Helping entrepreneurs maintain the accuracy of their balance sheets is important says Edmonton bookkeeping. Intimate, who are the makers of the QuickBooks accounting software, it is a survey of entrepreneurs in order to assess their basic business financial literacy. The respondents were asked questions about what the role of the balance sheet is, what accruals are, as well as how to improve cash flow for example. 82% of all of the people who responded end up scoring less than a 70% on the quiz. Since many entrepreneurs struggle with understanding their business finances, teaching entrepreneurs early on in their business, what Accounts Payable is, and how it is recorded on their balance sheet can go a long way in helping them make informed financial decisions.
One of the first things that entrepreneurs should understand is what is an account payable in their business. Edmonton bookkeeping says that this refers to a liability that an entrepreneur incurs for their business when they make a purchase for their business, but then did not pay the invoice at the time of purchase. This generates an invoice for the business, which is referred to as Accounts Payable. Edmonton bookkeeping says that entrepreneurs should understand that these invoices equal liability for an entrepreneur, and the more invoices that they have, the higher their liability is.
Entrepreneurs often wonder how their accounts payable shows up on their financial statements. Edmonton bookkeeping says that business owners should understand that their accounts payable will show up on their balance sheet. When they are looking at their balance sheet, there will be three parts. The top will include a list of their assets, in order of liquidity, with cash being at the very top of their asset, followed by their Accounts Receivable. The middle section of the balance sheet will include a list of all of their liabilities including the accounts payable in the business.
When an entrepreneur wants to assess the financial health of their business, they look at the balance sheets, and simply subtract the liabilities from the assets. Because of how important looking at the balance sheet is before they make any financial decisions in the business, entrepreneurs need to understand that they should be entering in their accounts payable into the accounting software very regularly so that whenever an entrepreneur looks of the balance sheet, they will have a clear financial picture of their business that can help guide them to making informed financial decisions. Edmonton bookkeeping says that if entrepreneurs are not entering their accounts payable into their accounting software in a timely fashion, the liabilities will appear lower, and make it look like they have more money in their business. When an entrepreneur uses the balance sheet in order to decide if they can make purchases or not, and the liabilities are incorrect, it could end up with an entrepreneur making a financial decision is in their business that puts a financial strain on their business, or even has them running out of money. That could significantly and negatively impact their business, which is why it is important that entrepreneurs understand how to enter and accounts payable in a timely fashion to their business.
Edmonton Bookkeeping | Proper Protocol In Receiving Invoices
Learning how to be very organized with their accounts payable can help entrepreneurs keep their balance sheets up-to-date says Edmonton bookkeeping. By having a well-defined process when it comes to receiving products and invoices, can help entrepreneurs enter in invoices quickly, and confidently so that they can end up with accurate financial statements such as balance sheets so that they can use those reports regularly any time they need to make a financial decision in their business.
The three documents that entrepreneurs need to be familiar with, in order to develop a defined accounting process for receiving invoices are purchase orders, receiving reports, and invoices. Edmonton bookkeeping says that these three reports will help an entrepreneur significantly in developing a system that will ensure the accuracy of their invoices.
Edmonton bookkeeping says that entrepreneurs need to understand what a purchase order is. This is a report prepared by the vendor, to communicate to the business owner what they have ordered. Not only does this report include a list of all of the items that they were ordered, but what quantity as well as how much each item is. It is very important that an entrepreneur keeps this report as they receive the products, and the invoiceís they can use it to double-check the accuracy of the information.
As an entrepreneur receives the products that they ordered, Edmonton bookkeeping says that they will also receive a receiving report to document all of the products that are included in the shipments. An entrepreneur should verify that the amount that is listed on the receiving report matches what is listed in the purchase order. If there is any items missing either in the shipment or in the receiving report, an entrepreneur should be able to tell by looking at the purchase order and contact the company. The receiving report might indicate at the bottom that it is only a partial order, and if that is the case, entrepreneurs need to keep their purchase order and all of the receiving reports that they get until they received everything that they expect.
Once an entrepreneur has received all of the items that they expect, the next thing that a loan it is an invoice. Business owners need to service to the receiving reports, to ensure that all of the items that are on the invoice have actually been received, and compare the invoice to the purchase order to ensure all of the prices that they were quoted on the purchase order is what they are being charged. Edmonton bookkeeping says that when this is not the same, business owners can question that with the company, instead of simply entering into their accounting software and hope that it is accurate. This system is very valuable when different people are making the purchase, then receiving the products, and then entering the invoices in to the accounting software.