Accounts Payable

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

Bookkeeping – Tracking Cash (Lesson 46)

Tracking Cash

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. 

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Bookkeeping – Accounts Payable Management (Lesson 43)

Accounts Payable Management

With small business the biggest hearache for the bookkeeper is addressing the daily phone calls and letters (bills, statements and notices) related to purchases.  Vendors regulary communicate with the accounts payalbe manager wanting to know payment cycles and status of their respective account. 

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Accounts Payable Turnover Rate (Ratio)

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).

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