To understand the methods you can implement to upgrade your business’ accounts payable management, you need to understand what this system represents. In the modern era of doing business, entrepreneurs are encouraged to adopt various systems to streamline workflow in their business. One of these systems is the accounts payable, which consists of procedures, policies, and practices implemented by organizations specifically to manage trade credit purchases. These procedures involve seeking trade credit lines, acquiring favorable terms of purchase, and managing the flow and timing of purchase. Here are six methods you may want to consider when upgrading your Accounts Payable Management.
Adopt a Paperless Environment
Most traditional investors often rely on physical copies of their records to run their business. However, with the increased adoption of technology, a paperless environment may just be what the business needs. Adopting digital platforms to store your records can prove to be secure and efficient, especially when you need to keep tabs on your finances. The very first step towards going digital is requesting electronic invoices from your vendors. Many companies are excited to go paperless in today’s market because it means reduced costs and they can even get tax incentives for being more eco-friendly. This saves you money and also time as paperless invoices are much easier to process and file without taking up expensive storage space in your office.
Use Online Accounting Software to Track Invoices and Payments.
There is various accounting software that can come in handy when managing your accounts payable activities. It is advisable to go for cloud-based options for this. With a cloud-based bookkeeping program, you will be able to generate purchase orders for every commodity your purchase on account and perform supplier invoice matching against the purchase orders before authorizing payment. Your accountant and management can also keep track of all outstanding Account Payables by reviewing the aging reports. Identity resolution software can also be employed to help track and identify invoices to and from entities that may be submitted under different but similar names, ensuring you don’t miss a payment to Ben just because the invoice is from Benjamin.
Automate Your AP Management
This is probably the best move with regard to AP management. An automated system saves you and your team time wasted on endless hours of data entry while minimizing possible losses resulting from document storage and bookkeeping errors. Another benefit that comes with an automated system is the ease of control and review. This way, you are able to make informed decisions with reduced risks of fraud. Instead of digging through hundreds of paper invoices and trying to consolidate what you owe to who, you can use software to track and manage this for you. Of course, not all payments can be automated. There are a lot of one-time payments that need to be processed and tracked without errors. In these cases, you want software that is able to correctly file new invoices without requiring previous data from that particular vendor in order to file and pay it. This is one of those instances as well where you want a real live accountant that can check these payments and make sure that your system is working correctly and processing everything correctly.
Standardize Your Accounts Payable Workflow Process
Ensure you put in place a standardized system to help with managing invoices from the time of billing to when the payment is due. Make sure all your invoices are in a central location to make it easy to retrieve them. Have your team order them in terms of priority and date. You can use the accounts payable aging report to keep track of the invoices by date. There are a lot of accounting software options available that can help you track and manage your invoices as they come and even automatically process them into your system. Of course, this would not replace the need for a human accountant, as they would be the ones to oversee this software, set it up, and check the ongoing reports to make sure that they are accurate and being processed correctly by the system.
This is one of the most proactive approaches when it comes to managing your accounts payable. When swarmed with administrative duties, it is easy to forget some payments. Setting up reminders provides you with an opportunity to take care of your bills before their due dates. Even better is if you are able to automate payments wherever possible. However, you also will want those automated payments to be tracked as part of your regular budget management so you don’t continue to pay into services or products that aren’t a benefit to your company anymore. Therefore, it’s best to have both reminders and automated payments so that you are able to maintain an ongoing awareness of where your company’s money is going, even if it is regular payments.
Evaluate Your Relationship With Your Suppliers
You need to understand your relationship with your suppliers and how they fit into your business. Just like using market research to understand how various customers operate and how best to address their needs, you can employ this process when dealing with vendors. Working closely with the vendors helps know how your accounts payable system can best suit their needs.
Every entrepreneur knows that finances are the backbone of their business. Running payments smoothly is one of the best ways to keep your finances in check. This being said, improving your Accounts Payable management is definitely a worthy venture.