Did you know that 82% of businesses that failed did so because of cash flow problems? A business accounts payable team has a lot to do with how much cash is going out of the business.
If you expect your company to succeed, your accounts payable process needs to stay efficient. Read on to learn the best practices to do just that.
Create a Paperless Environment
Your accounts payable department can benefit from going digital. Going digital is just as safe and secure because digital communication creates its own paperless “paper trail.”
Having something you can track online is easier to take care of and rely on. If you don’t want to go fully paperless, you can start by requesting electronic invoices and work your way up from there.
It might be impossible to go paperless if your employees request physical pay stubs. If this is the case for your business, you can take advantage of a pay stub maker.
Use Online Accounting Software
The accounts payable process runs a lot smoother with online accounting software that tracks invoices and payments. However, any accounts payable activities can be better managed with an online program.
With a cloud-based bookkeeping program, you can create purchase orders and perform supplier invoice matching. You can also track any outstanding balances so that an accounts payable clerk can easily review them.
The accounts payable team should always prioritize invoices and organize them based on the size of the business. When you can’t keep track of what needs to be paid, you cannot effectively manage cash flow.
The easiest process to create invoices is to pay them according to the due date and payment terms. Keep in mind that you’ll also need to match the invoice with the products or services you received.
If applicable, rely on payment discounts that suppliers offer if you pay early. This can save you a lot of money in the long run.
Without measuring what you are trying to make better, you’ll never know if you have achieved your goals. If you use this guide to change your accounts payable process, use KPIs to measure the revised process.
Here are some metrics you can keep track of:
- Cost per invoice
- Payment accuracy rate
- Number of invoices paid on time
- Amount of time spent on supplier disputes
Even if you choose not to automate your processes, tracking metrics is essential to the success of your business.
Can You Make Your Accounts Payable Team Better?
The number one truth in business is that there is always room to improve. If you are looking at the bigger picture for success, changing the way your accounts payable team functions is a great start.
When you implement some or all of these techniques into your business process, you’ll reap the benefits.
If your business could use more advice on a variety of topics, our blog is for you. Check out our other posts now!
Tandardize your accounts payable workflow process
Repetition is key to an efficient accounts payable process. Set up a standardized system for managing invoices from the time you receive a bill to when you pay it.
Keep your invoices in a central location where you can easily locate them. Order the invoices by priority and date. For example, organize bills by the closest due dates to the due dates furthest away.
Use an accounts payable aging report to manage invoice due dates. An AP aging report helps you see which vendor payments are past their due dates.
Set up reminders
Take a proactive approach to organizing accounts payable. It can be easy to forget about payments and let some invoices slip through the cracks. By setting up reminders, you can take care of bills before their due dates pass.
Reminders help you anticipate expenses. Use a calendar to manage invoice due dates and set up alerts that automatically let you know when a due date is approaching.
Archive your data
One of the best ways to manage paid accounts is to keep track of invoice data. As soon as you receive the payment documents, keep them in an online file. This includes purchase orders, invoices, receipts, and notifications from sellers.
Keeping these types of documents helps you pay invoices accurately. You know when to pay the bills, who to pay, how much to pay, and why. Refer to these documents when answering invoice questions and submitting your small business tax form.Review contact details
You need to be able to access your vendors and suppliers. Find your current merchant numbers, email addresses, and postal addresses. Combine merchant contact details in a shared space.
Your merchants also need to be able to reach you. Make sure your contact details are up to date with all communication channels.
Look for discounts
The flow of a paid process is under pressure when you owe less money. Try to get discounts on the supply, inventory, and services you need.
Some retailers offer early payment discounts. Find out if your merchants will deduct your debts before the due date. Also, learn who pays interest or late withdrawals and avoid late payment to those merchants.
If you order a large number of items regularly, you may be able to get a discount on bulk purchases. When shopping in bulk, order a larger number of items at a discounted price. This can save you money over time. Just make sure you need what you order before you buy in bulk.
Maintain a relationship
Your relationships with merchants are an important part of effective accounts. Establishing trust goes a long way. Merchant relationships can help you in many situations, from the demand for flying goods to a delayed due date.
Make sure you pay your vendors on time as much as possible. When you can’t afford it, open it. Contact your dealer as soon as you realize you may not be able to meet the deadline. It comes with a solution, as a payment plan that you can both agree on.
Merchant relationships help you find better deals on the things you need. You also grow your network, as trusted vendors may recommend you to others.
Plan your expenses
Creating a business budget can enhance the process of ending account payments by helping you avoid late payments. You know what you need to pay, and how much you have to pay.
Use your invoices to determine how much of your monthly debt you cover. Make sure you have at least that amount of money when making your business budget. Use budget and invoices ’deadlines for time costs. That way, you don’t spend more money than you have.
Create a set amount
Sometimes, it is difficult to pay your business debts when you have to. When months of slow cash flow make you short on current invoice payments, it is a good idea to have a set amount.
A purse is an emergency fund that you use only when necessary. Open a business savings account and regularly donate money to it. A set amount can help you if you don’t have enough credit available within a given month. Make sure you replace the money you spend in the wallet as soon as possible.