Even if you are new to accounting, I imagine that you’ve heard the term “accounts payable” before.
For those who haven’t been working as accountants for years, “accounts payable” is a liability to your business. Or, in laymen’s terms, it’s the money your business owes to its suppliers. In QuickBooks, detailed accounts payable information for each vendor shows a record of increases (bills) and decreases (payments) and the remaining balance payable after each of these transactions.
If you want to be able to accurately gauge the financial health of your company, you’ll need to maintain correct accounts payable information.
And, of course, on a periodic basis you should perform special cleanup and control processes and accounting adjustments so that at the end of any accounting period you have a set of books that reflect your company’s true overall financial health.
So, How Do You Maintain Correct Accounts Payable Information?
First of all, let’s go over the different types of accounts payable.
- Trade Payables are accounts payable (or money owed) to creditors, lenders, vendors, or suppliers for products or services.
- Expense Payables are accounts payable (or money owed) for operating costs such as:
- Sales and marketing costs
- Administrative costs
- Occupancy costs
- Office expenses
- Non-operational expenses, such as interest income, interest expense, taxes
After you set up your accounts payable system to reflect both your trade payables and expense payables, you’ll want to match incoming bills for each vendor with the payments you’ve made. If, after you’ve accounted for the ‘crossover’ between payments made and bills on hand, there is still an outstanding amount, that balance is what you still owe.
This often raises the question…
…Is There a Way To Automatically Track My Accounts Payable?
When I’m working with clients to set up or improve their in-house accounting systems, they often pause here.
“What if I’ve made a mistake and I am left with errors?”
The most accurate way I’ve found of keeping track of accounts payable information is by using accounting software – such as QuickBooks – that tracks the details for you, and helps you to stay on top of what you owe. That way, after you enter a vendor’s information, whether it’s for an on-going expense or a one-time transaction, your QuickBooks accounting software will automatically keep track of it for you. Then all you have to do is look at the resulting balances owed to each vendor.
Of course, if you’re going to rely on accounting software for such an important aspect of your business, you’ll want to know exactly how the software works so that you can still check for, catch, and correct any errors.
That’s where we come in. If you’re ready to learn how to use accounting software to manage your accounts payable information…
…Let Us Teach You!
Through BuildYourNumbers.com, my team and I offer many individual (online) QuickBooks desktop training tutorials through our job-cost (subscription-based) training series. This set of classes has been designed to help small- and midsize-business owners learn how to set up and maintain their own in-house accounting systems. This includes learning exactly how accounting software works, and how to use it to best benefit your business, such as utilizing the accounts payable features to their fullest potential for your individual business. If you’re ready to start learning, you can get started today. If you’d like individual coaching, or have any questions, please give us a call or send us an e-mail today. We’re here to help you and answer any questions you may have.