Ensuring that the accounts payable aging summary is as accurate as possible is important says Edmonton bookkeeping. And just as important as reviewing this report in the first place.
Business owners need to understand, that the reason why they should be fixing the errors on these interim financial statements. Is so that the information on them is as accurate as possible.
And when they use these reports to guide their business decisions. They will be able to make the best, and most informed decision possible. Using the most up-to-date, and accurate information they have available.
The first thing that business owners need to learn when looking at their accounts payable aging summary. Is how to read the information.
It will be listed horizontally on the page, starting in columns at the left-hand side. The far left column will list all of the entrepreneurs suppliers that they currently owe money to.
The column next to that will show an entrepreneur a list of all of the money that they currently owe those suppliers, that are not past due.
As the columns proceed to the right, the columns indicate invoices that are increasingly past due. Until they reached almost the far right, showing a list of all of the invoices that are over ninety days past due.
However on the far right says Edmonton bookkeeping. Is the final amount column, adding up all of the totals that the entrepreneur owes each supplier. At the bottom, there will be a grand total listed.
One of the first things that Edmonton bookkeeping suggests entrepreneurs pay attention to. Are any amounts that are over ninety days past due. The reason why, is typically these are invoices that are mistakes.
Because the only reason business owner should have any invoices that are outstanding that long. Is because they are in serious financial difficulty. And in that case, they should be speaking to their accountant about a strategy.
Therefore, if they are not serious financial trouble. They should review these ninety days past due amounts as a red flag indicating a mistake.
The mistake that business owners typically make when they see this. Is that they have accidentally entered an invoice twice. The reason why they have entered it twice.
Is because they received the invoice in a paper copy when there supplier dropped off the product or supplied the service. And then the supplier emails another copy hours later or later on in the week.
If a business owner is not careful, they can very easily enter both invoices into their accounting software. And when they make a payment, one invoice is eliminated. But the other one remains on the books, causing a problem in the accounts payable aging summary.
Or, a business owner may have accidentally entered the amount of the invoice incorrectly. Making it appear as a much larger invoice than it is.
And when the entrepreneur enters the payment. There is an amount left owing. Making it look like an entrepreneur owes more money to that supplier than they actually do.
By understanding how easy it is for business owners to make mistakes that appear on their accounts payable aging summary. Can help them understand how to look for those errors. So that their interim financial statements can be as accurate as possible.
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Since a business owner should be looking at their interim financial statements before making any financial decision says Edmonton bookkeeping. Reviewing those same reports for mistakes is just as important.
In fact, if entrepreneurs are making decisions using those interim financial statements. But they are not first reviewing them to find and fix any mistakes.
They may very well be making financial decisions that could negatively impact their business. Based on what mistakes there may be on those reports.
One of the first things that Edmonton bookkeeping suggests entrepreneurs look for. When reviewing their accounts payable aging summary. Are negative numbers. Negative numbers indicate a deposit has been made.
And while deposits are not entirely uncommon. They are much more likely to be an error, then they are an actual deposit.
A business owner should very easily be able to determine or even remember if they have paid a deposit. And if not, it will indicate there has been an error made in their accounting.
But that they are typically means says Edmonton bookkeeping. Is that an entrepreneur has entered a payment into the accounting software. But they had not entered the invoice first.
This is common oversight. And by finding, and then entering the invoice. Can cause this negative number two disappear from the report.
Therefore, a business owner should ask themselves any time they see a negative number. If they prepaid a supplier, or put a deposit on something?
However, if a business owner sees that there is a negative number, followed by a positive number in the same amount. In both for the same supplier. That typically means that there was a mistake in the accounting software.
That mistake typically is they business owner has entered the invoice and entered the payment. The did not book the payment to the invoice directly. Edmonton bookkeeping says by fixing this, can cause that negative number two disappear from the report.
Another number that business owners should look for when reviewing their accounts payable aging summary. Is if there are any round numbers on the report.
Round numbers are typically uncommon. Especially as GST is added to invoices, that may have started as round. But more often than not, this is an indication that an entrepreneur has entered an estimate. And not an actual invoice.
They should look for the invoice, so that they can update that round number into the number that they actually owe. So that when they make the payment, it is less likely to create an amount that is still left owing. That might continue to show an incorrect total on their accounts payable aging summary.