A purchase ledger records all purchases made by your business.
It helps you to monitor: • your business' outgoings • how much money you owe (creditors) at any one time • a record of your most regular suppliers and how much you have spent with each • to gain insight that can help you negotiate a better deal from your suppliers • it can also help you with calculating your VAT liability and submitting your VAT Return, if applicable.
How do get the best out of using a purchase ledger?
By recording in the purchase ledger payments for purchases you have made, you will be able to identify the amount unpaid. Each time a payment is made, note it in the "Date paid" column. You can add up the totals on a regular basis to see how much you owe. It is a good idea to number each bill when you receive it and record this number against an entry in the ledger. It is also advisable to file the bills in numerical order. That way, you will be able to easily find the bill if a query arises later. To support your purchase ledger for reconciliation purposes you may wish to make reference to bank or card statements.
Don’t mix your professional and your personal
It is best to treat the business as a separate person, from which you only take income in the form of wages, dividends and in claiming back business expenses against receipts.
Put a system in place and make it secure
Spend time setting up a system which you stick to. Allocate a regular time every week or month to deal with your financial administration or make it a key responsibility for a trusted employee or manager. The fewer people involved in your record-keeping, the fewer the errors that are likely to creep in. It is a good idea to password-protect your company records and only divulge the password to those that need it. Numerical recommends using a two-step authentication process, wherever possible. Even if you choose to keep all your records electronically, it is vital that you keep a regular electronic back-up and a paper copy elsewhere. Store records that cannot be copied, such as chequebook stubs and paying-in books in a fireproof box.
By keeping your Purchase Ledger up to date will give your business the best advantage.