Manage Your Accounts Payable and Cut Loss
Whether you are a small-business CFO who handles accounts payable yourself or you have an entire team dedicated to your billing and finances, it’s always worth it to make sure that you are employing the best approaches available.
Make sure you have a system that actually works for you and don’t make these mistakes!
Paying Early Isn’t Always a Good Idea
Having a clearly defined pay schedule is almost always better than paying your expenses right off the bat each month. Why? It decreases the amount of liquid cash you have to deal with an emergency that may pop up. It’s always better to have actual money in the bank to back you up rather than relying on a line of credit.
What About Early Payment Discounts?
Great question! Early payment discounts are a great way to pay a little bit less! There is such thing as a 2/10, Net 30, which is basically an opportunity to pay the invoice within 10 days of its issue and get a 2% deduction. You certainly don’t have to do this and can pay the full amount within 30 days, but if it’s a large invoice and 2% is worth it to you, go right ahead. Just record everything you do and make sure your emergency fund is solid.
Don’t Be Late Either!
Don’t forget that missing a payment can be extra costly. If you lose track of a payment or put it off for any reason you could face pretty serious consequences. Eventually, you will stop receiving that product or service, they will demand the entirety of what they are owed at once, and collection agencies will be hounding you.
Stay Organized! (Don’t Pay Twice!)
Your suppliers will likely be sending you two different statements: an invoice and a statement of account. Often time the statement of account will come first, and if you don’t stay organized you may end up reading the statement of account and thinking that you forgot to pay the invoice and then (oh no!) pay it twice.
If you pay your suppliers based on an account statement then you don’t get to verify orders/quantities/prices, you don’t have documentation for tax purposes, and you are more likely to send a duplicate payment when the invoice actually arrives.
Request copies of any invoice that you only have a statement for. If you use an automated bookkeeping software, make sure to enter invoice numbers each time you log a payment. Attention to detail is key when it comes to accounting.
At the end of the day, the people you employ and the tools you make use of will define your business. If your bookkeeping process is bloated then consider downsizing: one good bookkeeper in-house might be the best option for you, or perhaps outsourcing to a remote-accounting service would be more efficient. Just make sure to fully interview and vet whoever will be handling your payments and finances!