should be aware of when they are reviewing their accounts payable summary. Is anything that is a negative number.
Negative numbers typically represent if a deposit has been made. Or, if an entrepreneur has over paid an invoice. Therefore, any time a business owner sees a negative number in their accounts payable summary. They should review their records to see if they have paid a deposit.
And by being careful to always enter invoices even if they have made a prepayment. Can help ensure that that negative number gets cancelled out as soon as possible. So that their accounts payable aging summary can be more accurate.
Especially if a business owner sees an negative number, followed by a positive number of the exact same amount for the exact same supplier. Business owners should realize that this means that while they had entered the deposit and the invoice.
They did not go into their accounting software to ensure that they put the payment directly on the invoice itself. By fixing this error. Drops the negative number from the report.
Business owners will be able to make more accurate businesses decisions says Edmonton bookkeeping. If they have a more accurate and up-to-date accounts payable aging summary. By learning how to keep this report accurate. Can help business owners make more informed financial decisions.