No matter what kind of business you are in, or whether you’re a nonprofit or a for-profit corporation, paying bills is a big part of doing business. In fact, if you cannot effectively pay your bills, chances are your business is not going to be that successful. If you establish effective accounts payable management procedures and adhere to them, you can put your company on solid financial footing and make more money. Here are four great tips to help you improve your accounts payable practices today,
Pay Your Bills on Time
Paying your bills and vendors on time is critical. Beyond the benefits of financial discipline in paying your debts and managing your cash flow, timely payments help you establish and build good relationships with your vendors. Paying your bills on time may even lead to discounts, and help you avoid late payment penalties which are a drag on your bottom line. In order to do this, ensure your accounts payable management department (or you, if you are a sole proprietor) organizes all of your bills and invoices, and pays them according to an established turnaround time. Your company should monitor your accounts payable procedures closely, and ensure that it is meeting the company’s guidance in terms of timely, accurate payments at all times.
In the past, businesses had to rely on ledger books, paper invoices and billing statements, checks, and the postal service for their accounts payable management. The process was tedious and inefficient, and often labor intensive. It no longer has to be that way, and technology continues to revolutionize the way businesses deal with payments. At the simplest level, accounts payable spreadsheets enable small businesses to manage their bills and debts much more effectively than ever; other business software facilitates more sophisticated accounts payable management as well. Services like those that Due offers also make it much easier to deal with invoices, and make instant payments. Make sure your business is taking advantages of all of the new accounts payable innovations that it can afford to.
Manage Vendors to Optimize Terms
Much like your creditors, your vendors are absolutely critical to your business. You should strive to establish and maintain a good relationship with them. Cultivating relationships with your vendors may pay off over time as well for your accounts payable management department. If you are on good terms with a vendor as a customer, you may be able to get a discount. Additionally, if your company prides itself on timely payments, you may be able to secure discounted payment terms (like 2% at ten days after invoice). Regardless of the deals offered, you should nonetheless call your vendors and make a good faith effort to negotiate the terms of your transactions. Remember, your vendors almost certainly value your business as well.
Guard Against Fraud
Accounts payable fraud, either due to unscrupulous vendors, or dishonest employees, can become a serious problem, and even put your business in peril. To avoid fraud, as well as costly errors, ensure you have procedures in place that detect and deter it. An important step to deter fraud is to establish a “separation of powers”. This makes it so that no one person can establish a new obligation and then make payments to it. For instance, you should designate the person in the company who can authorize the establishment of a new vendor account; that person should not be the same one who oversees check issuance to vendors.
You should routinely review vendor invoices. Ensure that you are receiving the goods or services paid for without being fraudulently or erroneously billed. Finally, when in doubt, it is worth bringing in an outside pair of eyes. This can be in the form of an accountant to audit your accounts payable and ensure everything is above board.