Managing accounts payable (AP) is tough for small businesses and entrepreneurs. Failing to properly manage accounts payable will cause a serious effect on the business. Poor accounts payable management can affect company’s relationship with vendors. However, this can be avoided by improving your accounts payable process and following certain strategies:
Accounts Payable Strategy
Having a detailed strategy of how, when and how often you pay bills can help improve your AP process. The strategy should outline how purchases and payments are approved. The effective accounts payable strategy will take certain things into consideration, such as discounts, being paid earlier, and relationships with vendors when outlining rules for the system. A good AP strategy will also include payment decisions and ensures visibility into the overall management process.
Automate Accounts Payable Processes
Making your office paperless is what we mean by accounts payable automation. Work to automate all your purchase and payment processes. This would help management make timely, informed decisions pertaining to cash flow.
Connect with Vendors
To make accounts payable more efficient and effective, one ideal way is to connect with key suppliers. If you want to order in bulk from one or more suppliers, then integrating accounts payable and inventory through a vendor or supplier portal can be a good option. With the digital portal, you agree on a given price for supplies and the supplier ensures inventory stock level is always at the level agreed. Also, vendor portal helps suppliers to track inventory supplies and receive automated payments from the company. The automated accounts payable solution will simplify accounts payable processes and ensure that company has a steady supply of inventory, which is critical to your company.
Accounts Payable Fraud and Errors
Businesses lose billions of dollars due to accounting fraud every year. Fortunately, you can protect your company from accounts payable pitfalls through automation. In addition, having more than one person authorizing payments, monitoring AP activities, and monitoring fraud can protect your company’s financial information.
Finally, conducting regular audits can help evaluate how effective your team is managing the accounts payable. Also, this would spot any potential irregularities that occur in the system.