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8 Tips to Best Manage Your Accounts Payable

Rahul Maingi

By admin, June 25, 2019

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Every company has certain material requirements that they need to buy from vendors and suppliers. Processing these payments and invoices related to the purchase is the responsibility of the accounts payable department. Mismanagement of the workflow of this service can lead to late or missed payments and incur fines which in turn will induce loss for the company. To avoid such a situation, it is essential to have a strong accounts payable department.

This post compiles some basic but effective tips which will help you to improve the accounts payable process flow of your company.

8 Tips to Best Manage Your Accounts Payable

Tips to Improve Your Accounts Payable Management

The following are different ways in which you can improve and organize your accounts payable cycle so that no payments are missed and left due.

1. Go paperless

Seek digital invoices from your suppliers and vendors. This way you can avoid waiting for the invoices to come by post, which can be lost in transit. Also, maintaining paper invoices and bills diligently is not always feasible and problems arise when they are lost or damaged. Online billing ensures that you will always have a copy of the bills and can avoid late payment because of losing the hard copies.

If some of your vendors prefer the traditional way of sending printed copies of the invoices, make it a habit to scan them and upload the digital copies on the accounting software you have. This will be helpful in the long run to find any bill you need since all of them will be stored in the same place.

2. Single entry point for invoices

Invoice entry is a critical part of accounts payable process. To make sure you do not miss out on any bills, set up a single-entry point for all kinds of invoices. Start with creating an email ID for receiving invoices from all the vendors. Organize the invoices according to the priority and due date. This will make your invoice processing faster. Accounts payable aging report can be used to keep a check on which vendor’s payments have crossed the due date and require immediate attention.

3. Set reminders to avoid missing anything

Proactively handle the accounts payable to maintain a good relationship with your suppliers and vendors as this can help you seek favours in the future. A very simple yet effective way to avoid missing out on any payments is setting a reminder for each of the vendors. The reminders will also help you to keep track of your upcoming expenses, and you can create a monthly budget accordingly. In case you have a recurring payment to be made, consider automating the payment through your accounting software. Your accounts payable department will be able to advise you best on which is the best accounting software for this.

4. Update changes in contact information

If there are any changes made in email address and other contact information related to the accounts payable department, it should be immediately notified to your vendors and suppliers. Without the updated contact they will keep trying to send the invoices in your old addresses which will lead to major miscommunication. Follow up with your vendors from time to time enquiring about any updates regarding their address and phone number changes and maintain the latest records.

Also, it is important to keep the communication open in every possible way so that your vendors can easily contact you. In case you are late with your payments but diligent about keeping them informed and updated, they will be more trusting about conducting trade with your company.

5. Maintain a healthy relationship with your vendors

A good relationship with your suppliers and vendors is important to build a reputation for the company. If you pay the dues on time consistently, your vendors are more likely to advocate for you to prospective clients and other vendors. Not only that, you can also get occasional discounts and rebates from long-term suppliers who are satisfied in their business transactions with your company. From delaying due dates when you need to on-the-fly supplies, a vendor who trusts you and shares a good business relationship with you will be ready to accommodate such favours.

This will only be made possible when the accounts payable process flow is smoothly managed. In case you have any trouble with the current payment plans, be open about it and talk to your suppliers and come to a solution together that you mutually agree with.

6. Work ahead of times

As soon as an invoice is sent to you, ask your accounts payable department to start processing it. This will ensure that all invoices that require immediate attention is processed at the earliest followed by the less important ones. This also helps to avoid duplicate, and erroneous payments as there is no last-minute rush among your accounting staffs to process a bulk of pending invoices. Update your vendor list and clear records of stale suppliers who you no longer trade with to avoid confusions with payment.

7. Flexibility with card and other digital payments

Using the card or virtual currencies for payment make the process much faster and eradicate the necessity of following up about the cheques you have issued. This will prove to be helpful when you urgently need to make the payments to avoid late fines. To accommodate such flexible payment methods, it is important to discuss with your suppliers before-hand whether they’re comfortable using virtual currencies or not and then include the related credentials in your records.

8. Reserve cash to manage payments in crisis

Financial crisis can arise anytime for a business owner but letting that affect your payments to suppliers can lead to more than financial losses as it also tarnishes your reputation. The best way to deal with accounts payable process during a financial crisis of the company is thinking ahead and maintaining an account for reserved cash which can be used in this situation.

Keeping the above-listed tips in mind will help you manage the accounts payable operations smoothly, make payments on time and hence maintain a good relationship with your suppliers. The improvements can be tracked by analyzing the six essential KPIs. This also helps you find out ways to improve further.

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