New smaller businesses and entrepreneurs quickly realize that the accounts payable process turns into a monster. Whether it isn’t handled properly, unpaid bills stack up and get paid late, making vendors angry and perhaps damaging the business’ credit score.
Once a consistent procedure is developed, the accounts payable process will go smoothly. If you’re in business on your own and cannot manage to hire outside help, listed here are ten ideas to help begin a consistent accounts payable process:
1. Purchase accounting software by having an accounts payable module
In today’s business and computer world, some may wonder why this even must be a suggestion inside a list similar to this. Surprisingly, Internet studies have shown that as much as one-half of micro businesses (understood to be under ten employees) don’t use accounting software, instead using spreadsheets as well as paper ledgers.
The benefits of using accounting software by having an accounts payable module are tremendous and outweigh the price and learning curve. When used correctly and consistently, the program will serve several important functions: an indication as to when bills are due; an electrical generator of payments; along with a recorder of payments in to the checking register. Time savings alone over performing these functions manually warrant purchasing accounting software.
2. Make use of the vendor’s auto-debit or auto-charge feature, if available
Power companies, and other kinds of companies who’ve recurring payments, often offer auto-debit or auto-charge services. When used, the total amount due is automatically deducted in the business bank account, or charged towards the business charge card, on the date shown about the invoice. Often, the paper invoice continues to be mailed, but sometimes the seller insists on emailing invoices if this service is activated. In either case, the invoice can be obtained for viewing prior to the amount is deducted or charged. When utilized in conjunction with accounting software, the total amount can be post-dated in to the checking register or charge card register. When the company includes a good and consistent income, this procedure saves money and time by avoiding the balance payment process altogether.
3. Make use of the software’s internal “bill pay” feature, if available
Quick Books, for instance, offers a “Bill Pay” feature that’s very inexpensive and simple to use. Once established, bills are paid electronically based on the software user’s authorization. The balance payment service takes the authorized amount in the designated banking account, then either issues a paper check towards the vendor, or electronically transfers the cash to the vendor’s account. The reduced monthly fee isn’t much more compared to cost of postage and paper check printing.
4. Enter unpaid bills on time
Do not delay entering unpaid bills in to the accounting software. Waiting too much time to enter them can lead to late payments, finance charges, and possible harm to the business credit rating.
5. Enter unpaid bills correctly
It is crucial to examine the balance and go into the correct vendor name, bill deadline, and invoice number. Entering an incorrect deadline will result in a payment occurring eventually than necessary. After entering them, stamp them as “Entered” or “Posted” utilizing a rubber stamp with red ink. Make sure to write about the bill the date these were entered.
6. Organize unpaid bills
If there are lots of bills, get them organized in an alphabetical file system to ensure they are easy to locate. However, a tiny bit of bills might be placed in just one file.
7. If money is tight, determine your money flow before you spend money bills
Simple income reports are simple to generate in Excel. Begin with the actual sum of money available to settle payments. Include amounts in checking accounts, savings accounts, and credit lines. Subtract bills that should be paid immediately. When there is not a comfortable cushion of money left over, lessen the the amount of bills to become paid.
8. If money is tight, contact any vendors who should be paid late
No vendor appreciates being paid late, however they do appreciate open communication. Should you must pay a vendor late, inform them, and inform them a specific date you intend to pay them. Then, remember to pay them with that date.
9. Settle payments on a consistent timetable
Begin a regular timetable to pay for bills – weekly is a great and common choice.
10. Once they are paid, stamp them correctly, then file them
Purchase a rubber “Paid” stamp, and employ it on each bill that’s been paid. Write the check number (or payment method), date paid, and amount paid about the bill. File them based on how they show up on the taxes. In other words, file Utilities together, file Office supplies online together, file Travel and Entertainment together, etc. This will make them easy to find in the event of an audit.