It is not just enough for business owner to learn how to read their interim financial statements says Edmonton bookkeeping. He also need to know how to check for errors. To ensure that these reports are accurate.
Not only can reviewing these statements help entrepreneurs make financial decisions that can help them run their business. And avoid problems such as running out of money in their business.
But business owners can in fact make even better decisions with these reports. When they are able to review them and fix mistakes that might occur on them.
Since the accounts payable aging summary is a list of all of the people and suppliers that a business owner owes money to. They should be very aware of how this report is oriented. And the information on it.
On the very left-hand side, will be a list of all of the suppliers that the entrepreneurs owes money to. With all of the columns to the right, showing how much money they business owner owes them.
And the farther write the column goes, the longer amount of time these invoices have been outstanding. Finally, on the far right. Will be a column adding up all of the amounts that an entrepreneurs owes each supplier. With a grand total listed at the bottom.
And while this report may seem straightforward. Edmonton bookkeeping says there can be common errors that are easily fixed on this report.
One of the first things that business owners should look for are any negative numbers on this report. The reason why, is because a negative number indicates that a business owner has made a payment that they did not have a deposit for.
And since that is usually very unlikely or rare. Anytime a business owner sees this. A should question it says Edmonton bookkeeping. And verify it to see if that is in fact true.
A business owner should very easily be able to recall in what circumstances and what suppliers they have paid a deposit. And if they have not paid a deposit, they should look for the most likely error.
Typically, what error this indicates. Is that the entrepreneur has entered the payment. But they forgot to enter the invoice initially. So that it shows as a deposit. When it should have showed a payment on an invoice.
By entering the invoice, business owners will have that negative number cancel out, and it will not appear on the AP report, making it look like an entrepreneur has more money than they do.
However, if an entrepreneur sees a negative number, alongside a positive number in the exact same amount for that same supplier. This typically means an entrepreneurs has entered the invoice. As well as entered the payment. But they have not booked the payment to the invoice directly.
By going into their accounting software and fixing the mistake. Can help ensure that no negative numbers will appear on their accounts payable aging summary. Making it look like they owe less money they are suppliers than they actually do.
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If business owners understood how easy it was to make a mistake on the accounting programs they use says Edmonton bookkeeping. They will understand why they will need to review these reports for mistakes on a regular basis.
Typically, when an entrepreneur is manually entering things into their accounting software. There is an element of human error. And with the possibility of mistakes due to humans entering things incorrectly.
Business owners should be reviewing their interim statement on a regular basis. Looking for the most common mistakes. So that they can fix them, and ensure the accuracy of these reports.
One of the first things that Edmonton bookkeeping suggests entrepreneurs do. Is look at the invoices that they owe over ninety days.
Unless a business owner is in financial difficulties. They should not have any expenses outstanding that long. Therefore, the typical reason why these amounts are ninety days outstanding. Is due to an error.
The most likely error that cause this to occur. Is an entrepreneur accidentally entering an invoice twice. For example, when they enter the invoice when they receive a paper copy from their supplier. But then there supplier also emails a copy. And they accidentally entered it twice.
When they apply the payment, it gets applied on one of the invoices but not the other. And it stays on the report, even though it is a mistake and not a valid invoice.
Another mistake that could cause an amount to a peer in the ninety days past due category. Is if an entrepreneur makes a mistake will entering the invoice. And enters a much larger number than is actually on the invoice itself.
When this happens the business owner pays the invoice correctly. But it shows that there is an amount left wing on that invoice. Which ends up being overdue for a significant period of time. Even though a business owner does not owe the money.
Another way that a business owner can verify the accuracy of their accounts payable aging summary. Is by looking for round numbers. While round numbers are not always going to indicate to a business owner that there is a mistake.
Round numbers are much more unlikely. Especially since invoices will have tax applied to them, making them much less likely to be round, whole numbers.
What usually happens when there is around number on the accounts payable aging summary says Edmonton bookkeeping. Is that an estimate was entered.
Business owners should look for the invoice, and update the estimates to the actual invoice amount. So that business owners can be assured of that amount being the real amount they owe.
It is very important that entrepreneurs keep their accounts payable aging summary accurate. Therefore, whenever they pull their interim financial statements. In order to make financial decision. The decision they make will be the best possible one, using all of the correct information they have their disposal.