5 Tips for Streamlining Your Accounts Payable
No one loves to handle accounts payable—not even a professional accountant. First of all, it’s cash going out of your business, not coming in. And, when you have to sit down and really get in the weeds with the invoices you owe, you can feel like you’re wasting hours of time you should be investing in making money for your business.
Beyond being sort of a pain, accounts payable has a way of getting a little out of hand. You let a week go by without entering something; another where you’ll “deal with it later.” It seems harmless, but missing invoice due dates means late penalties, or even permanently damaging relationships with your suppliers. Some might not even allow you to work on trade credit any longer, and force you to pay with cash up front.
If you’re responsible for your company’s invoices, then it’s extra crucial that it’s organized, error-free, and easily trackable. Read on for a simple and manageable way to get your accounts payable streamlined, no matter what shape it’s in now.
1. Make Sure You Have Your Basics Tight
Creating a solid system means going back to basics. In order to have an organized accounts payable system, you’ll want to create a new spreadsheet from scratch. Whichever program you use is fine.
Next, you’ll need to gather all of your currently open invoices, and enter the following info into your spreadsheet:
- Vendor’s name
- Account number
- Invoice number
- Date you received the invoice (not the date on the bill itself)
- Payment due date
- Status (waiting approval/paid/past due)
It’s a little extra work, but you might want to think about adding in the last 60 or 90 days of paid invoices, too—just to have some additional reference data. It’s a lot easier to spot trends over at least a 30-day period, and especially if you don’t use vendors monthly, you know you’ll have a couple of invoices from common suppliers as points of comparison should you need them.
2. Determine How You’ll Pay Your Invoices
How are suppliers getting their money? Are you paying them as soon as invoices come in, or will you batch your payments on certain intervals? Maybe every other Wednesday? Are you cutting checks? Using your ACH? Who’s inputting these invoices? You get the jist.
Don’t only figure out your details, but document them, too. A big part of streamlining the process is creating documentation that others can reference in your absence, so nothing gets out of whack again.
The other benefit of creating records of your process is you can understand where procedures bottleneck and inefficiencies arise.
3. Identify Repeat Behaviors
Perhaps the most beneficial part of streamlining your accounts payable is what you can learn from having all of your invoicing information in one place.
With this history, you’ll be able to identify patterns including which vendors you do the most business with and in which months you spend the most across the board. You can also start to see with a keener eye things including categories in which your spending is most consistent, and where your spending fluctuates.
With insight into your fixed costs vs. variable expenses, you’ll be able to both trim your operating expenses, as well as more efficiently manage your cash flow from month to month. Plus, the longer you’re in business and staying on top of your new process, the more effectively you’ll be able to gather data and put changes into effect.
4. Look to Delegate
Another major benefit of having so much insight into your processes is that you’ll be able to see the kind of accounts payable tasks you do over and over again. You know, the low-level time-suck kinds of things, whether that’s literally writing out the checks or data entry.
As you begin to identify these patterns, see if you can pick singular or even groups of tasks that you’re able to delegate to junior staff members. You can even think about outsourcing to freelance or contract workers, or maybe looking to see if there’s a program or tool that might automate your process. An upfront investment could save you a lot in the long run.
5. Find New Tools for Your Business as You Evolve
If you’re finding that your spreadsheet system is becoming a little unwieldy, be proactive to keep it from getting out of hand. Integrating or transitioning over into the best business accounting tools can help keep your accounts payable continuously organized, without a lot of legwork.
Some tools automate accounts payable processing (like we briefly mentioned above), integrating into your current accounting software. Or, you might find that you need a more complex accounting infrastructure. This is a good time to look into bringing in a bookkeeper, too.
Whatever the solution is, it’s important to pay attention to your needs, and get a jump on improving your systems so you never miss a bill. Staying current on all of those invoices is how you know you’ve successfully streamlined your accounts payable—even if it’ll never be a total breeze to take care of.
Meredith Wood is the editor-in-chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. She is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.
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