Do you know what Accounts Receivable and Accounts Payable are?
Simply put – they are two sides of the same issue: Money still owed to you by clients, and money you still owe to vendors.
Accounts Receivable is made up of all the balances still owed to you on invoices.
Accounts Payable is made up of all the balances still owed to vendors on purchase orders (only on invoiced items).
Why should I care?
As always, two reasons:
The first reason is to have accurate financial reports. Both accounts receivable and accounts payable affect your financial reports. If these numbers are not right, then your financial reports, and your tax returns will not be right.
The second reason is that correct and up-to-date numbers can help you monitor your cash flow, make projections, and make informed business decisions. Watching these numbers regularly will help you start to recognize trends in your business.
How do I monitor these?
The first and easiest thing to do is to make it a habit to look at the lists on the top of your Studio Designer dashboard. The Invoices list shows every invoice with a client balance. These make up your Accounts Receivable and is money owed to you by your clients.
The Orders list shows every purchase order with a vendor balance.
On both lists, there may be maintenance or cleanup needed. For instance, you may need to write off or close out invoices which have become uncollectible. On the purchase order lists, you might see small balances due to the difference between your purchase order and what you actually paid.
Open balances on invoices and on purchase orders will stay on your financial reports FOREVER until they are either paid in full or closed out with adjustments.
Quick tip – you can also go to reports, and pull a report for both Accounts Payable and Accounts Receivable.
I strongly recommend you review these reports in November or December, and write off or close out any balances that are not correct, so that your year end financial reporting and taxes are correct.
Please feel free to reach out to me or my team if you need more information or help with cleanup of Accounts Receivable and Accounts Payable.