Accounts Payables Management Tips

Update time:2018-01-16  source:

Accounts payable management means the administration of a company's outstanding debts, or liabilities, to vendors for purchases of goods and services made on credit.


Payables management is important for each company, no what’s matter what size your business is, paying bills will always be part of it. Besides seeing sales increase, you have to watch expenses carefully. Any time and any place you see expenses growing faster than sales, examine your costs carefully to find places to cut or control them.


By implementing best business practices you can streamline your accounts payable process and be prepared for future growth. Here are some more tips for your successful accounts payable management:


1. Simplify Your Accounts Payable Process
Reduce the number of check runs; two per month at most is plenty. Make Accounts Payable aware of any cash disbursement ceilings for each check run so they can then select the most important invoices to pay. Empower your staff with decisions to make partial payments on larger balances, or delaying payments to vendors.


2. Reduce CFO Impact to Verification & Signature
Typically the CFO signs checks but should not be assembling the check run. CFO simply checks the invoice amounts against the check before signing. Let Accounts Payable know up front what their “budget” is. They will know best what vendors can wait until the next check run.


3. Payment Terms May Be Flexible
Vendors will often give discounts or special terms to customers that purchase large volumes and on a regular basis. Even if the normal terms can’t be changed, you can negotiate terms for your own company. Take full advantage of creditor payment terms. If a payment is due in 30 days, don't pay it in 15 days. Use electronic funds transfer to make payments on the last day they are due. You will remain current with suppliers while retaining use of your funds as long as possible.

Do not always focus on the lowest price when choosing suppliers. Sometimes more flexible payment terms can improve your cash flow more than a bargain-basement price.


4. Improve Technology
Make sure your accounts payable module is set up correctly so that transactions flow properly. You may need to use a consultant to make sure your accounting software and accounts payable module are correctly configured, or you could cause more problems than you solve.


Run aging reports so you know what is in the pipeline.  You may have a small check run this period, but could have a large one coming up that you didn’t know about until looking at these reports.


5. Reduce Accounts Payable Fraud
Anywhere cash/checks are handled (incoming or outgoing) can be a high-risk area for company fraud. In Accounts Payable, this is often accomplished by setting up a “dummy vendor”.  Invoices for services never provided are created, and your business pays these invoices, essentially paying the employee.


Implement policies & procedures to mitigate the risk.  In the above example, have system parameters set so that the person cutting checks does not have the ability to set up new vendors. Each new vendor that is set up should require explanation to the owner prior to creating them.
Separation of duties, proper approval by department heads, and spot checks will help reduce the risk of fraud.


6. Consider Vendors' Discounts
Carefully consider vendors' offers of discounts for earlier payments. These can amount to expensive loans to your suppliers, or they may provide you with a chance to reduce overall costs.


Take full advantage of creditor payment terms. If a payment is due in 30 days, don't pay it in 15 days.


Use electronic funds transfer to make payments on the last day they are due. You will remain current with suppliers while retaining use of your funds as long as possible.


7. Provide Original Invoices
Always pay from original invoices.  If you have to pay from a copy, be sure to check your records for the same invoice number and dollar amount.


8. Accounting Department before Approvals
Have all invoices come to the accounting department first before being sent out for approval(s).  This way the invoice can be logged before it enters the black hole.


9. Enter Each Invoice Individually
Do not enter invoices as a batch.  Each one should be entered individually in order to have an audit trail.


10. Centralize Accounts Payable Processing
Through a shared service environment to ensure all staff members adhere to common practices and standards and measure their performance against established business metrics. This has the added advantage of enabling you to accomplish more tasks in a faster timeframe and with fewer   resources, ultimately reducing enterprise costs.


Regardless of the size of your company, you can start managing your accounts payable process more effectively to save time, money and streamline your processes.


The above is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Before taking (or not taking) any action,   readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this article.

 

Contact Us
For further queries,please call our hotline at anytime: HK Tel: 852-21962686; Fax: 852-34262391; China Tel: 86-755-82352600; 86-791-88167848;Fax: 86-755-82143182; Website: www.citilinkia.com; E-mail: info@citilinkia.com. You are also more than welcome to visit our HK office: 7/F, Fourseas Bldg, 208-212, Nathan Rd, Jordan;Shenzhen Office: Unit D, 23F, Taiyangdao Bldg, 2020 Dongmen R.S, Luohu, Shenzhen, China.