The accounts payable process is an important part of any business as it can have a direct impact on a company's cash flow. Failing to manage accounts payable correctly often leads to financial problems down the road for many small businesses.
In this guide, we'll look at some strategies that we'll help you stay on top of your accounts payable process. But first, let’s start with the basics - what is accounts payable, exactly?
In short, accounts payable is the process of a business paying off its debts. This might include vendor invoices, utility bills, or other types of debt.
The accounts payable process usually involves four key steps:
Invoices can be approved for payment in different ways - sometimes a manager will sign off on invoices, while other businesses may have an automated system that approves invoices based on certain criteria.
Once an invoice has been approved, it needs to be paid as quickly as possible to avoid late payment fees. This can be done through a variety of methods, including cheques, direct debits, and even credit cards in some cases.
There are a few different types of accounts payable systems that businesses can use to manage their invoices and payments. The most common are:
No matter what type of system you use, there are a few things you can do to make sure your accounts payable process is as efficient as possible. Let’s take a look at some tips and strategies.
There are several different AP automation tools available that can help streamline your accounts payable process.
Some of the most common features include:
An automated approval system lets you set up notifications so that you’re alerted as soon as an invoice is approved, allowing you to make payments on time. Late payments can cause all sorts of problems for businesses, from missed discounts to increased interest rates.
By using an automated approval system, you can avoid these fees and keep your business running smoothly.
Another way to streamline your accounts payable process is to go paperless.
Nowadays, there’s really no need to keep physical copies of invoices and other documents. Not only does this take up valuable storage space, but it can also make it harder to keep track of important information.
When you switch to a paperless system, all your accounts payable information is stored electronically. This makes it easy to find what you need and helps reduce the risk of lost or misplaced documents.
You can either store your invoices and other documents in the cloud or on an internal server - whatever works best for you.
Another way to streamline your accounts payable process is to use purchase orders (POs). POs are basically like contracts - they specify the terms of a transaction between a buyer and a seller.
Using POs can help you in a few different ways:
If you’re not using POs, now is the time to start. You’ll be surprised at how much they can help you save time and money.
If you find yourself inundated with paper invoices, it might be time to look into self-billing. Self-billing refers to when you prepare the invoice for your supplier and send them a copy of it. This can save time and hassle when it comes to accounts payable, as you’ll no longer need to wait for an invoice to arrive in the post.
Just make sure your supplier is happy to bill you this way - not all of them offer self-billing.
Even if you have the best systems in place, it won’t do you any good if your employees don’t follow good organizational practices.
One of the most important things to remember is to always use a standard process for processing invoices. This will help ensure that everyone is doing things the same way and that no steps are missed.
It’s also important to create an organizational chart for your accounts payable team. This will help you track who is responsible for what, and will make it easier to assign tasks.
Finally, make sure you have a system in place for filing invoices and other documents. This will help you keep track of everything and ensure that nothing gets lost.
Accounts payable can be a complex and time-consuming process, but there are ways to make it easier. By using the tips and strategies in this article, you can streamline your accounts payable process and save time and money.
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