Accounts Reconciliation Blog

Part of getting more business profits is to handle the accounts payable smarter. Your suppliers will also enjoy being paid on time causing a good relationship.  Accounts payable best practices can have a significant difference when you get to minimize late payment costs. These include late-payment penalties, interest charges, and lost prompt-payment discounts.

Actions done to accounts payable have a great impact on the trust between a company and its creditors. Whenever a company honors agreed-upon payment terms and pays its bills on time, it helps strengthen the business relationship. A company that has a streamlined accounts payable operation also saves money through the efficient processing of invoices with a minimum of staff and low cost of materials.

In a  business there are all kinds of expenses. From a business lunch to a company party money is spent which in most cases are good for the business. To keep track of the money that is spent it is a good idea to use an accounts payable voucher which will keep track of the money spent. Then whenever a bill comes in you can use an accounts payable voucher.

An accounts payable voucher is very easy to use. It is just a small sheet of paper where you fill in the following information: Name of company or name of person as it should appear on the check payment, amount to be paid and payment deadline. This simple sheet saved the accounting a lot of time. It made things so much easier for them to collect data without the need for verifying any data. The accounts payable voucher is also collected and compiled by the accounting department for proof.

Movies about the mob are often a hit. People love watching how mob bosses were caught. Several years ago there was a real life mob boss in Chicago who was suspected of killing a lot of people. He was eventually caught and placed behind bars but not for his murders but because he of tax evasion. That is probably an extreme example of how ignoring the IRS and accounts payable can lead to prison.

The IRS and accounts payable may seem unrelated. However, we all know that the IRS is an agency we shouldn’t be playing around with. As dutiful citizens we must all pay our taxes les the IRS catch us. As companies, all accounts payable should be settled lest you be questioned by the IRS. If you don’t pay your debts or file your taxes you’re going to be in trouble.

There are many things that you have to know when you open your own business. Knowing your target market, handling the IRS and setting up your accounting are a few. My biggest question was can someone please define accounts payable?

With some research, I could easily define accounts payable. Accounts payable is what the company owes to suppliers, individuals and other companies for the purchase of their product or service on credit. When I opened my business, my contractor gave me 15 days to pay him after he had finished constructing my store. That amount I owe him is part of my accounts payable. It is my duty to settle all accounts payable. When the accounts payable are all paid, my cash on hand will naturally decrease.

It is the job of some people to prepare the company’s financial statements. However the statements are done, the books have to be prepared first. There will be a need to do journalizing, the balance sheets and bookkeeping. You need to classify what you would place under debit and credit. You also need to decide what to place under accounts payable and accounts receivables. Accounts payable classification is needed so that a new accountant knows immediately what should be under accounts payable.

Accounts payable classification should be done as early as possible. It is much easier on the part of the accountant if she knows which fall under the accounts payable. This way there will be lesser mistakes. I remember when I was first doing accounting I would sometimes mix up my accounts payable and my accounts receivable.

It is not unusual especially today that a small business has to close it’s doors and file for bankruptcy.  There are many reasons why a small business does not make it but most small business can point the finger at poor accounting issues. If all business could take the time to improve the accounting particulary the accounts payable there would be alot less businesses going out of business. There are simple ways to improve accounts payable, if you can do some of these you might increase your chances of making it in the business world.

Here are a few simple ways to improve accounts payable:

First of all you need to take care of your accounts receivables. You need to collect all your accounts receivables because you will use this to pay your accounts payable. Make sure you collect payments from your customers and clients right away. Make sure you pay your suppliers on time. If they give you 30 days to pay them then use the 30 days. However if they give discount for early payment, you should take advantage of this as well.

In business you have to sometimes remove a debt from your accounts receivable books that is not going to get paid. This is unfortunate especially with today’s economy that sometimes you will not get paid. If you are using QuickBooks accounting software you can enter the write-offs of accounts payable this way:

Go to receive payments
Click on the invoice to be written off
click on discount
In the discount window put in the amount that you have to write-off
select bad debt expense

The accounts payable department is the department that pays clients and suppliers. Accounts payable turnover is the amount of time it takes to make those payments. The accounts payable department is dependent on the accounts receivable department. When the money comes in the payments can go out.

In an accounting period, an accounts payable turnover measures the company’s efficiency of paying bills. This is measured using the average duration an item remains in accounts payable, equal to total purchases, divided by average accounts payable. A change over time in the accounts payable turnover means your company is paying off its suppliers either faster or slower than you were previously doing.

Alot of the success of a business can be attributed to the accounting department and the financial reports. This can also make for business running smoothly and functioning properly based on what the reports show. One important practice in the accounting department is accounts payable reconciliation. By doing this regularly you will be able to be sure that the records of money going out from the business is accurate and can cut back in losses due to penalties.

Be sure to know what you are doing or find a professional to perform the accounts payable reconciliation. This is usually done by comparing the listings on general ledger and subsidiary ledger. General ledger takes the total amount or sum of accounts payable while subsidiary ledger contains the detailed information of the account. Their values should match all the time. Should there be discrepancies, thoroughly review items and try to spot if possible recording errors were made.

Today’s businesses run mostly with credit to each other. In order to keep the business in the black you have to careful watch the accounts payable department to make sure that money is not going out faster then it is coming in. If you are not sure that this means then you might be asking “What are accounts payable?” The accounts payable department is part of the accounting department and is responsible to make sure that all bills are paid. They are capable of regulating the overall financial cycle of the company.

If you are a small business and do not have an accounting department, you might want to consider hiring a company to outsource accounts payable. If you do you will receive:

Rest assured that payments are made on time
The expertise and advice of a knowledgeable business
The ability to ask questions from a company that knows the business
Less costs hiring outsourcing then in house