Purchase Ledger 101

What is the purchase ledger?

The purchase ledger is a financial system which covers financial processes and helps a business monitor its creditors. A healthy purchase ledger is important to prevent mismanagement and cash flow issues.

A purchase ledger should be a well-oiled machine. Maintaining a correct purchase ledger requires consistent effort, and knowing how to spot discrepancies and nip them in the bud is important. Here we’ve highlighted some common mistakes we’ve seen businesses make so you can avoid them.

Common purchase ledger mistakes to avoid

1. Avoid doubling up on payments

It’s surprisingly easy to double up on payments. In a time when efficient handling of cash has never been more important, it’s vital that you have a system in place that avoids overpaying for services or goods.

2. Watch out for invoice fraud

Invoice fraud is on the rise. You can protect your business by double-checking that the supplier‘s details match up. If they don’t, it’s best to double-check using your trusted contact details. When choosing new suppliers, check their credentials and legitimacy as a company before handing over any money.

3. Regularly review for errors

Regularly reviewing your purchase ledger is vital for identifying issues. After all, inaccurate numbers can affect your cash flow. One or two inaccuracies probably won’t cause a huge impact – depending on their value. But, if they are allowed to snowball over time, your business financial statements won’t add up, and your money won’t be handled as efficiently as it could be.

One thing you can do is look out for debit balances. These can indicate one of the following:

• A payment has been made without a recorded invoice
• A supplier has been overpaid
• There may be mis-postings of invoices or payments between different suppliers

4. Record the errors

Recording the errors as you go can really help pinpoint problems that are recurring. This will help you review and tighten your processes so that you can have more accurate ledger records.

How to speak to an accounting ledger professional

Maintaining, reviewing and correcting a purchase ledger and sales ledger takes time. If you need assistance with your purchase ledger, or your sales ledger, it’s important to seek out professional help.

Speak to us about purchase ledger management today by speaking to our corporate accounting team. Contact us or book your free initial consultation.