One of the most common reasons why business owners fail in business says Edmonton bookkeeping. Is that they run out of cash in their business. In fact, according to industry Canada, it is the second most common reason why Canadian businesses fail.
And while there may be several different reasons that contribute to an entrepreneur running out of money. Making poor financial choices can significantly impact an entrepreneurs cash flow. And can cause them to run out of money.
And while teaching entrepreneurs how to read their interim financial statements can help them make better financial decisions. That can help them avoid running out of money in their business.
If they do not learn how to review these statements for errors. And fix the errors in a timely fashion. May and up with an entrepreneurs making a decision they think is a good decision financially says Edmonton bookkeeping. When it actually is not because of the air that has been persisting on their financial statements.
The reason why business owners should learn how to catch these errors themselves. Is because if they wait for their year end done by their accountant. The mistake may have persisted for several months, causing them to make many mistakes.
So fixing these mistakes early on is extremely important. Also, if business owners wait for their Edmonton bookkeeping company to catch mistakes. This could be once a month, or once every six weeks that the bookkeeper is working.
Which means that a business owner may have made several financial decisions before that mistake was caught. Which could have negative consequences for their own business.
This is why it is extremely important for business owners to learn how to catch these mistakes themselves. And then scanned the report for those errors. Every single time they pulled report.
And since an entrepreneurs should be pulling this report prior to making any financial decisions. Whether that is running payroll, paying bills.
Or even if an entrepreneur is paying themselves, or purchasing assets. They should pull their interim financial statements. And review them for errors for making any decision.
The first thing that business owners need to look for when they are reviewing their summaries for mistakes. Is any amounts that are over ninety days past due.
Unless a business owner is in significant financial difficulty. They should not have any expenses that are outstanding for longer than ninety days.
Therefore, if they see an invoice on the report that has been outstanding this long. Business owners need to review their invoices to see if this is actually outstanding or not.
If it is outstanding, they need to fix it immediately by paying the supplier. So that they can have a good relationship with that supplier.
However, if it is not actually outstanding. The typical reason why, is because an entrepreneur has entered the invoice twice. And then when they applied the payment. The payment only went on to one of the invoices. Causing one to remain on the statement causing problems.
All an entrepreneur has to do is avoid that one incorrect invoice from the accounting program. And ensure that their accounts payable aging summary is more accurate than it was before.
Is there an easy way to do Edmonton Bookkeeping?
It is very important that entrepreneurs learn how to fix errors that might exist on their accounts payable summary says Edmonton bookkeeping. The reason why, is because they use these statements to guide their financial decisions.
If there are mistakes on these interim financial statements and especially their accounts payable aging summary. The financial decisions they make.
May not be the best or most prudent ones for their business. And they may not even realize it. Because of the errors that persist on the reports.
And until a business owner can learn how to scan the report for these errors. And what to look for. They may continue using these reports to make financial decisions. And end up making decisions that could negatively impact their business.
One of the first things that Edmonton bookkeeping suggests business owners look for when they scan this report. Is anywhere that they see and negative number. While a negative number is not necessarily a mistake.
A negative number that is not a mistake typically indicates that an entrepreneur has paid a deposit to a supplier. Or has prepaid an invoice.
Therefore, when a business owner sees a negative number. They should ask themselves if they did prepay, or put a deposit down.
And if business owner has not paid a deposit. They should then look for the missing invoice. That was not entered into the accounting software.
By not entering the invoice, but entering the payment for that invoice into the accounting software. Makes it look like there was a prepayment done. And by going into their accounting software and entering the invoice. Will fix this mistake very quickly.
If an entrepreneur happens to see that the negative number is followed by a positive number for the same amount for the same supplier. Edmonton bookkeeping says this typically means that they did not apply the payment against the invoice correctly.
All an entrepreneur has to do is go back into their accounting software, and apply the payment against the invoice. And this negative and positive number will disappear from their accounts payable aging summary.
Once an entrepreneur has scanned their accounts payable aging summary for mistakes. They can start using this report to make decisions.
And they can also use this report to help them decide which suppliers should get paid first. This is especially important if entrepreneurs are experiencing some financial difficulties.
Edmonton bookkeeping recommends that entrepreneurs identify he suppliers first, and pay them right away to continue getting the supplies they need to function in their business.
Next, they should look at their accounts payable aging summary. In order to see all of the small invoices that they can easily take care of. So that they do not end up getting a lot of collection calls for a very small amount of money.
And once they have done this, the next thing that they should do. Is create a payment plan for all other suppliers. So that they can ensure the suppliers that they are making an honest effort to pay them.
So that they can spend the rest of their time generating revenue to increase their finances to be able to pay the rest of the suppliers that they owe.