Company owners are always looking for ways to make their business practices more efficient and one way to do that is to optimize your accounts payable process. Getting your payments to vendors out the door is an integral part of any business and whether or not you use accounts payable software, you should follow these best practices to ensure your AP process is as efficient as possible.
Simplify Your Accounts Payable Windows
There is no need to pay a bill the moment it comes in. Instead, limit your AP windows to once or twice a month. Create a central repository for all bills and pay them at the same time or times each month. This way, you’re less likely to miss paying a bill because you can easily check off the ones you receive and pay during the AP window and everyone in the company will put their bills in a single place so you won’t have to track them down.
Limit Access and Define Roles
Not everyone in the company should be paying bills. Designate the accounting employees whose job it is to process accounts payable so that you don’t have a bunch of hands in the process. This only leads to errors and missed payments. Depending on the size of your company, it may be that a single employee can handle the entire AP process.
If you need more than one person to manage accounts payable, make sure you define their roles explicitly. For example, not all employees should have the ability to approve and add vendors to your software. In fact, the team that cuts the checks should never have the ability to add vendors because this creates a situation where fraud can occur. Your company needs to tightly control where your money goes and controlling vendors and monitoring payments is one way to make sure this happens.
This is particularly important if your business has cash flow issues. Each AP window or check run should have a cap for payments. This will help you budget better and ensure you have enough money to last you until the next check run. Vendors will wait for your payments as long as you pay them on time, so prioritize your invoices by due date and payment terms to ensure all bills are paid according to these deadlines.
To reiterate, do not pay invoices as they are received. This will severely hinder your cash flow and could leave you short money to pay more urgent invoices that come in later. Setting up your payroll process by when payments are due is a good first step, but you’ll want to go further by organizing them by terms as well, so a bill that isn’t due for 60 days doesn’t have to be paid right away, allowing your money to go to a bill that has a 30-day term instead.
No matter how big your company is, your accounts payable process can either make your life easier or harder. Make your AP process more efficient by implementing these best practices so you can focus on what you do best: running your business.