You need first-rate suppliers to meet the needs of your growing business. They provide you with the materials you require for the products you sell. They might also be providing you with services that you can’t afford to hire in-house. First-rate suppliers and vendors come at a cost. You’ll need to create a budget that allows you to balance your needs and the fees of your chosen suppliers. This is when managing accounts payable effectively matters. You need to pay your vendors while maintaining a positive cash flow that funds your operations, marketing campaigns, and the salaries of your employees.

Why is managing accounts payable important? These are some of the reasons to consider.

 

Pay Dues on Time

You want to maintain a good business relationship with your suppliers. One of the ways to achieve this is to pay them on time. Effective accounts payable management allows you to always know the due dates of your suppliers. If you’re using accounting software, you can schedule payments to your suppliers. It also allows you to monitor the checks you released and keep track of your cash flow. You can also use various communication platforms to connect with suppliers regarding payments, due dates, and possible negotiations for payment terms.

 

Precise Financial Reports

Managing accounts payable enables you to use accurate financial reports. You’ll need the latter to make budget decisions and create financial forecasts. Accounts payable management makes sure that your team captures and validates vendors’ invoice data. It also allows them to see if an invoice has already been approved before processing for payment. This reduces mistakes and keeps data in your records and reports accurate.

 

Comply with Regulations

Your company might incur penalties and fines because of noncompliance with regulations and policies. Noncompliance adds to your costs and might cause distrust in your customers and suppliers. An effective accounts payable strategy makes sure you comply with all government requirements.

 

Reduce Business Costs

Managing accounts payable has an added benefit of cutting business expenses. Streamlined processes, approval of invoices, and simplifying workflows allow you to save more money. You won’t need to hire new employees because there are no redundant positions in your accounting team. The extra money generated allows you to reinvest in your business and/or improve the skills of your in-house employees.

 

Improve Efficiency of Processes

Redundant steps in your workflow and manual tasks have a negative effect on the efficiency of your accounts payable process. If you manage your accounts payable effectively, you can identify inefficiencies and redundancies in your workflow. You’ll be able to improve and streamline your processes and delegate tasks to your most experienced accountants.

 

Balance Your Cash Flow

Your company’s cash flow is a determining factor whether your company is profitable or not. Poor cash flow prevents you from implementing your growth goals and limits your company’s operations. One of the causes of poor cash flow is mismanagement of accounts payables. You often miss due dates which incur penalties and fees. Mistakes are present in the invoices which causes delays in payments. Managing accounts payable enables you to balance your resources and improve cash flow. You are always able to pay vendors on time. This allows you to improve your relationship with your suppliers and possibly negotiate for better terms.

 

Manage Your Budget

You’ll be able to manage your company’s budget better with effective accounts payable management. You’ll know the due dates of your suppliers’ invoices, track the checks you release, and monitor the amount of money you spend. This enables you to balance your budget and allocate your cash to different aspects of your business.

Now that you know the importance of managing accounts payable, these are the best practices you can implement to improve accounts payable management.

 

Monitor Payments Regularly

You’ll have a clearer idea of how you spent your money when you monitor payments to vendors regularly. Store invoices in a cloud-based platform so that you could track if you paid them already. Cloud-based tools are easier to access and have multiple layers of security. Organise invoices according to the supplier you sent them to. This allows you to not only monitor those who you already sent payment to, but also pending due dates. Monitoring payments also enables you to pay accounts payable on time.

 

Identify an Invoice Payment Approver

Too many decision makers might lead to mistakes in accounts payable processing. Identify an approver for all invoices that your team processes. A clear delineation of roles and responsibilities make the process smoother and lead to fewer mistakes. A designated approver enables you to trace irregularities in the computation and release of payments.

 

Automation of Tasks

Artificial intelligence and software are tools you can use to simplify and modernise your accounts payable process. These allow you to automate certain administrative tasks that reduce the workload of your employees. They can use tools to schedule release of payments to suppliers, organise data, and access information just to name a few. This allows your in-house employees to take on analytical and decision-making tasks.

 

Stronger Internal Controls

Establish internal controls to prevent fraud in processing accounts payable. Delineate tasks so that no single employee processes all invoices. Conduct an audit regularly to determine inefficiencies and anomalies in your process. An audit enables you to improve your accounts payable process and identify fraudulent transactions.

These are some of the tips you can follow to improve your accounts payable process. Doing so enables you to simplify your process, monitor payments, and maintain a good business relationship with your suppliers.

 

If ever you are looking for a business partner to assist you in processing your accounts payable, you can rely on us. Robookkeeper can provide you with first-rate small business accounting services. Our team’s experience in managing and processing accounts payable can provide relief for your in-house team. Our team has years of experience in handling accounts payable, accounts receivable, bookkeeping, and other tasks you might need. Reach out to us so that we can customise a package for you based on your needs and requirements.