Accounts Payable – how to turn managing your invoices into a business strength
October 13, 2011
by Justine Parsons
Cash-flow is an area many small businesses struggle with and if paying your invoices is something you dread, your Virtual Assistant can manage this area of your business. We can assist with processing your invoices, setting up your internet banking schedule and talking to your suppliers to ensure you have the best possible terms – you simply receive an email reminder stating that your online payment schedule is ready for your approval.
Benefits of Managing your Accounts Payable
- When managed well, you’ll improve the working capital in your business, reducing the amount of working capital financing required.
- You never run out of essential supplies in times when you really need them because you don’t have cashflow to purchase COD.
- By managing your payments there is no need to ever be placed on ‘stop credit’ or ‘cash only’ which can affect your productivity.
- You’re in an excellent negotiating position for obtaining price discounts and volume discounts (even early payment discounts) when you can demonstrate a track record of a well-managed, well administered account. This may also give an advantage over your competitors.
- You’ll have excellent working relationships with your suppliers enabling you to call upon them for exemplary credit references which you can use to obtain further favourable credit terms with other suppliers – giving you essential alternate supplier options, and more bargaining power.
- By establishing well documented, accounts payable procedures no one is unclear about what “needs to be done”, reducing the likelihood of exceptional or extraordinary events that take up management time to solve and work around. You have a more efficient business.
- Clear authority levels and expenditure mandates aid control, and help appropriate expenditure decisions to be made at the right level of the business. This improves net profit – by reducing unnecessary expenditures, and improves return on capital because appropriate considerations to investments are made at the right level of the business.
Managing your accounts payables is AS essential as collecting your accounts receivables.
Organize Your Invoices and Suppliers
In managing accounts payables the first important thing you need to do is organize your documents well. All invoices should be tracked along with the payment schedule so you will be aware of when the accounts become due and if a vendor offers a discount for paying earlier than the terms they offer. Prioritizing the suppliers is also crucial in managing accounts payables. Classify the suppliers that you need to pay first and several suppliers that you can pay later, especially if they offer terms.
Mind Your Cash Flow
You need to watch your cash flow patterns. Regular analysis will help you to recognise serious cash flow problems early. By identifying a pattern in your cashflow, your accounts payable schedules and supplier agreements can be adjusted to suit your cashflow.
Identify Your Supplier’s Terms
One of the most effective ways to manage your company’s money is know what terms your vendors expect. These can include cash on delivery, payment in 7 days, terms due 20th month following invoice and early payment discounts. You also need to tag any supplier who may charge interest on overdue accounts.
Use Available Technology
When looking at systems, determine what best suits your needs. Whether you use an Excel spreadsheet, desktop application such as Quickbooks or MYOB, or choose a Cloud based package such as Xero – the system you choose needs to suit your level of skill, your mobile requirements and your budget.
In today’s economy, every area of your business needs to be as efficient as possible. By managing your accounts payable wisely, you have one less thing to worry about and one more thing to be proud of … helping your business to succeed through productivity and efficiency.
Resource: Contact me for your free example of an Accounts Payable Procedure flow chart.