Each year, just over 400,000 startups open their doors for business. For some, the driving force behind the business is someone experienced and confident in what needs to be done to make their fledgling company succeed.
For others, the experience is lacking, and many questions pop up as the tiny startup forms into a bona fide business. One common question is, what is accounts payable?
This is one of those critical questions because it directly relates to how you manage the startup’s finances. Keep reading to learn about this section of your business’ finances and why they’re so important.
What Is Accounts Payable?
Accounts payable is a complete list of the debt and liabilities of your company. If you make orders on credit or have materials ordered before paying for them, then you have accounts payable.
When looking at the accounting for a business, these are liabilities creditors have a right to ask for based on goods and services already provided. You may also hear this section of accounting referred to as “trade payables”.
What’s Not Included on Accounts Payable?
Long term expenses like your payroll or property leases aren’t considered a part of accounts payable.
Create Your Accounts Payable Ledger
You need to create an accurate paper trail that will allow you to track and audit your business activities easily. If done correctly, the incoming invoices should equal what your accounts payable ledger says you owe.
To make this happen, you need to record each debt you incur when you purchase goods or services. Make sure that your accounts payable records contain the following information.
- Vender name
- Invoice number
- Account number
- Type of expense
- Date invoice received
- Payment deadline
- Current status
To gather this vital data, you may need to use service documents. This could include contracts, purchase orders, other agreements made with venders, and vendor invoices.
You Can Automate the Process
In the beginning, your accounts payable will be easy to manage and it’ll be another thing on your to-do list. But as your business grows, your time will become more in demand, and soon you won’t have time to manage them on your own.
To make it more challenging, your accounts payable list will begin to grow. This will make the task more time-consuming.
As with anything, the answer is to automate. The AP automation for JD Edwards system lets you manage your invoices with a hands-off approach. By integrating your accounting software, you can simplify the entire accounting process.
Streamline and Organize Your Accounts Payable
If you’ve asked the question, what is accounts payable? Then you’re on the right track. As a startup owner, you need to have an accurate financial statement of your company. This included the money that you owe to venders.
Take a look at your accounting statements and make sure your financial person is recording your liabilities and debts correctly.
Check out the money section of our blog for more helpful articles on managing your startup’s cash.