How to Manage Accounts Payable: The Key Steps in the Accounts Payable Process
Do you have a pile of bills that need to be paid? Are you familiar with the accounts payable process?
How to manage your company’s bills or expense reports?
Keeping track of all your bills and expenses can be daunting. We’ve got some advice for making managing accounts payable easier.
Accounts payable (AP) is the term used to refer to a company’s total outstanding bills that have not yet been paid. To manage AP accurately, it’s important for companies to stay organised throughout the process and keep track of all payment details.
What is Accounts Payable?
Accounts payable are the bills you have that record what goods or services you have purchased. It usually includes information such as vendor name, date of purchase, quantity ordered, price per unit, payment terms and discounts if applicable.
These accounts are an important part of managing your company’s finances because they tell you what you’ve spent money on when it was purchased, and how much each purchase cost.
Why do you need to manage your accounts payable process?
As these are liabilities to your business, it’s important to have a process in place for managing your finances efficiently. Automated systems can help to simplify and improve the accounts payable process so that you know where your money is being spent.
There are many processes in place for managing accounts payables, depending on what type of company you run; but there are a few key steps common to most accounts payable management procedures.
In addition, having an effective accounting system will help you manage the cash flow of your business by allowing you to pay creditors on time and keep up with other financial records.
Internal controls
At the very least these controls should be put into place to pay vendors on time, and correctly preventing errors and frauds from occurring. these controls should be put into place to pay vendors on time, and correctly preventing errors and frauds from occurring.
- verify the details of the invoice before releasing payment.
- check for errors and discrepancies in order to avoid frauds that could be costly to your company such as duplicate invoices, falsified documents or items not delivered.
- check to see if the invoice has been paid, have a clear tracking system in place.
- the business owner or a different staff member conducts regular audits of payment transactions to check for errors and or frauds.
- make sure that the accounts payables process is up to date and follows federal and state laws, rules and regulations.
Pay vendors on time and avoid late fees
Some vendors charge late fees. Having good payment practice will avoid extra charges, maintain a good relationship with suppliers also a healthy practice for your business reputation management.
Manage your cash outflow
As a business owner, you should know your cash flow and what is coming in. Know the balance of accounts payable so that your company does not overspend on purchasing goods or services from suppliers. The goal is to make sure there are enough funds available for day-to-day operations.
So stay on top of your business expenditures by tracking bills, payments and outstanding balances.
Your business finances are separate from your personal finances. You should maintain separate bank accounts, credit cards and business statements to make sure your financial records are accurate for tax purposes. Having separate accounts would also help you see the true state of your business.
Create a schedule at the end of each week or month to go over your expenses and outstanding balances. Make a batch payment for all the upcoming due bills to save time. Make sure you have enough funds in your accounts to cover all of the current expenses.
Overall, it is important for business owners to know how their company spends money so they can take appropriate actions before a problem escalates.
An effective accounts payable solution is the key tool for managing this process efficiently.
Just to reiterate this is a necessary component of managing your business’s cash flow. It helps you stay on top of the bills that come in and ensure payments are made quickly to avoid any penalties or late fees. A lot of small business owners feel overwhelmed with this responsibility, which can lead them down an unnecessary path towards increased stress levels and debt.
If you need help establishing an effective process for your company, we would love to talk with you about what Onbookkeeping offers our clients – including time-saving benefits like automatic invoice matching! Contact us today so we can discuss how our team can take the load off your shoulders by handling all those tedious tasks for you.