Understanding the impact of accounts payable on your business is crucial to managing your expenses and maintaining good cash flow. Accounts payable or A/P refers to any bill or expense that your business owes, such as bills for inventory, office rent, equipment, travel expenses, and any other expenses that apply to your business. Here are some of the most important considerations to help you manage accounts payable in your small business.
Carefully Track Your Accounts Payable
It’s essential to carefully track the expenses your business accrues. Using reliable accounting software helps you do this more efficiently. Make sure that every detail about transactions, such as billing and payment dates, is entered correctly. One way to make it easier to manage accounts payable is to track your expenses on a weekly basis rather than a monthly basis. If you don’t have a bookkeeper or accountant on staff, at some point you may want to consider hiring one to make accounts payable management more efficient.
Create an Efficient System for Managing A/P
To track A/P with precision and accuracy, make sure you have a consistent and efficient process in place. Enter each invoice individually to make them easier to track. Working from the original invoice is always best. If you receive the invoice digitally, print it out and file it so you have both a physical and electronic copy. You always want to be able to produce an invoice in case there’s ever a dispute. Make sure you or the person entering invoices uses the same system each time. It’s also best if the person responsible for approving invoices in your company isn’t the one who enters it into your system.
Save Money on A/P by Paying Early
You can often save money on A/P by developing solid relationships with creditors. In some cases, you can get a discount by paying your invoices early. It’s easier to do this when you track A/P weekly. However, even if you do it monthly you can separate the invoices that provide discounts for paying early from the others. Look for vendors that offer this benefit. You can also ask them for an early payment discount. Even if the discounts are small, they add up at the end of the year.
Improve Your Cash Flow
Efficient accounts payable management is really about keeping track of your cash flow. It’s always important to make sure you have a good supply of money coming in to balance A/P. Many businesses run into problems in this area because they don’t track their expenses carefully enough. By analyzing your A/P you may find that you can eliminate certain unnecessary or excessive expenses.
Riviera Finance offers supplier assurance letters, which are effective tools for managing accounts payable and building credit with suppliers. Used in conjunction with invoice factoring, supplier assurance letters can free up cash flow and turn opportunities into real business growth.