Good morning and welcome to another episode of always up to date. I’m Denise and this is Yahweh [inaudible] and we are the coders of always bookkeeping. Um, today we’re going to be talking about accounts payable. Uh, and so our coach for today is from a red Adair who specialized in extinguishing and capping oil well fires. Uh, so the quote is, if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. Uh, this statistic that we have for you today is from Intuit, who are the makers of QuickBooks. Uh, they did a survey of a small of small business owners and quiz them on some basic, uh, business financial literature literacy questions. Um, like for example, the role of the balance sheet, uh, accruals and how to improve cashflow. Uh, 82% of the respondents scored less than 70% on the test with Edmonton Bookkeeping.

Um, so, um, we’re gonna consider today a buyer who makes a purchase and takes delivery of the goods but doesn’t pay the seller immediately. Uh, the seller therefore is selling on credit. Uh, and as a result, the buyer and seller now have a credit, debit, debit or relationship which lasts until the buyer pays for the goods. Okay. There are some questions here that you might want to ask when you’re hiring a bookkeeper and regarding me. So first of all, how can a bookkeeper help you with accounts payable? Yeah, good question. Um, so you know, no one likes to, uh, hand out money, right? When you, when you have a business, that’s probably the hardest part is actually sending out money to, um, to pay for things. It’s a little bit, um, stressful, but you can make stress, uh, less stressful if you have a clear view of um, everything through your accounts payable. Yeah. Um, so good Edmonton Bookkeeping can help you with your accounts payable by making sure that your payments are made on time and especially that you don’t pay the same supplier twice the same invoice twice.

Well, what is an accounts payable? Yeah, so basically an accounts payable is a liability for an amount that that’s old to a credit or for a purchase of goods or services. So anytime you buy something and you don’t pay for it right away, it becomes an account payable on your books. Um, where do I record accounts payable? Yeah. So, um, similar to accounts receivable, accounts payable is recorded on your balance sheet. The difference though is that accounts payable is considered a liability. It’s a short time, uh, sorry is term debt or a liability? Um, so this unpaid purchase stays in accounts payable for the life of the debt. Um, so when the, once you pay that accounts payable, uh, then the balance decreases by that amount and a accounts payable are a little bit more, uh, like you said, like it’s short term borrowing. So they should be separated from your long payments and um, your other financing payments or at least payments.

Yeah. Um, what happens when the buyer pays is accounts payable. Um, so when the buyer pays an invoice, um, from a seller, the buyer uses cash. So the buyer’s account, uh, accounts payable is going to decrease, but your cash account is going to decrease as well. Um, yeah, so prior to doing that, um, so once the buyer purchases goods on credit, um, the, the accounts payable on the balance sheet is credited and then another account is debited. So that other account might be, um, an asset or an expense account. So, um, you know, if you buy office supplies or whatever, you’re going to see a debit to your office supply account. Yeah. Um, what documents helped me to know that the accounts be able to earn legitimate, inaccurate. Yeah. So the question, yeah. So there’s a few different documents that you’re going to need to keep track of your accounts payable with Edmonton Bookkeeping.

Um, so there’s purchase orders, um, which are issued by, by your company. Um, there’s receiving port, uh, sorry, receiving reports, uh, invoices by the vendor, um, contracts and agreements. All of those things are going to help you. Um, a well-run accounts payable process will include timely processing of a, uh, an accurate and legitimate vendor invoices, accurate recording and the appropriate general ledger account and the accrual of obligations and expenses that have not yet been completely processed. The, and it’s, it’s very important to take into account your accounts receivable, accounts payable, not just because you need to pay these people’s, but sometimes you have debts that will require that covenant or that will need a debt to equity ratio. Yeah. Accounts payable is something that you can, um, control more easily, uh, by means of paying it and not accumulating more. Right. So, um, I think it is very important and it should be taken into consideration as well if you’re looking at your financial statements and you have the, that carbonated existing from your land.

