For a company to trade successfully, it is important to be able to order and receive goods and services in advance of paying for them, often known as buying items on account or on credit.
To make sure that you balance your books correctly, it is important to be able to accurately track money that has been paid and money that is still owed.
Accounts Payable will normally have a credit balance, which means that when a seller’s invoice is recorded, ‘accounts payable’ will be credited and another account must be debited. This is known as double-entry bookkeeping.
When an invoice is paid, ‘accounts payable’ will be debited and ‘cash’ will be credited.
If you’ve balanced your books correctly, your credit balance in accounts payable will equal the sum total of invoices that have been recorded but have not yet been paid.
The accounts payable process requires great accuracy to ensure that your accounts are up to date and you know exactly how much money is still owed to your business.
To find out how Salhan Fund Flow can help you and your business, please contact us.