Your business is booming. The profit margin is excellent, customers are paying you on time and the bank balance couldn’t have been better. But before you get too comfortable, remember that you have bills to pay here, just like at home. These aren’t just bills for electricity and water, though – these are payments to vendors for goods and service that you haven’t paid for yet.
Paying your vendors on time will ensure a trustful productive relationship with them and help you avoid extra costs associated with late payments. You may be tempted to delay payments in order to preserve a healthy bank balance, but in the long-term this may wreak havoc on your business.
What are payables?
According to the most basic definition, the Accounts Payable indicate how much a business owes to its creditors in short-term debts. Although this can mean taking small loans from individuals or other businesses, in the modern sense it usually represents the amount owed to suppliers for goods or services received. Usually, these debts must be paid off within a relatively short amount of time, and are therefore grouped together under Accounts Payable or just “payables”, separate from other liabilities.
Why are payables important?
As mentioned above, Accounts Payable are short-term debts, which makes them distinct from long-term debts such as loans and debentures. The keyword here is “short-term” which, far from diminishing the importance of payables, actually makes it a more urgent object of attention.
Although both types of debts share the same purpose of financing the business operations, the methods of disposing of them are different. Paying off a bank loan may be several years down the road, but paying your suppliers is part of day-to-day operations. This means several payments to different entities over a long period of time, and missing too many of them can be as disastrous as defaulting on a bank loan. It’s not uncommon to hear that a business went bankrupt because it couldn’t pay its short-term creditors.
Managing payables, therefore, is essential for not only ensuring a productive relationship with vendors, but also for keeping the business afloat.
QuickBooks Online A/P Reports
How can QuickBooks Online help you manage payables? Well, information is power, and QBO gives it to you in the most helpful way possible. With six different A/P reports that show different facets of your payables, it gives you a bird’s-eye view of the credit situation of your business. You can see how far behind you are on payments, how much is owed and when it is due. In a nutshell, you can see how well you’re managing your payables. Based on this information, you can decide whether to relax or to act immediately to keep your business from going under.
The six reports that QBO furnishes you with are:
- A/P Aging Summary
This is a simple but informative report that divides up you outstanding debts into categories based on how old they are. Debts 1 to 30 days old are shown in one column, as are debts 31 to 60 days old, and so on.
- A/P Aging Detail
This report expands upon the previous one by showing the exact age (in days) of the debts, as well as some other details such as the date and type of the transactions. The age categories of the summary report (1-30, 31-60, etc.) are maintained here and the totals for each category are shown.
- Vendor Balance Summary
This is the most basic report, showing simply the amount that you owe to each creditor. Although it contains the least amount of information, you may want to look at it first before becoming bogged down in additional details.
- Vendor Balance Detail
It lists each transaction (along with the original date and the due date) that you have with a vendor. You can also see the total amount that you owe a particular vendor.
- Bill Payments List
This report shows the payments that you have made within a certain period of time.
- Unpaid Bills
It shows the list of outstanding balances in your A/P after you have made the payments. It is similar to the Vendor Balance Detail report, with an additional column showing the number of days past due.