Accounts Payable Petaluma - As a new or experienced business owner in Petaluma, Ca, what must you know about your businesses accounts payable?
Well, let’s first start by saying: “Congratulations”
since you’ve taken a leap of faith not everyone is brave enough to do. Owning
your own business requires belief in yourself and the ability to have a vision
and go after it. There are many aspects of owning a business and keeping a great
set of books will go a long way in establishing your business as a viable
Therefore it should come as no surprise that you should be familiar with some basic financial or bookkeeping terms so that discussions with your CPA or bookkeeper don’t sound like a foreign language to you. Accounts receivable (A/R) and accounts payable (A/P) are two key bookkeeping principles and terms that every business owner should clearly understand. So as not to overload you with too much information the dynamics of A/P will be reviewed first.
Basically A/P is short-term liabilities associated with running your business. The types of payables vary based on your unique small to medium sized business. They are usually associated items you’ve purchased on credit. If you are a retailer, then vendor invoices for products are a large part of your short-term payables. These expenses appear on your balance sheet as short-term liabilities.
Understanding and keeping close tabs on A/P will affect your cash flow. Negotiating payment terms with your creditors will impact your cash. If you can, especially with vendors that you have a good relationship with, try and extend your terms from thirty-days to forty-five days. In essence, this gives you the opportunity to keep needed cash on hand for longer periods of time.
Accounts payable are considered as cash or an asset because it’s available credit for your business use. On your general ledger, cash accounts typically have a debit balance and your A/P account has a credit balance. When you pay an invoice you are posting a credit to your cash which decreases your cash balance, and you are posting a debit to your accounts payable which decreases your accounts payables balance. At the end of your accounting periods accurate A/P balances are vital.
Even if your business is small the proper recording of items is still important to you. If managing your own bookkeeping, then start off by using inexpensive or free bookkeeping software. Your bank may provide free online tools.
Bookkeeping software will allow you to set up repeating payments and provide tips for the correct account allocations. Once you take the time to set-up repeating vendors, paying bills will go quickly. Make sure you use calendar software for bill alerts so that you are paying your invoices timely. Slow pays or missing payments will negatively impact your credit rating and your ability to secure more credit if needed.
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