Knowing your account receivable is important and this has been explained. It is also important to know your account payable using a schedule. This will help you avoid overpaying creditors and suppliers. It will help you know the amount you owe suppliers and the due date. Account payable must be controlled to avoid owing more than the business capacity. A spreadsheet application, for example, Google Sheet can help you track them efficiently and effectively.
What’s Account Payable?
To begin, let me give you a brief definition of account payable. It is an account that tells you the current amount that a business owes its clients, suppliers, and creditors within a year. Some account payable aging schedules may be broader than others. But if the business pays its creditors on time, this shouldn’t be so. And of course, it is discouraged to owe creditors more than a year. Unless there are economic benefits that outweigh the costs.
Why Prepare an Account Payable Schedule
Knowing your creditors is one reason why you should have this aging schedule. Other reasons are:
To know the total amount payable. You need the total amount payable when preparing the business balance sheet. Also, you need to know if you have exceeded your limit for payables. This will enable you to take further action.
To know the next supplier to pay. The schedule is usually set up to show months’ account payables that have aged. With this, you can pay those suppliers that you owe for more than one year first. Before paying others.
For comparison purposes. You can use the information from the schedule to compare with a/c receivables. Generally, the amount in your account payable should be less than that in receivables. You can also compare it with sales, purchases, inventories, and noncurrent assets.
Setting up Payables in Google Sheet
Step 1: Launch the Google sheet app on your phone or computer. And add a new sheet.
Step 2. Name the sheet. You can do this at the top left of the software. The suggested name is Account Payable Aging Schedule.
Step 3. Create columns for date, invoice number, name of clients, phone number, amount.
Step 4. Next, create more columns for the aging periods. Say 0-30 days, 31-60 days, 61-90 days, 91-180 days, 181-360 days. These are the days the debts are due for payment. For example, if a debt is due for 30 days, you put the amount not paid on 0-30. If the same clients were not paid after 30 days, the amount is shifted to the next aging date. That’s 31-90 days and so on.
Step 5. At the bottom line, there is a row for totals. Here you can know the totals of each aging account payable. You can see the screenshot of how I prepare a simple schedule for a fictitious business with fictitious creditors.
Account Payables are a/c for creditors and suppliers of goods (raw materials) the business used for its normal business activities. A schedule can be prepared to track this account so that the business will not owe debts more than it can handle. I have listed steps to prepare a simple account payable schedule on a Google sheet with your phone or computer.