No matter what the size of your business is, managing accounts payable is a daunting task for all enterprises. Besides paying bills, sales, marketing, and delivering services are typically high priority of a business owner or a manager.
Failing to manage accounts properly may lead to serious trouble for businesses. Inefficiency by managers to come up with effective accounts payable strategies can strictly limit the organization’s liquidity, leaving the company with very low cash when they have narrow windows to grab short opportunities.
Also, managing accounts payable ineffectively can greatly affect an organization’s relationship with important vendors and limit access to credit too. But the good news is that these problems can be easily avoided by implementing the approaches mentioned below that will keep your cash flow healthy and enhance your accounts payable.
Automating the Accounts Payable System
When you start thinking of automating your accounts payable system, the first thing you can do is to go paperless. Make effort to eliminate all paper-based organization’s payment activities and analog bills and start dealing electronically through mobiles or computers completely.
Going paperless also has many other benefits to your business such as managing and organizing your files in a simple fashion so that they are easily accessible. That’s why every business should introduce a software for file management system to help keep their files all in one place, without having to spend a large amount of time searching through any paper documents.
Start automating the payment approval and purchase processes. A cloud-based accounts payable software is safe and secure to access from mobiles, computers, and tablets making it easy for managers to monitor anytime to make informed decisions regarding cash flow of the organization.
Developing an Effective Accounts Payable Strategy
Planning is the first step that you must take to improve the accounts payable process. Your organization must have complete detail on when and how often you are paying bills. The strategy must also provide clear guidance for how and by whom payments and purchases are being approved.
This should be linked with rest of the cash flow that will aim at optimizing your organization’s liquidity. In many organizations, managing accounts payable involves waiting for a longer period to pay bills. But with effective and good accounts payable strategy you can build a long-term relationship with vendors while establishing rules governing the system, getting some discounts for early payment and more.
Leveraging technology can make your accounts payable more effective and efficient and one way of doing so is by seamlessly connecting to the main suppliers. When you are ordering purchases regularly from suppliers than it is important to link them to your inventory network and accounts payable through a salesperson which will serve as a great option for your organization.
The organization agrees on inventory stock level on a certain price for suppliers with a supplier portal that is needed on hand all the time. This supplier portal enables vendors to monitor inventory supplies, direct resupply, along with receiving payments automatically from your organization. Such systems make it simple to manage accounts payable and ensure that the vendor is ready to supply inventory that is vital to your organization.
Protect Your Organization from Fraudulent Activities and Accounting Errors
Every year businesses lose dollars due to accounting errors and fraudulent activities. But there are many ways your organization can save your accounts payable from these troubles.
Firstly, automation tools and engaged management can track your organization’s accounts payable in case of any frauds and also monitor any kind of accounting errors too. Securing data and protecting an organization’s financial information are also vital.
Authorizing a payment that needs multiple approves can protect your accounts payable from error or fraud. Lastly, auditing accounts payable frequently also helps your organization to evaluate how efficiently your department is managing accounts payable and figure out irregularities in the system.
Also Read: The Savings Account Cocoon
Consider Accounts Payable as a Management Responsibility
Lacking suitable management emphasis in the cash flow of the organization can lead to delayed bills that spoil your organization’s relationships with salespeople, limit access to the fine credit terms, leading to lost opportunities.
A manager must supervise the accounts payable ensuring that your company’s strategy is thoroughly followed and the organization is working hard to improve accounts payable. Related activities must be easily accessible through an organization’s computer network or mobile devices and should be a part of the daily routine task.
Role of Chief Financial Officer (CFO)
CFO’s of organizations are quite busy people, and may not get enough time to assemble and verify checks. Automated accounts payable process helps to minimize their work of checking invoices and signing them for the release of payments.
The accounts payable team at your organization should be able to leverage technology and ensure that all the invoices are assembled, checks for invoice printing are approved and verified by the managers, and then they are presented to the CFO for signing.
To Sum Up
Accounts payable is considered as a significant part of your organization’s cash flows. Accounts payable management ensures that you have the optimum cash on hand for sustaining your business along with maintaining a strong relationship with your vendors, which is also important for your organization’s well being. By following the above, you can improve your accounts payable process and ensure your organization has healthy cash flows in the near future.