Accounts Reconciliation Blog

Every business accounting cycle makes use of the balance sheet which contains the organization’s assets and liabilities. Liabilities, such as accounts payable, should be maintained to have a sound financial state. It is very important therefore that there should be someone of great knowledge on how to reconcile accounts payable. This reconciliation should be in place especially towards the end of the year when almost all companies close their books.
Here are some simple tips on how to reconcile accounts payable:

*Your accounts payable in the general ledger (sum) should be equivalent to the amount in your subsidiary ledger (detailed)
*A spreadsheet program can be used wherein you could match your general ledger and subsidiary ledger in two columns – they should match
*Review items thoroughly and add or subtract items omitted from the other ledger
*Spot possible errors in recording of data
*If you can’t reconcile it, make adjusting entries to close the account

Most businesses operate on credit. You get credit from your suppliers so you can operate your business or expand your operations. In turn you give credit or discount to your big customers. To keep track of your credit, you make a list. This list is called accounts payable and accounts receivable.

Accounts payable is the money you owe your suppliers. Accounts receivable is the money due you. Learning how to manage both lists is critical to business success. Get too much credit and you get buried in debt. Get none or too little and you’re not maximizing your potential. Also, extending too much credit can lead to your downfall.  Some businesses will give very lenient terms to close the sale. If they don’t manage it properly, they’ll encounter cash flow problems.

Some people love to gossip. Gossip is rampant not just in entertainment and showbiz it is being done in business too. The advertising industry is filled with gossip; about people and about clients. One of the most popular gossip is that Clients do not pay or take forever to pay. This is why when I finally made the move from an agency to the Client side I made sure the company I worked for employed accounts payable best practices.

Companies should all ensure that they employ accounts payable best practices. This means that they should all pay their suppliers on time. This is the most basic rule in accounts payable. Clients who do not handle their accounts payable correctly are often the subject to gossip. As we have seen in the recent recession, companies who were not able to manage their accounts payable properly filed for bankruptcy.

In the company that I work for, we do a lot of events. For the past years, we have asked for cash advances informally. We have also made payments to suppliers easily. A couple of years ago, the accountant decided to professionalize matters. She announced that we needed a paper trail. After that whenever a supplier sent us their bill or invoice, we couldn’t just give it to the accountant. We had to attach an accounts payable voucher.

Our accounts payable voucher was so simple. 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.

When a company is just starting, it is best if the policies and procedures are laid out. There are methods that need to be followed to ensure that things are done properly. When it comes to the companies payable and receivables, the simplest way to do it is to prepare an accounts receivable and accounts payable flowchart. This way, it will be easier for the employees to follow the policies. This is also a way for employees and managers to review their workflow.

It is relatively easy to do an accounts receivable and account payable flowchart. The flow chart for the accounts receivables and the accounts payable can differ from one company or from one accountant to another. The basics though are generally the same. Accounts payable begins with identifying and organizing your payables and ends with a payment. Accounts receivable begins with identifying sales and receivables and ends with deposit of received payments.

If you run a big company you need to make sure everyone is doing their job. You have to check and see if someone is cheating you. This is why some companies hire auditors to make sure that things are going as they should. The auditors also check on the accounts payable and the accounts receivables. When a report is submitted on top management it is common to include an audit report introduction accounts payable summary.

An audit report introduction accounts payable summary merely enumerates the company’s payables and ascertains that they have been checked. The auditors check to make sure that procedures are followed. They also check the cash flow, the payables and the receivables. The auditors are the ones who usually check if anyone is cheating on the company. Some companies employ a third party to do their auditing.

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.

I have been involved in creative work for most of my life. I have had no background whatsoever or interest in finance or bookkeeping. When I decided to open my own business a few years ago, I had to take a crash course in accounting. There were so many terms that were completely foreign to me. One of the first things I learned was how to define accounts payable.

After a few days, 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 what falls under the accounts payable. This way there will be less mistakes. I remember when I was first doing accounting I would sometimes mix up my accounts payable and my accounts receivable.

Several companies have folded up and filed for bankruptcy. A lot of business process outsourcing companies have also lost millions. One of the reasons why these companies are in trouble is their failure to manage accounts payable. If only companies big and small companies could improve their accounts payable then perhaps some of them need not have gone bankrupt. There are simple ways to improve accounts payable, if you can remember some of these, then maybe you can prevent your company from financial threats.

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.