Accounts Reconciliation Blog

A lot of people neglected their basic accounting class in high school and college. They probably do this for two reasons: accounting is boring and accounting requires tedious work. Often people thing accounting is unnecessary. Only would be accountants should pay attention in accounting class. If this is your line of thinking, you’re wrong. If you plan to be in any form of business setting someday, you need to pay attention in accounting class. Accounting is vital to business success. If you miss the bus on accounting, like me, there are lots of accounting certification courses you can take. Courses like basic bookkeeping or accounts payable certification courses are plentiful.

Even if you run a big company and have the services of an accountant, you still would need to understand basic accounting. Otherwise, you risk being bypassed or if you owe the business, you risk being stolen from. How do you plan to read and understand the reports your accountant made if you don’t have knowledge about basic accounting? Accounts payable certification courses and basic bookkeeping is designed for professionals from middle management up. It will teach you the basic concepts of accounting.

When I was growing up, I hated my accounting class. I figured why need accounting when I don’t plan to be an accounting. What I wanted to be was to become an entrepreneur. I wanted to become CEO of a top 500 company. I don’t need to learn accounting because I’ll have a room full of accountants doing my bidding. Boy was I wrong. If you plan to be in a business setting someday, you must learn and understand basic accounting concepts. Questions like what are accounts payable and how to do bank reconciliations should be basic knowledge for every businessman.

What are accounts payable? Accounts payable is money owed to a supplier. If someone did you a service or you bought something from someone or you’re paying rent or bills, this all goes to the accounts payable list. Now, the trick in business is to have a list that you can manage. You must pay all suppliers on time every time. If you don’t, you raise a red flag in their eyes and risk losing that particular supplier. Your supplier is your business lifeblood. It is the second most import business relationship you have. The most important business relationship is of course your relationship with client.

Accounting work is tedious and time consuming. It also requires lots of paperwork. In order to get paid you need the P.O., sales invoice and delivery receipt. Or if you plan to reimburse something, you’ll need an official receipt. Sometimes though, you can get reimbursed or paid with nothing to show. Take for example per diem or allowance.  Accounts payable allowance or per diem can be paid with little or no paperwork.

Allowances are paid even without a receipt. It is an agreed upon price to cover living expense.  It usually covers food and lodging. For example, your company might have a $100 a day allowance or per diem policy for out of town trips. You have a seminar for 5 days. Your company therefore will release $500. Often no receipts are necessary. It will just be listed as accounts payable allowance and paid outright to you.

Most people are just ignoramus when it comes to accounting. Unfortunately, accounting is a vital cog to business success. High management to business owners need to learn and comprehend accounting concepts in order to succeed in the workplace. From my experience, the best way to comprehend anything is through a flowchart. A flowchart will guide you step by step in the right direction. Take for example accounts payable flowchart. 

Most accounts payable flowchart will show you how to go about in making full circle accounts payable payments. First you must understand what accounts payable is. In layman’s term, it is the money your company owes to a supplier. You just don’t go outright and pay them. Who knows, you might have paid them already or someone in your company cancelled the order but you still got billed. The first thing to do is check the paperwork on the deal. Check your purchase order receipt. Make sure there was an order from people who are accountable for it. Next check the sales invoice. Make sure they there are no discrepancies. If there are no discrepancies, proceed with check preparation. The flowchart should show all possibilities in every step of the procedure of making accounts payable payments.

To succeed in business follow the statement buy low sell high. That in essence is what business is all about. Look for the best suppliers. Get the best terms. Cut the middle man. That way you can give your clients/customers the best deal in town. When you fine this supplier take care of that relationship. Pay your supplier on time as scheduled.  Make it AAA priority in your payment schedule. Pay them in full. If they give you term payments, pay accounts payable payment terms in full and as scheduled.

Some suppliers will give you lots of leeway when paying them. When they give you lenient payment terms pay them on time. A missed or late payment will raise a red flag with regards to your account. They might call in you debt. If they do this, it might create cash flow problems. That’s why it’s best to study your accounts payable payment terms. Make sure that you don’t miss or delay payments to key suppliers.

Business is highly competitive and requires lots of paperwork. Paperwork is necessary to avoid mistakes. Take for example accounts payable. Accounts payable is money due to your suppliers. Before making payment to anybody, the proper paperwork should be done. Here are the usual accounts payable procedures.

First check your company’s purchase order to your supplier. Then reconcile it with the sales invoice from your supplier. Make sure there are no discrepancies. Make sure your company receives the item you ordered. Make sure it’s the right item. If both purchase order and sales invoice tally, then you can start the process of preparing the check for payment. Once you released the check payment and it cleared, then you can take out that supplier from your accounts payable list.

Accounting work is tedious and time consuming. In spite of this, accounting work is vital to business success. Like the saying goes, you can’t get from point A to point B if you don’t know where point A is. My point is, in order for your company to run properly and profitably, you must understand all aspects (marketing, sales and accounting) of your business. You, the entrepreneur, don’t have to be a licensed accountant but you do need to understand the basic concepts of accounting. Questions like “what is full cycle accounts payable” and “how to do bank reconciliations” are just some of the accounting jargon you will need to know.

What is full cycle accounts payable? Basically, it is covering all the bases before you pay someone. If your accounts payable list says you owe money to certain supplier and need to pay them soon, you start processing the paperwork for payment. You first check your PO if you really ordered. Next, you check if the item you ordered came to you via the original sales invoice. Check for discrepancies. If all is in place, then you prepare the check for payment. That in essence is full cycle accounts payable.

Most entrepreneurs go into business because of the sense of adventurism. Closing deals negotiating takeovers is trilling. But business is also a game of balance. You must temper expansions as against conservatism. Or mediate the eternal battle between sales and accounting. Accounting work is just as vital to business success as sales and marketing. Learning how to reconcile accounts payable is just as vital to an organization as learning how to close a sale.

Learning how to reconcile accounts payable is not for accountants only. Entrepreneurs need to learn it also. Even if you can afford the services of an accountant you’ll still need to read and interpret the results of their work. Otherwise, worst case scenario, they bleed your company dry and run off with your money. Accounts payable is the money you owe to your creditors. Pay them on time. It is important that you keep an unblemished record in their eyes. It’s the second most important business relationship.  The first of course is your relationship with your clients and customers.

Finance plays a vital role in any organization. This department has the capacity to control the overall operation of any business. One of the most important aspects that it closely keeps track is the accounts payable. This is the account that deals with the total monetary value of debt that a company owes to suppliers and has not been paid yet. With this, purchasers are given the chance to pay these suppliers after the receipt of their products or after the completion of their services.

A company’s overall financial cycle can be regulated by accounts payable. If properly managed, it could result to several benefits for the organization. It could bring awareness in terms of financial changes. This could also increase profitability by the reduction of annual accounts payable. The growth and development of a business can also be tracked because of the several financial reports generated by this account.

The success of a business can be attributed to a very good financial statement. This paves way to a smooth operation of the business. Therefore, constant accounts payable reconciliation should be practiced by any organization. It plays a very vital role in increasing the profit margins of a company. This eliminates the penalty costs brought by delayed or duplicate payments.

Since accounts payable reconciliation greatly contributes to business growth, it should be done perfectly and accurately. 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.