Yeah. Yeah. Um, what is a purchase order? Yeah. So a purchase order is prepared by your company to communicate and document precisely what you’re ordering from the vendor. Um, so the purchase order are often called a PO, um, shutting CLO clued a purchase order number, uh, the date that it was prepared, uh, the company name, the vendor name, uh, the name and phone number of a contact person and a description of the item that’s being purchased. Um, you also want the quantity, the unit price, the shipping method, uh, the name D that it’s needed. And anything else that might be pertinent to that purchase. [inaudible] and I’m just bearing in mind that purchase orders, even though you’re recording it in your accounting software and these are non posting transactions, so if you do have a purchase order that you, um, um, that you have in your QuickBooks file, they might not necessarily show up right away, um, on your books.

So, um, and just bear that in mind that unless you, uh, you get the invoice or the bill for it, it doesn’t become an accounts payable on your side. So if you have a lot of purchase orders outstanding that hasn’t been filled yet, you might want to take any, uh, into consideration, um, your cash flow available, uh, for the amongst be ordered once they’re billed. So, uh, that’s another thing that you want to think about when I had well regarding the purchase orders. Right. Um, what are the, what is a receiving report? Yeah. So, um, the receiving report is the company’s document, um, once the product has been received. Um, so on this, you want the, um, the quantity and the description of the goods shown. Um, and it should be compared to the PO. So really your receiving port report should match your purchase order and sometimes companies will send you a part of what you’ve ordered.

Um, so you might have more than one receiving report for a purchase order. Yeah. And you don’t want to get rid of that purchase order until all of the products have come in or you’ve got a credit for something if it’s back ordered or, or whatever. Yeah, yeah, yeah. And I mean the main purpose of these reports and receiving of the purchase orders for you to be able to match, especially if you’re not the only one that’s doing purchasing in your company. Right. Um, it is very important that you were able, you are able to match all these documents together. Um, first level, uh, for the purpose of control to make sure that you’re not over your, your, uh, the other person that’s not using the purchasing power for their own sake. [inaudible] and, and, and again, for your cashflow to be able to track it using Edmonton Bookkeeping.

Yeah, exactly. What is the vendor’s invoice? Yeah, pretty, pretty straightforward. Um, the supplier provides an invoice once they shipped the goods to you. Um, and it’s gonna give you the, the amount that you owe. Basically that’s the amount that you’re going to put into your, um, your accounts payable. And these are bills, uh, as well. Um, like not necessarily just your, um, uh, for your costs of goods, but also your Bo from ATPCO or yeah, those are considered then there’s invoices, right? Yeah, exactly. Um, how can I ensure my accounts payable is accurate? Yeah. So, um, we use a system called the three way match. So basically the documents that we talked about, the purchase order, the receiving reports, and the vendors invoice, we want to match those three reports together. We want to make sure that the purchase order and the receiving receiving report match and then that the vendor’s invoice that you get matches those two versions of Edmonton Bookkeeping.

And so, um, whatever it is that you originally ordered, that’s what you’re getting built before. You’re not getting billed for anything more or anything less than that. Um, so I’m a good company, um, with their accounts payable, we’ll have a different employee doing each of these, um, positions. So, you know, you’d have a different person doing a purchase order, a different person doing a receiving report and a different person doing the Ben, uh, the vendor’s invoice looking at over making sure it all matches together. Um, and then a fourth person that’s actually paying the invoices. But we know that, um, we’ve talked about it before. So many small businesses, you’re the only person doing it or you don’t have enough employees to have one person do each position. Uh, so it’s so important to have a good will keeping system in place so that you can make sure that those, um, those transactions are all being taken care of properly and that your accounts payable is, um, where it should be so that you can just take a quick look at it and see how much you actually paid to vendor or, or owe to vendors that use Edmonton Bookkeeping.

Sorry. Yeah. Yeah. Um, so I think that’s all we have for today. Uh, thanks for joining us for this episode. And please click like and subscribe. If you have any comments or questions, please write down below and we’ll see you guys next time.