Your business must pay its bills accurately and on time. Doing this ensures that you develop and maintain an outstanding credit rating. Furthermore, a properly managed accounts payable department can do a lot to build a good reputation and goodwill for your brand.
Late and unpaid invoices indicate an organizational problem. For instance, an ineffective AP workflow could prevent some bills from ever entering your accounting system. Sometimes inefficiencies such as manual approval processes can cause delays as bills accumulate on a manager’s desk.
Fortunately, you can take intentional action right now to improve your accounts payable department. Begin by implementing the following three tips.
Papers can get lost, misplaced, misfiled, and accidentally discarded. So, do everything possible to transition your accounts payable into a paperless environment. Begin by requesting that all your business’ stakeholders submit digital documentation, including your vendors, suppliers, and contractors.
Designate one person to check the physical mail and immediately scan printed invoices into your software system. That way, your AP department will always have updated data on which to schedule and prioritize payments. Furthermore, such a process will ensure that your business stores all its bills in one location.
Whenever possible, you should eliminate the use of paper checks. Even if you receive physical invoices from some vendors, see if you can configure them for online payments. When your business must issue paper checks, consider outsourcing that job. Check with the people who develop your accounting software to see if they offer such a service.
Regardless of whether your AP department manually or automatically processes payments, you should use reminders as a key component of your accounts payable strategy. If your accounting system has built-in reminders, use that function. If not, use calendar, email, or task management software to create reminders and send alerts.
In addition to creating reminders for individual bills, you should schedule a periodic review of your AP system. By actively monitoring the performance of your accounts payable software, you can identify and resolve bottlenecks, system malfunctions, and other sources of failure before they become major problems.
You should also create reminders for reviewing your AP reports. Such a simple step can ensure that you and your team have enough information for financial decision making. Create overview reports so that you can easily spot potential problems with your current and projected payables and budgets.
Stay in touch with all your service providers and suppliers. Also, periodically verify and update their contact information. If you do, your team will always know who to call when mistakes happen. Also, don’t underestimate the value of building a rapport with your vendors. For instance, if your business experiences a cash crunch, a sympathetic ear from your vendors can ease the pain.
Paying bills on time and maintaining good relationships can encourage your vendors to provide good credit references. Relationships can also open the door to your firm for special deals such as special prices or products. Moreover, many suppliers will offer volume discounts and other incentives to their favorite customers.
Ultimately, good relationships and open communications provide your business with a valuable tool that can help during good and bad times. So, encourage your team to take a personal interest in the people with whom they deal. A little extra time and effort in that regard can pay large dividends over time.
Improving your accounts payable department should rank near the top of your priorities. After all, paying bills quickly and efficiency can build a good reputation for your firm while avoiding unnecessary fees and penalties. You’ll also lay a solid foundation of goodwill that can serve as a vital lifeline when things go wrong.