There are two mistakes that entrepreneurs make when it comes to reviewing their interim financial statements says Edmonton bookkeeping. The first one is that they do not correct mistakes on the report. And the second one is that they do not look at their interim financial statements at all.
Interim financial statements are extremely important. Because they help business owners understand their financial situation.
And allow them to make decisions in their business such as if they can run payroll, or purchase assets. Without running out of money in their business.
Since 50% of all entrepreneurs fail in business. And 29% of failed entrepreneurs attribute their failure to running out of money in their business. Learning how to read and review these financial reports.
Can help entrepreneurs make better financial decisions. That can help them overcome the obstacle of running out of money in their business.
One of the first things that Edmonton bookkeeping recommends entrepreneurs do, is learn what their accounts payable aging summary is. And how to read the information on the report.
This report shows all of the money that entrepreneurs over their suppliers. Both for direct and overhead expenses in their business.
It is organized in columns, with the far left column showing a list of all of the businesses that entrepreneurs owe money to. And in the second column, all of the money that entrepreneurs owe those suppliers for the current period.
As each column progresses to the right, they will represent invoices that are longer and longer past due. Until they get to a column that has ninety days past due.
The column after that will give a total of all of the money that entrepreneurs owe that supplier. With a grand total listed at the bottom.
This grand total will show entrepreneurs how much they owe their suppliers in their business. And is important in helping them know how much they are making in their business per period.
This can also help them understand if they need to minimize their expenses, or increase their pricing. In order to be more profitable in their business.
This is why is very important that entrepreneurs are entering the invoices that they receive as they receive them. So that each timeframe can have an accurate representation of the expenditures of that time.
The next thing that Edmonton bookkeeping recommends entrepreneurs do. Is look at that column of ninety plus days owing. And looking to see if there are any totals in that category.
Ideally, there should not be any legitimate expenses owed over ninety days. Unless the business is in extreme financial trouble.
And the typical reason why an invoice would show here by mistake. Is because there was a mistake made in entering the invoice. Either entering it twice. Or entering the incorrect amount.
And when an entrepreneur pays that invoice. It is applied to the first entered invoice. Or the correct amount was applied. And that is leaving an amount owing left.
Therefore, when an entrepreneur sees that they have invoices that are in the ninety days past due category. This most likely is a mistake that they can fix. So that the amount on their accounts payable aging summary is more accurate.
Learning how to have more accurate accounts payable aging summaries. Can help business owners make more informed financial decisions. That can help them not only avoid running out of money. But help them grow in their business as well.
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The reason why business owners should look for errors on their accounts payable aging summary says Edmonton bookkeeping. Is because due to human error. Mistakes can occur. And fixing them quickly. Can help ensure that these statements are accurate.
If business owners and up making significant financial decisions without verifying the accuracy of the report. They might end up spending money that they do not have. And putting their business at risk.
And while some onto manures might think that they need to review it every few months for accuracy. Edmonton bookkeeping recommends that any time an entrepreneur pulls the report. They should be reviewing it to ensure that there are no mistakes.
Once a business owner learns what to look for on their accounts payable aging summary. In order to minimize mistakes. It will be a quick process, that can help ensure that there is no glaring errors or omissions. That could be costly to a business owner not to catch.
One of the first things that business owners should scan the report for. Our for round numbers. While round numbers are not necessarily a mistake.
Round numbers typically indicate an estimate. Because once sales-tax gets applied to the invoice, the number is usually not as perfect as it looks in the estimates.
Therefore, business owners can look up the invoice very quickly to verify the amount. And either enter the correct amount. Or come to the conclusion that it is not an error. Either way, they are ensuring the accuracy of this report.
The next thing that business owners should review their accounts payable aging summary for. Our any negative numbers. A negative number typically indicates that a business owner has paid deposit.
And when the business owner receives the invoice, the invoice will zero out the negative number. Showing that there is nothing outstanding.
Business owners should first verify that they have in fact paid a deposit. And if they have not. Edmonton bookkeeping says this typically is because they forgot to enter the invoice, however they have made the payment.
However, if the negative number that they see is it followed by a positive number for the same supplier. This typically means that while an entrepreneur entered the invoice as well as the payment into their accounting software.
They most likely did not book the payment against the invoice. And this is a very easy fix, that they can go into their accounting software and book that payment. In order to ensure that their accounts payable aging summary is accurate.
These errors are very easy to scan the report to look for and find. And just as easy to fix. And when entrepreneurs get into the habit of reviewing their report every time they pull it to look for errors.
They will always be able to ensure the accuracy of this report. That will allow them to have peace of mind when making financial decisions, both big and small in their business.