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Keeping payables and receivables in order is essential to a successful business. Here’s a complete guide to managing your accounts payable.
Managing your accounts payable is a crucial part of running a business. If you want your business operations to go smoothly, you’ve got to make sure your payables are getting taken care of properly.
The managing of the money your business owes can be very time consuming though, so it’s probably not on the top of your to-do list. If we’re all honest with ourselves, it probably should be though, right?
Luckily, managing payables doesn’t have to be a pain in the neck. To help you get a better hold on things, we’ve created this handy guide. Keep reading to learn how to manage those accounts without losing your mind.
The best way to keep a handle on your accounts payable is to start early. Waiting when invoices come is the first ingredient in a recipe for disaster.
When each invoice comes, deal with it immediately. Get it going where it needs to go. Don’t wait until you’re running out of time.
Waiting to pay on invoices just means you’re setting yourself up for stress and rushing. You can eliminate that stress by simply handling each invoice when they arrive.
Of course, you probably don’t handle every step of the pipeline that your invoices need to go through. So make sure your employees are on board with you. Get everyone energized about handling things as soon as they arrive.
Once invoices are out of the way, nobody will have to worry about them and other operations can be taken care of.
Check for Accuracy
Always check for accuracy when invoices come in. You should be keeping track of whatever you’re being billed for, whether that’s services or items.
If you’re paid for legal services, you’d better know how much time you should be billed for.
Keep track of each expense and verify that invoices are correct. If things don’t match up, you’ll have your records to use when contacting the vendor about the issue.
Set Up a Workflow and Stick to It
If you don’t have a dedicated workflow you need to set one up now. Tracking hours and products and sending invoices in the right direction aren’t enough. You’ve got to have a plan for the entire process.
Your workflow could look something like this:
- Ask for/sign up for services
- Use the provided services
- Receive your invoice
- Verify that all information is correct
- Add the invoice details to your records
- Schedule payment of the invoice
However you plan out your workflow, stick to it every single time. Deviating from your workflow or ignoring it completely only leads to disaster.
Manual vs. Electronic Management
You have two options when it comes to your method of tracking information and invoices as they go through your workflow. You can do this manually or electronically.
If you prefer to track things manually, you’ll need to set up a filing system that has enough room for all your files throughout the year. This can be done with accordion folders, hanging folders, or any other method you prefer as long as you have enough space.
Every time you receive an invoice, track and verify it according to your workflow, then store the invoice in the folder for the month when the invoice is due.
Store invoices in the order in which they’re due. Then, when you pull them all out when that month arrives, you’ll already know what needs to be paid first.
Electronic accounts payable management can be done with the help of software programs. QuickBooks is a popular program that helps track expenses.
Whichever method you choose to use, use it every time. If you decide to change methods, switch to that method completely. Never do a mix of the two.
Find a Balance between Focus and Communication
If you have an engaging work environment, your employees probably like to talk to one another. Sometimes you may need to direct that talk, though.
Lots of time is wasted at work every single day. Cut back on that wasted time by allowing for non-work-related chat at certain times and encouraging focus the rest of the time.
To keep things running as smoothly as possible, you need every team member on board. Get them dedicated to focusing on the work at hand and your payables will be managed much more efficiently.
Keep Things Simple
The key to keeping your accounts payable workflow working its best is to keep things as simple as possible. That doesn’t mean you should cut out any necessary steps. It simply means you need to cut out every un-needed step and focus on what’s most important.
Take time to immerse yourself and your team in accounts payable best practices. Then build on those practices as you see fit.
Work with your team to develop the best direction and workflow by focusing only on the important things and eliminating those things that can be left out.
Managing Payables Doesn’t Have to Be Hard
As difficult and daunting as it may seem, accounts payable management can be easy. That doesn’t mean you won’t see issues arise along the way, but it does mean you don’t have to dread invoice handling every month.
Once you’ve got a good payables system in place, you’ll see a world of difference. Keep the info in this guide in mind and you’ll be off to a good start.
You need to be able to understand a financial statement in order to keep your business accounts afloat. If you find these statements confusing, check out our crash course.