Staying organized on their accounts payable should be an extremely important goal of all entrepreneurs says Edmonton bookkeeping. An organized account payable can help entrepreneurs ensure that they have a clear idea of how much they owe all of their vendors in a stress-free way, is that they can pay invoices on time, and avoid mistakes such as missing paying an invoice, or accidentally double-paying an invoice. In order to ensure the accuracy of this, entrepreneurs need to understand clearly what accounts payables are, and how they look in their accounting software and in their financial statements.
In accounts payable refers to the amount of money that an entrepreneur owes a vendor. Any time a small business makes a purchase but it does not pay for that purchase immediately, they essentially are using credit to make that purchase, and that purchase is entered into their accounting software as an account payable. This is all of the amounts that they owe all vendors that they have purchased from, but have not yet paid. Since this is an aggregate amount, entrepreneurs need to ensure that they are being very organized with managing their accounts payable, so they can pay it in a timely manner.
Since the accounts payable are actually considered a liability for short-term debt, business owners should understand how that appears on their balance sheets. The balance sheet shows at the top all of the assets of the business, the second section is all of the liabilities of the business, and the bottom shows the equity in the business. An entrepreneur can use their balance sheet in order to determine the overall financial health of their business. By subtracting the liability from their assets, an entrepreneur can gauge if the business has a lot of equity in it. Therefore, the accounts payable is listed on the balance sheet in the liability section.
An entrepreneur should also understand how those invoices appear on their balance sheet as they are paid. When an entrepreneur makes a payment to a vendor for an invoice that they owe, it is going to be recorded in the accounts payable section under liabilities as a decrease in the amount that they owe. However, Edmonton bookkeeping says that entrepreneurs should also understand that it will appear in the asset section of their balance sheet as a decrease in cash for the same amount. By ensuring that their liability decreases by the same amount that their assets decrease, can ensure that an entrepreneur is making a payment and accounting for it correctly in their QuickBooks software.
Once an entrepreneur understand what accounts payable are, how they look in their financial statements of the business, and why it is important to track, can ensure that they are being organized but there accounts payable so that they can ensure prompt payment of invoices and an accurate reflection of the business finances on their balance sheets. As it is important for an entrepreneur to review their balance sheets before they make any financial decisions in their business, ensuring the accuracy of the information, and understanding outlooks is vital to entrepreneurs.
Edmonton Bookkeeping | Tracking Accounts Payable
In order to ensure that an entrepreneur is entering in invoices correctly so that they can end up with accurate balance sheets, Edmonton bookkeeping says that they need to develop a system that will ensure the accuracy of the invoices that they receive, so when they enter them into their accounting software, they can do so confidently. This system that they can develop is called a three-way match, where they use the purchasing order, the receiving reports, and the invoice, to verify the accuracy of all of the information.
When an entrepreneur makes a purchase, they should receive a purchase order from their vendor, which will include a list of all of the items that an entrepreneur has purchased, including quantity and unit price. This is extremely important for an entrepreneur to receive so that when the product starts arriving from the vendor, an entrepreneur can verify their receiving what they have ordered.
Once in order from a vendor to start arriving, an entrepreneur should verify that included in the order is receiving reports. Edmonton bookkeeping says that this is going to have a list of all of the products that are being shipped. It should match the information listed on the purchase order. It is extremely important that entrepreneurs review this as the product is arriving, so that they can verify that everything that has been received is what is on the purchase order. The receiving reports might indicate that it is only a partial order, therefore it is extremely important that an entrepreneur holds onto the purchase order and the receiving reports until all parts of the order arrives.
Once all of the parts of the order have arrived, the third report that the entrepreneur should receive is the invoice. This will again include a list of all of the products that an entrepreneur has ordered, and received as well as have the amount that an entrepreneur owes. Any additional charges might be included in this invoice including a shipping charge if applicable, and taxes. Business owners should verify that all of the products that are being invoiced, match all of the products that they received. They should also verify that the amount for each product that they were charged matches what is on the purchase order.
Once an entrepreneur implements this system into their business, they can be very certain that the invoices that they enter into their accounting software are accurate. This is also extremely important when an entrepreneur has staff members doing any parts of this, so that they can verify that what was ordered was received, and what was invoiced is accurate. Being confident in the invoice that they receive is an important part of ensuring they can accurately enter their accounts payable into their accounting software. By doing this, entrepreneurs can ensure prompt entry of invoices into their software, which will help them have the most up-to-date balance sheets possible.