Effective accounts payable management is crucial to any company as it efficiently supports one’s financial management. It gives you an idea of how much cash your business has got and where your cash is being spent. Well, you could say it’s a core function of any business.
Whether you’re a small or medium-sized business, you need to understand how to manage it. Otherwise, you might end up as one of those businesses that failed due to losses incurred from improper accounts payable management.
Who would want that? To help keep you on the right track, read these tips on how you can improve your accounts payable process!
Don’t Delay Payments
Delayed payments are a real problem for businesses because they can lead to late fees and lost revenue. Yet more than that, it brings a bigger issue to your business—tainting your good company reputation.
Maintaining a good impression is one of every business’s keys to success. However, delayed payments could ruin all that in an instant. They would lead to wasted time and effort for everyone involved. Worse comes to worst, creditors can get upset by late payments and start filing lawsuits against your company.
Standardize Workflow
Having a standardized workflow can help you make sure that your accounts payable process stays as organized as possible. It helps ensure that all your transactions are recorded properly and can be easily verified if needed. If there is a discrepancy between an invoice and an expense report, you can easily spot it if everything’s listed in the same place.
Trace Transactions
If you don’t know what you owe or when to pay it, then you’re not getting accurate information about your cash flow. Effective accounts payable management comes with tracing transactions, it gives you a clear picture of where your money is flowing right now. Making sure that nothing goes missing between where your money came from and where it’s going.
The more you know about your business finances, the better equipped you are to identify problems and opportunities. Consequently, you can make the right decisions based on that.
Centralize Invoice Payments
Create a central location where all of your invoices are stored and any other information related to your payments. This strategy streamlines your accounts payable process. Also, you won’t have to go through different folders or files looking for the right one.
When you know where everything is, you’d immediately know what to do when it comes to sending out payments or updating the status of an invoice on file.
Know Who Authorizes Payments
When dealing with accounts payable, you must know who authorizes every payment. If you don’t know who authorized it, then you have would have no way of knowing how to track it. More so, it’s difficult to determine if the payment was valid.
You can also be liable for them if they were somehow made in error. This could mean losing revenue or even potential legal action against your business.
Log Your Invoices in Small Amounts
Logging your invoices when they come in is crucial in keeping track of how much money is coming in and going out, who owes what to whom, and so forth. When you’re looking at an invoice for its total amount, it can be hard to tell if something’s missing or if there are discrepancies.
Thus, logging your invoices in small amounts can help ensure effective accounts payable management and that the accounting side of things is done correctly.
Set Up Reminders
It’s hard to stay on top of things when there are so many other things going on in your life. Sometimes, this may cause you to miss important information about payments. To avoid this kind of issue, it’s essential to ensure you’re setting up reminders about bills. This is so that they don’t slip through the cracks and cause issues later on.
Maintain Good Vendor Relationships
When you have a good relationship with your vendors, it’s easier to communicate with them and get what you need when you need it. You won’t have to spend a lot of time negotiating different prices. Also, they’ll be willing to work with you on any issues that come up.
In doing so, make sure that you’re communicating clearly about payment deadlines, keeping your loyalty, and more.
Review Contracts Regularly
Think about this: if you don’t know what’s going on in your business contracts and how much you owe who, how can you possibly be expected to manage them? By regularly reviewing your contracts with suppliers, you can check that all the terms are being adhered to. Plus, you can also ensure that no surprises crop up at the final line item of a transaction.
Automate Your Data
Using automated systems, such as Zayls, can help keep organize your data in a way that makes it easy for you to find and understand. In terms of managing your accounts payable, automated systems assist you in achieving the following:
- tracking the progress of each payment as it moves through the process
- avoiding missing payments due to late or incomplete payments
- ensuring that all invoices are paid on time, every time
The Bottomline: Step-Up Your Game
Whether you’re new or well-versed in managing accounts payable, you must understand how to get the most out of it. By applying these practices, you can ensure that your company has a healthy pipeline of invoices and payments. This will allow you to focus on other aspects of your business.
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