‘A penny saved is a penny earned’ is a proverb in English. This brainy quote is enough to make you take your company’s accounts payable management more seriously.
You must know that 82% of startups fail because of poor cash flow. Therefore, you should have a serious consideration of all factors affecting your cash flow. And, accounts payable is a very important one.
For your business growth, only making handsome profits is not sufficient, you must spend your every single penny wisely. If you don’t, then you will lose more than your earnings. So, handle your accounts payable carefully.
Manual handling of AP consumes a great deal of time, as you have to correct innumerable errors, as humans are prone to errors. Therefore, banking on an advanced AP management software is wise.
According to some research, AP automation can help you save $16 or more, which depends on your company size.
So, moving to advanced technology for the proper management of accounts payable is prudent and necessary for your business growth and sustainability.
Including that, we will acquaint you with 8 tips to improve your accounts payable management. Let’s know them one by one.
How to improve your accounts payable management:
1. Healthy relationships with vendors
Your accounts payable management is highly dependent on your relationships with your vendors. The better the relationships, the more benefits you will have.
This bond can help you with many issues like needing supplies immediately, getting your due dates delayed, and being able to take advantage of discounts and tempting offers before your competitors.
You should make your all-out effort in paying your vendors on time. If unable to do so, be open and inform them. This will bridge the gap between both of you.
Furthermore, you’d better be prepared to find a solution to any issue coming to harm your relationship. Never hesitate to discuss a payment plan that can benefit both of you and bolster the professional bond.
The best thing about this is that your vendors can help you broaden your business network by introducing you to other influential ones.
2. Paying bills early
It’s wise to pay bills on time, but it’s much wiser to pay bills early. Doing so, you will leave a different and long-lasting impression on your vendors.
To keep you retained and delighted, they will always offer your tempting offers and enticing discounts, which can help you pay less and save more.
3. Have some cash in reserve
When financial crises befall you, then making payments on time becomes harder for you. But, having some cash in reserve can help you do so, thus saving your reputation from being spoilt.
An emergency can knock anyone’s door, so be prepared for that by having a cash reserve. Get business savings account open and fill it with money bit by bit for use in a financial emergency.
When you run out of money, this cash reserve will turn out to be a true companion of yours to help you make payments in such tough times.
4. Be prepared to tackle accounts payable fraud
Accounts payable fraud can put your business in peril. Your evil-minded vendors or dishonest employees can play a big role here.
Many unknown vendors are created in an accounts payable system, and companies pay such fake vendors, who have not or never rendered any services or products to the company.
To deal with such complicated issues, you’d better establish system parameters in place, which will not enable the creation of any new vendor without proper diligence.
If a new vendor is required to be created in the system, then all should be done after having full proof of the vendors’ existence, and the services or products taken from them.
You must make sure that setting up a new vendor in the accounts payable system must take place by having multiple levels of approval, which will keep the chances of fraud almost none.
5. Don’t lay a burden on your CFO (chief financial officer)
Don’t expect your CFO to check the authenticity of a bill. It is because their mind is already filled with the workload, they don’t have enough time to assemble all the checks and verify their accuracy.
And, depending upon them to a considerable extent can negatively affect your accounts payable management.
If you automate your accounts payable processes, then their workload can be cut. All they have to do is to check the bill amounts and sign for payment release.
It is the duty of your accounts payable team to collect all invoices to be paid and get the cheques printed and approved by the heads of your department. After that, they should be put before your CFO for signature.
6. Do not pay invoices before receiving product or service
In haste or workload, the heads of accounts payable department make the payment of any services or products before receiving them.
It lessens the available cash your company has. Moreover, chances of accounts payable frauds are more in such situations. Even your own employees can take advantage of this act of negligence by accompanying dishonest vendors to make some money.
Therefore, before releasing any payment, it’s wise to ensure that the delivery of the ordered product or service is not remaining.
7. Using Accounts Payable Software
As per Ardent Partners, 47% of AP professionals find lengthy processing time as their biggest challenge.
When you automate your accounts payable process by adopting an accounts payable software, then you become paperless. And, you deal with all your company’s analog bills and payment activities using computer systems or mobile phones.
Furthermore, you will also have all your purchase and payment approval process automated, which will save a great deal of time. Your all accounts payable activity will be cloud-based, safer, easily accessible via computers or cell phones. Also, click to know more about account payable process improvement ideas.
This will allow your managers to monitor your accounts payable activities any time, pay on time, and make financial decisions considering the current cash flow condition of the company.
8. Ease your vendors’ burden
To make your accounts payable more influential and efficient, you must bank on technology to get connected with your key suppliers.
If you routinely need to order bulk purchases from your suppliers, you’d better link them into your accounts payable and inventory network by means of a supplier/vendor portal.
This portal will make easier for you to track inventory supplies and automate payments for your vendors.
Having so, your accounts payable management can be simplified to a considerable extent. It will also assure you that your company has a ready supply of inventory, which is very important for your company.
Know, why are businesses choosing custom software for AR an AP management
Let’s conclude all:
Your clear interpretation of the importance of accounts payable management and 8 tips to improve it is our purpose.
These 8 tips to improve your accounts payable management include easing your suppliers’ burden, using cutting-edge accounts payable software, healthy relationships with vendors, and the like.
We also provided you with some stats to give you an idea of how automation of accounts payable management can help you save both money and time, which can be invested in something feasible for the betterment of your company.