As business owners and managers, we tend to focus a lot on accounts receivables since it’s so vital for us to get payments coming in to boost our cash reserves. However, a healthy business is also one that pays its suppliers on time and doesn’t let bills pile up too much.
While you need enough money coming in to pay your accounts each month, there are also specific steps you can take to manage this side of your company finances better.
Review Data Often
Firstly, keeping a close eye on all accounts payable (AP) data with weekly, or even daily checks, will help you understand your venture’s cash flow and identify red flags. It also makes it quicker and easier to pick up on and avoid common bottlenecks in your accounts payable processes.
Use analytics and reports to show AP trends, monitor the value and volume of invoices and payments, create an audit trail, and improve your cash flow planning, among other things. The more you and your team see how accounts processes work in your business, the better equipped you’ll be to make changes as needed.
With so many excellent software programs on the market these days, you’re remiss if you don’t take advantage of tech tools to help your staff handle accounts payable tasks. Apart from using analytics and reporting tools, you can use technology to speed up and automate processes.
AP automation software can look after things such as creating systems for the entire department and speeding up the approval process. Use it to reduce manual data entry and scan invoices straight into programs that automatically match them with corresponding paperwork. Technology provides an extra set of eyes and helps to analyze and reduce human errors along the way.
When you take advantage of software, you can move towards a paperless processing environment, which reduces the chances of important documents getting lost. Automate systems to enjoy other benefits, like electronic communication with vendors that enables automatically generated purchase orders, electronically validated and accepted invoices, and received goods tracking.
Put More Controls in Place
Another way to improve your venture’s accounts payable processes is to be more diligent about who has access to invoices and payments. Limit access to your Master Vendor File, in particular, to specific employees so only one or two people can create new vendors.
Plus, establish tight controls about who’s permitted to finalize payment transactions. Creating this kind of separation of duties and internal controls within the AP department makes it easier to spot mistakes or fraud if it happens.
Pay Attention to Security
With so much money handled in the accounts payable area of your business, it’s crucial to pay close attention to security. Implement checks and balances to mitigate the risk of employee fraud, and watch out for potential dummy vendor accounts. These are a common creation used by staff members trying to scam money out of their employers.
Also, have any team members who make digital payments use password-protected computers and Wi-Fi networks and set up gadgets with comprehensive security software programs. Train your staff on ways to reduce the likelihood of hacker attacks, such as being careful not to open emails or click on links that could be risky. Also, by implementing automation you are reducing the possibility of accounts payable fraud.
Renegotiate Supplier Terms
A tip to help your accounts payable department is renegotiating vendor payment terms over time. For example, many suppliers are open to giving customers longer timeframes to make payments or bundling orders into fewer invoices.
Making these kinds of changes give your workers more time to get through payments and less paperwork to deal with. Note, too, that it’s a good idea to let suppliers know ASAP if late payments are likely. This transparent communication improves relationships, and suppliers become more likely to excuse late fees, too.
Train Your Team in Best Practices
As the leader of your business or the AP department, it’s up to you to train your team so everyone can work together to make operations run more smoothly. Establish routines and processes for capturing, approving, and making payments. While there are always going to be many variables involved in vendors and invoices, you can create consistency in handling these things.
For example, set up procedures for dealing with each invoice type and guidelines for how close to due dates they should be paid or even how many payments to batch together. There should also be processes around how new vendors get set up in business systems and how often you check-in to see if contact or payment data needs updating.
Accounts payable tasks are many, varied, and often time-consuming, but you can make life easier for your workers and yourself. Follow the tips above to streamline how you manage this facet of your business.