Ways to Improve Your Accounts Payable Workflow
Managing accounts payable is often little more than a second though for small businesses and entrepreneurs. Marketing, sales, and delivery of services are typically at the forefront of a manager’s or business owner’s mind, not how and when they are going to pay their bills.
However, failing to properly manage accounts payable can seriously affect a business. Managers who do not develop an effective accounts payable strategy can severely limit their company’s liquidity, leaving them with insufficient cash on hand when they have narrow windows to seize fleeting opportunities.
Poor accounts payable manage can affect a company’s relationship with important vendors, or limit access to credit as well. However, these problems can be easily avoided. Here are six great tips to improve your accounts payable, and keep your cash flow healthy.
Develop a Core Accounts Payable Strategy
The first step in improving your accounts payable process is to have a plan. Your company should have a detailed strategy for how, when, and how often you pay your bills.
The strategy should also provide explicit guidance for how purchases and payments are approved, and by whom. It should be linked to the rest of the your cash flow, and aimed at optimizing your company’s liquidity.
While many companies’ accounts payable management simply consists of waiting as long as possible to pay their bills, an effective accounts payable strategy will take in to account such things as discounts for paying earlier, or relationships with key long-term vendors when establishing rules governing the system.
A good accounts payable strategy will also link payment decisions and visibility to overall management processes as well.
Make Accounts Payable a Management Responsibility
Do not delegate your accounts payable oversight to someone without a significant stake in your company. Failing to put appropriate management emphasis in the company’s cash outflows can lead to late bills that damage your company’s relationships with vendors,. It can also limit your access to good credit terms, and ultimately lead to lost opportunities.
Either the business owner or a trusted manager must oversee the accounts payable. Leaders must ensure that your company’s strategy is rigorously adhered to. This will ensure that the company is always working to optimize its accounts payable.
Overview of accounts payable activities should be a part of key routine business meetings, and accounts payable activity should be easily accessible through your company’s computer network and mobile systems.
Automate Your Accounts Payable
You won’t be able to access your accounts payable information unless you build a network to do so. When automating your accounts payable system, a good objective to start with is to think paperless. that Strive to remove all of the company’s analog bills and payment activities, and deal with them completely online.
Next, work to automate all your purchase and payment approval processes. Finally, all accounts payable activity should be cloud based, secure, and easy to access. This will help management make timely, informed decisions regarding the company’s cash flows.
Empower Your Vendors
If you want to further leverage technology to make your accounts payable more efficient and effective, one way to do so is by connecting seamlessly to your key suppliers. If you routinely have to order bulk purchases from one or more supplier than linking them into your accounts payable and inventory network via a vendor, or supplier portal, may be a great option for your company.
With a vendor portal, your company agrees on a given price for supplies. The supplier then ensures inventory stock level is always at the level you require. The vendor portal enables your suppliers to track inventory supplies, direct resupply, and receive automated payments from your company.
Systems like this dramatically simplify accounts payable management, and also ensure that your company has a ready supply of inventory that is critical to your company on hand.
Protect Your Company from Accounts Payable Fraud and Errors
One of the best ways to ensure that you do not have sufficient liquidity to take advantage of fleeting opportunities is to hemorrhage cash due to fraud, theft, or costly errors. Businesses lose billions of dollars due to criminal activities and accounting errors every year.
Fortunately, there are several steps your company can take to protect your accounts payable from these pitfalls. First, automation tools and engaged management can monitor your company’s accounts payable closely for fraud,. They can also catch accounting errors as well.
Additional measures, such as requiring more than one person to authorize a payment, can further insulate your company from fraud or error. Securing your accounts payable data network and protecting your company’s financial information are also important.
Finally, auditing your accounts payable occasionally can help your company assess how effective your team is managing its accounts payable. It might also spot any potential irregularities in the system as well.
If paying all of your company’s bills is consuming too much of your time, and you find yourself unable to effectively manage your accounts payable and other equally important aspects of your business, consider getting help. If your company’s size and scope of payment activity warrants it, hire a chief financial officer, or accountant, to oversee your accounts payable.
You might not be able to afford additional staff, and that’s ok. Just seek the services of an accountant who can review and provide accounts payable support on a routine basis. Either one of these strategies can help ensure a trained professional is guiding your accounts payable process; they can also free you up to focus on other areas of your company that may need your undivided attention as well.
Accounts payable is much more than paying your bills. It is a critical component of your company’s cash flows.
Managing your accounts payable ensures you have the optimal cash on hand to sustain your business,. It also helps you maintain strong relationships with vendors critical to your company’s well being. Applying any of these tips discussed here can help you improve your accounts payable process. Try a few of these tips today, and ensure your company has healthy cash flows in the days ahead.