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.

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 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.

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.

In business there is a mutual agreement between the business and the vendor that credit will be given for product. This is not only the benefit of the vendor but also the business providing the credit. Businesses are willing to have account payable payment terms in order to get the business.

Usually there is negotiation about the accounts payable payment terms. The business relationship becomes strong over time with the accounts payable payment terms becoming for relaxed. An example would be that if payment is due on the 30th day but a friendly phone call by the buyer can make it a week longer. It is also wise to take payment discounts wherein suppliers offer certain reduction on price if you pay within their specified period of time, say 10 days. This will bring back a portion to your working capital.

As with any job it is best to write out a procedure. It is very important with the accounts duties. If you have the procedures outlined then it will be very clear as to what needs to be done for each occurrence with each of the accounting departments. How to handle the accounts receivable is different then how to handle the accounts payable.

By making accounts payable procedures it you will have down on paper the procedure to follow no matter what situation. You can get professional help to write up the procedures for you. You can then also ask questions and clear up any confusion you might have.

The accounting department of a business is the heart of the business. The accounting department will handle all financial transactions including finance reports. The financial reports will be done on a weekly or monthly basis. To meet primary objectives, a series of steps or accounting cycle is necessary.
Each of the accounting staff must be well-versed with what is full cycle accounts payable. This refers to the following processes:

~ Verifying the vendor’s original invoice
~ Checking the purchasing companies’ purchase order and receiving slip
~ Preparing, running and mailing the check for the vendor
~ Keeping proper record of the transaction

In business as in all walks for life debts must be paid off on time. In big businesses the accounts payable department will make payments for bills and suppliers. This is an accounting entry found on a balance sheet under the heading of current liabilities. They are often referred to as payables for short.

Payables are not limited to companies, however. In households, people are also obligated to pay bills for goods or services. Some examples of these are phone, gas, cable, and electric bills provided by creditors. Each of these services are usually provided first and the creditors bill the customers after the goods or services are delivered.