You are a pro at business, except when it is about getting paid. Don’t worry; no need to be a math whiz. Here is your own version of accounts payable for dummies.
Each year, American small businesses have over $850 billion in unpaid invoices. Being a successful small business owner will require you to stay on top of both what you owe other companies and what customers owe you.
For most new business owners, getting a crash course in accounts payable for dummies is essential. Failing to keep track of what your business owes can lead to financial disasters in the future.
Many business owners fail to realize just how important keeping their accounts payable department organized is until problems occur. Instead of letting a poorly managed accounts payable department negatively impact your small business, now is the time to take charge.
The following are some of the most important things you need to know about the accounts payable process.
Accounts Payable For Dummies 101: Prioritizing Invoices is Crucial
Having a large stack of overdue invoices on your desk can be extremely stressful. The best way to remove the uncertainty that comes with a stack of invoices is by prioritizing them.
The best way to organize invoices is by the date in which they are due. Some business owners fail to realize how much of a financial strain paying invoices as soon as they come in can be.
Most creditors will give you between 15 and 30 days to pay outstanding balances. If you organize your invoices by the due date, you will have no problem making these payments on time. Invoices that have the same due date will need to be organized based on the amount of interest you have to pay.
Don’t Be Afraid to Review Your Accounts Payable Data
Keeping track of your business’s finances is the only way to tell when there are problems to address. Turning a blind eye to things like accounts payable and cash flow data may lead to big money issues in the future.
Utilizing the power of an automated accounts payable program can help you avoid late payments and collect data on what you actually owe creditors. If you are interested in this type of automation, you can find out more here.
With financial data, you can easily do things like improving cash flow analysis and planning, as well as reduce fraud related to accounts payable.
Establishing Internal Controls For Your Accounts Payable is a Must
Business fraud and other workplace crimes cost business owners nearly $65 billion a year. This is why you have to work hard to establish internal controls in relation to the accounts payable process.
Only granting certain employees access to your master vendor file is a good idea. Doing this will allow you to narrow down the search should business fraud occur.
When choosing employees to put into this department, be sure to consider how long they have been with your company and how well they perform in their current position.
With the right people in place, you can reduce added expenses like late payments. Attempting to run a business and an accounts payable department alone will lead to lots of mistakes being made, which is why delegating these responsibilities is a smart move.
One Person Can’t Handle The Entire Accounts Payable Department
Saving money is something you should be passionate about as a small business owner. However, your desire to lower your operating costs should not come before sound business financial practices.
While you can save money on payroll by putting accounts payable into the hands of one person, it is something you need to avoid. Not only will that employee get overwhelmed when saddled with this responsibility, but there is also a higher chance of fraud occurring with just one person handling this job.
With no one to look over what they are doing, a person can write checks for fake invoices without a business owner ever knowing. This is why you need multiple individuals in this department.
Routinely Check for Duplicate Payments
Delegating the responsibilities of accounts payable is a good idea, but you will still need to keep an eye on the activity in this department. One of the main things you need to check for in relation to accounts payable is duplicate payments.
The best way to reduce the chance of duplicate payments being made is by automating the accounts payable process. Humans are going to make mistakes, which is why using the power of technology is essential.
An automated system will be able to make a payment and mark it off of the list of what needs to be paid with ease. While a good accounts payable automation software program may be costly, it is definitely worth the investment.
Keep an Eye on Invoice Disputes
Billing errors are quite common in the world of small business. Going over each invoice a creditor sends you with a fine-tooth comb can help you find these errors.
If there are errors on a bill, you will need to contact the creditor so they can fix it. Generally, this will take some time, which is why you need to keep track of which invoices are currently being disputed.
Finding a new vendor may be necessary if these billing errors consistently occur. Failing to look for these billing errors can cost your small business lots of money over time.
Follow Up on Any Uncashed Checks
Once payments are sent out to creditors, you need to have your accounts payable department track them. If a certain creditor has not cashed a check that was sent out, be sure to follow up with them.
If a check gets lost in the mail or the vendor simply forgets to cash it, you need to know about it. Neglecting to track your checks can result in unnecessary late fees.
Your Hard Work Will Pay Off
Now that you have taken your crash course in accounts payable for dummies, you need to put this information to use. Properly structuring your accounts payable department can save lots of money and improve the future of your finances.
Looking for more information on how to make your company successful? If so, read our article on how to create an efficient business and visit our Business or Finance sections today as well.