Sometimes, products and services are paid on the spot. For example, if you go to an office supply store to purchase items that are needed for the office, then you will likely pull out a credit card or cash and pay for the items immediately. There are times when businesses share relationships that allow products and services to be provided on credit, then the vendor will send you an invoice for the amount due. These outstanding balances fall into the category of “Accounts Payable” (AP). If you add up the AP balances for your business, then it is the total amount currently owed to suppliers and vendors.
1. Automate: It takes valuable time to manually calculate the invoices that need to be paid. Additionally, a manual system can be quite burdensome when it comes to tracking the payments that have or haven’t been finished. Whenever manual calculations are occurring, there are points where human error could interfere with the accuracy of your numbers. Invest in a good accounting system that will automate this process.
2. Paperless: If you want to have a truly automated accounting and bookkeeping system, then you need to eliminate the stacks of paperwork. Not only is a paperless system more convenient, but it reduces the workload that needs to be managed in your office. Eliminating paperwork means that you don’t have to have big filing cabinets, paperwork tracking systems, and office space to manage these documents. Plus, a paperless accounting system enables you to leverage the services of an outsourced accounting team more effectively.
3. Audits: Even if you automate your bookkeeping and accounting system, there is always a risk of errors along the way. Building safeguards to catch errors not only helps you detect mistakes but also shows the red flags if fraud is occurring. The best way to build trust and minimize the risk of losing money internally is to have checks and balances in place. Don’t assume that the accounting software is always accurate. You need to have a third party who can run internal audits to ensure that everything is adding up.
4. Timely Payments: Maintaining good relationships with your providers is critical to ensuring that those products and services will continue to be available when you need them in the future. So, it is important to watch the due dates and prioritize payments based on the calendar. Not only does avoiding late payments help you maintain good business relationships, but you can also avoid extra costs that are often added on for late fees and interest charges.
5. Payment Terms: When you’ve established a good relationship with the right vendor, you might have the chance to adjust the payment terms if needed. You will have more opportunities to negotiate when you’ve already built trust with the provider. You might find an opportunity to negotiate better terms for the products or services that are needed. For example, talk to your main vendors to see if they offer discounts for early payments.