Of all the assets in business cash is the most valuable and coveted. Keeping track of how much is available and where it goes is the responsibility of the bookkeeper. Often owners have no idea of how much they really have nor how much of the existing cash is earmarked for certain items.
Accounts payable are amounts due to vendors or suppliers for materials and services received. It is located in the current liabilities section of the balance sheet. For more information or an in-depth article, read: Accounts Payable Management. If you want a more sophisticated understanding, read: Accounts Payable Turnover Rate
The accounts payable turnover rate is a business activity ratio measuring the frequency of the company’s ability to pay its vendors and suppliers. The numerical value is customarily reported as an annual value. The higher the number, the more often the payables are cleared (paid). A ’12’ would indicate that all payables are paid every month (360 days/12 = 30 days). Ideal values exceed 20 as this indicates all accounts are paid on average at least every 18 days (360 days/20 = 18 days).
Creating a file structure for accounting is critical for the overall success of the business. If properly structured, data retrieval and information access add to the overall value of the company. This article teaches the new business owner how to create a file structure to use with accounting.
The primary goal of creating a file structure is to make data retrieval easy and understandable by just about anyone involved in office operations. Keep in mind that the end user is how the structure is developed. From a simple format to a more complicated structure incorporating the entire office, the file structure should be organized in a systematic approach. First, break down the accounting function into the respective areas of importance. Next, subdivide these areas by accounting cycles. Finally, incorporate the accounting software function and the overall office to end up with a well-organized file structure for the company.