Laura A. Ehle | June 3, 2015| LAE Business Services, Inc.
No what matter what size your business is, paying bills will always be part of it. Whether it’s the monthly operating expenses, an occasional order to pay or a fully staffed accounts payable department managing hundreds or thousands of invoices. By implementing best business practices you can streamline your accounts payable process and be prepared for future growth.
Below are 4 tips to help you successfully manage your accounts payable:
1. Simplify Your Accounts Payable Process
Reduce the number of check runs to every other week.
When the accounting staff prepares check runs, they should have the invoice, any backup (packing slips, pod’s, etc.) ready and invoices approved by the appropriate department heads before coming to you for signatures.
Make Accounts Payable aware of any cash disbursement ceilings for each check run so they can then select the most important invoices to pay if cash is tight during that payment cycle.
Empower your staff with decisions that will make your life easier and are not dangerous for them to make. The decision to make partial payments on larger balances, or delaying payments to vendors who have a higher tolerance on due dates are a couple of examples.
2. Use Technology
Analyze and reduce errors such as paying incorrect amounts, incorrectly entering check numbers used to pay vendors, and paying too early or too late.
Make sure your accounts payable module is set up correctly so that transactions flow properly. You may need to use a consultant to make sure your accounting software and accounts payable module are correctly configured, or you could cause more problems than you solve.
Have Accounts Payable staff enter terms for each vendor in which the system can default to, such as Net 30, Net 60, etc. Terms are often provided by the vendor, and are usually printed on the face of their invoice.
If they don’t send them already, require your vendors to send monthly statements to ensure you’re not missing any invoices.
Run aging reports so you know what is in the pipeline. You may have a small check run this period, but could have a large one coming up that you didn’t know about until looking at these reports.
Use laser printed checks, which will update the system automatically, marking which invoices have been paid and with what check numbers.
3. Vendor Terms May Be Negotiable
Usually invoices will come with set terms-Net 30, Net 60, 2%10 Net 30, etc.
Give you vendors a schedule of when your check runs are so they know when to expect payments.
Regardless of the terms given, you can call your vendors and negotiate terms for your own company.
Vendors will often give discounts or special terms to customers that purchase large volumes and on a regular basis.
Even if the normal terms can’t be changed, if you run into an issue and must pay late, it’s best to call and discuss it with your vendor rather than avoiding them. Follow the phone call up with an email with what was discussed to there is no miscommunication.
4. Reduce CFO Impact to Verification & Signature
Typically the CFO signs checks or in the case of small companies, an owner will often sign the checks, but should not be assembling the check run.
Accounts Payable should run the aging, choose which invoices to pay, assemble the invoices, print the checks, and verify that all invoices are approved before bringing them to the appropriate party for signature.
Regardless of the size of your company, start managing your accounts payable process more efficiently to save time and money.