One of the reasons why it is very important for entrepreneurs to keep track of their accounts payable is so that they can ensure the accuracy of their balance sheet says Edmonton bookkeeping. Since entrepreneurs use their balance sheet quite regularly, in order to understand the financial position of their business in order to make financial decisions, learning how to ensure their accounts payable is accurate in their accounting software is extremely important.
The first thing that entrepreneurs need to learn, is what exactly an account payable is in their business. It is essentially a liability for an amount a small business owner owes their vendor for any goods or services that they have purchased. Any time an entrepreneur purchases something from a vendor and does not pay for it immediately, this results in an account payable in their business. Since an entrepreneur ends up making a purchase on credit, the business owner and the vendor have a creditor/debtor relationship until that entrepreneur pays the invoice in full.
Because it is essentially a liability, it counts as a short term debt that exists as long as the entrepreneur owes that money. It ends up showing up as an account payable on the balance sheet. The balance sheet is a list of the assets, the liability and the equity that exists in the business. Ten bookkeeping says that entrepreneurs use this report to assess the financial health of their business, by subtracting the liabilities from the assets. This is why it is very important that entrepreneurs need to record all accounts payable in their accounting software is often as they receive the invoices. This way, an entrepreneur can always be prepared to pull that balance sheet report from their accounting software and use it to make financial decisions.
When entrepreneurs are entering in invoices to their accounting software, they should be watching the balance sheet to ensure they are adding the invoices correctly. The amount listed in the liability should go up with the same amount that the invoice that they are entering is. The more invoices they have, the higher the liability should look. When an entrepreneur starts paying their bills, they should be aware that is the make those payments, the liabilities on their balance sheet are also going to decrease. However, business owners also need to be aware that is the pay their liabilities, their cash in their business also decreases. Entrepreneurs should be looking at their balance sheet at this time as well, so they can verify that the liability and the cash both have decreased at the same amount.
By learning how to review the balance sheets of their business in order to keep track of their accounts payable, and how the payments look on their balance sheet as well, Edmonton bookkeeping can ensure the accuracy of the balance sheets, so that business owners can use that information any time they need to make a financial decision in their business.
Edmonton Bookkeeping | Tracking Accounts Payable And Accounting Software
Entrepreneurs should develop a bookkeeping system, to help ensure the accuracy of the invoices that they receive says Edmonton bookkeeping. The reason is that when entrepreneurs are more organized, they can ensure that the invoices they enter are accurate and that they are entered in a timely fashion so that they can pay their invoices on time, and avoid either double-paying invoices or missing an invoice that needs to get paid. By being organized when they receive their invoices, can significantly help entrepreneurs ensure the accuracy of their accounts payable on their balance sheets.
One of the first things that a business owner should do, ensures that they are keeping all of the various reports that they will receive when they make purchases their vendors. When the first place the order, they should expect to receive a purchase order. This is a numbered report, that indicates all of the items that an entrepreneur has ordered, including quantities and the unit prices. This is important for an entrepreneur to keep so that they have a record of what their purchase is, as well as what the price they should expect to see on the final invoice.
As the products that they order to start arriving in their business, Edmonton bookkeeping says entrepreneurs should also expect to get a receiving report. This is a document that should accompany the products, that indicate what products are in order. The information should match the information listed in the purchase order. If all of the products that were ordered were shipped, the receiving report should match exactly the purchase order. However, if the vendor only shipped a partial order, an entrepreneur needs to keep track of what was received, and what is still left to get. Partial orders will require multiple receiving reports. It is important that an entrepreneur keeps everything until all of the products arrive in their business.
Once an entrepreneur has received all of the expected products, the vendor should issue an invoice. An entrepreneur should verify that the amount listed matches the amounts on the purchase order, and all of the products that are on the invoice match the ones on the receiving report as well as the purchase order. When they do this, entrepreneurs can ensure that the invoice is accurate, because they received all the products that they ordered, and the price is what they expect. By utilizing this system, regardless of how many different people are involved in the process, whether it is a different person purchasing, receiving and entering invoices, anyone can follow this system, and ensure the accuracy of the purchases.
When entrepreneurs can ensure the accuracy of the invoices they receive, they will be able to confidently enter the information into their accounting software, and keep their accounts payable up-to-date and accurate regularly. This is extremely important for entrepreneurs so that they can have an up-to-date balance sheet any time they need to use it in order to make financial decisions in their business whether it is paying invoices, running payroll or making asset purchases.