In order for business owners to understand the importance of tracking accounts payable in their business, Edmonton bookkeeping says they need to understand what accounts payable is, and how it appears in their financial statements of their business. Since many entrepreneurs struggle with understanding their business finances, this is extremely vital in order to help entrepreneurs ensure the accuracy of their balance sheets.
An entrepreneur should understand that any time they make a purchase for their business, but they do not pay the invoice immediately, that invoice is considered accounts payable in their business. This refers to all of the money that they owe vendors for purchases that they have made, but have not paid for yet. It is considered a liability of the business, and is owed to a creditor for any goods or services that they have purchased. Great examples of potential account payables are when an entrepreneur orders office supplies from Staples, another great example of an account payable is the utility bills, or phone and Internet bills of the business. These are also considered accounts payable.
How these account payables show up in the financial statements of the business says Edmonton bookkeeping is on the balance sheet. The balance sheet will have a list of all of the assets, in order of liquidity, the second is the liabilities of the business, which is where accounts payable is going to be indicated, and the equity in the business. Business owners should be reviewing their balance sheets on a regular basis to gain an understanding of the financial health of their business overall. They do this in order to make financial decisions in their business, such as if they can afford to meet payroll, or make an asset purchase. With how important this report is, entrepreneurs should be ensuring the accuracy of, by entering in accounts payable into their accounting software in a timely fashion. Entrepreneurs will subtract the liabilities of the business from the assets, in order to get that picture.
Every time an entrepreneur receives and accounts payable, they should be entered into their accounting software, but it can show up on the balance sheet. A great way to double-check that they have entered invoices inaccurately is once they have entered in and invoice into their accounting software, is to look at the balance sheet and verify that the liability has increased by that same amount. Also, Edmonton bookkeeping says that business owners should be aware of how it looks when they make payments, not only should the liability decrease in their liability section, but also the cash should decrease by the same amount when looking at the asset section. The cash should decrease because an entrepreneur leaves their cash to make that payment.
By understanding how their accounts payable looks in their accounting software and on their balance sheets, can help entrepreneurs understand their business finances, so that they can be certain their balance sheets are accurate any time they need to make financial decisions in their business.
Edmonton Bookkeeping | The Importance Of Tracking Accounts Payable
It is very important that entrepreneurs understand how to ensure the accuracy of the invoices that they enter into their accounting software says Edmonton bookkeeping. By developing and organized bookkeeping system, can help entrepreneurs have a clear view of all payables that they owe in their business in a stress-free way, which will help them ensure they are paying their invoices on time, and avoid either double-paying invoices or missing and invoice completely.
A great way that they can ensure the accuracy of the invoices they receive, is by utilizing a system called a three-way match when they make purchases says Edmonton bookkeeping. They need to utilize three different reports given to them by their vendor when they make purchases, that will help them ensure the accuracy of the invoice at the end. They will need to use the purchase order, the receiving reports and the invoice.
A business owner should understand what a purchase order is, and why they receive it when they make an order. This is a report prepared by the vendor that shows a list of everything that an entrepreneur has ordered. It should include quantity, description of the items as well as a price per item. The purchase order typically will not include the final price, but may include other information such as the date it was prepared, the date it scheduled to ship by, the shipping method and contact information. Depending on the company, the product or the industry, the information on the purchase order may vary slightly.
The next thing an entrepreneur should understand is that they will be getting a receiving report says Edmonton bookkeeping. This will come as the products that the entrepreneur has ordered arrives in the business. This receiving report should have the same information as the purchase order on it, except for the receiving report will include all of the products that are included in that order. If all products ship at the same time, that is just a quick verification that all of the products that were ordered were received. If companies are shipping partial orders, business owners need to be more organized in receiving the goods, because they will also receive multiple receiving reports. The final report that they received should indicate that all items were received, and an entrepreneur just needs to verify that.
Finally, once an entrepreneur receives all of their items, they will also receive an invoice. An entrepreneur should verify that all of the products that are on the invoice were actually received, and that all of the prices that are on the invoice match what was put on the purchase order. By verifying the accuracy of this invoice, entrepreneurs can competently enter the invoice into their accounting software, is as soon as it is received. By doing this, entrepreneurs can ensure their staying current on entering invoices, so that their balance sheets can stay accurate at all times. This is extremely important, is entrepreneurs will pull those balance sheets in order to make important financial decisions in their business.