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Streamlining the accounts payable process might not sound glamorous, but for small business owners, it’s an important process to keep things running smoothly. All successful companies, big or small, try to make their accounts payable process better. A well-oiled accounts payable process doesn’t only ensure that you’re paying bills but also maintaining healthy cash flow and positive vendor relationships. It’s the backbone of financial health for small businesses.
In this blog, we dive into why this task is vital and offer simple, actionable ways to do it better. We’re here to show that by making these improvements, you’re not just handling payments; you’re gearing towards success with the very foundation of your business.
Understanding the accounts payable process
For small business owners, dealing with Accounts Payable (AP) might seem complicated, but let’s simplify it. It’s a step-by-step process that ensures you handle finances correctly. It includes different stages, each doing something important to make sure you pay on time, keep your finances accurate, and keep your business healthy.
Invoice receipt: The journey starts with the receipt of invoices from vendors. You need a systematic approach to organize and categorize incoming invoices, establishing a foundation for subsequent stages. It’s about more than just paperwork; it’s about laying the groundwork for financial transparency.
Invoice approval: Once invoices are received, they undergo an approval process. This step involves ensuring that the goods or services detailed in the invoice were received or rendered and aligned with the agreed-upon terms. Clear approval workflows are important here, avoiding delays and fostering accountability.
Recording in the accounting system: With approved invoices in hand, the next stage involves entering the details into the accounting system. Accuracy is paramount at this juncture, as it sets the stage for the generation of financial reports and informed decision-making.
Payment schedule: Small business owners then move on to scheduling payments. This involves considering various factors, such as cash flow, early payment discounts, and the due dates specified in the invoices. A strategic approach here ensures that the business meets its financial obligations without unnecessary strain.
Payment execution: The last part of the process is when you actually pay the bills. You can do this with checks, ACH transfers, credit cards, or instant payments. This part needs to be done carefully and on time. Small business owners have to manage payments in a way that fits their financial goals and keeps their relationships smooth with their vendors.
Reconciliation and reporting: Post-payment, reconciliation is key. This involves verifying that the payments made align with the recorded invoices and accounting entries. It’s a checkpoint to catch any discrepancies and ensure the financial records remain accurate.
Strategic asset, not a routine task
Change how you see accounts payable—it’s more than just a task; it’s a key asset for your business strategy. Carefully handle each step, and you’ll gain financial insights, manage risks, and set your business on a path to success. Clear understanding and efficiency at every stage is the perfect roadway for effective AP management.
6 accounts payable success essentials
AP processing needs focus. Late payments can harm relationships with suppliers and affect terms. If you haven’t checked your AP workflows recently, it’s time. Here are six best practices to boost your business and create a smooth Accounts Payable system.
Implement automated invoice processing systems
Embrace the digital age by investing in good, automated invoice processing systems. These tools eradicate manual data entry errors, expedite processing times, and improve accuracy because, let’s face it, to err is human. Why take unnecessary risks? Automation not only saves you from inaccuracies but also allows your team to focus on strategic tasks, adding value to your business. According to a report, the average cost of processing an invoice manually is $15. It’s high time to ride the digital, simplify your work, and see your business thrive with less stress and more accuracy.
Don’t shy away from modern payment methods
Say bye to paper checks, ACH transfers, and credit cards, and hello to faster payments! Modern solutions like Forwardly offer instant payments, making transactions quicker, reducing costs, and ensuring security for both you and your vendors. With Forwardly, you can send your bill payments absolutely free. In 2024, switch to Forwardly for faster, and more secure payments, simplifying your financial transactions effortlessly.
Establish clear approval workflows
Make things easier by having clear approval workflows. This means having a set order and schedule for approvals, which helps avoid delays, reduces mistakes, and ensures everyone follows company rules. This not only makes payments faster but also holds everyone accountable. When it comes to business payments, the goal is to improve the workflow and reduce manual work. With Forwardly, you can easily set up and streamline your approval workflows, making your AP and AR business payments simpler and more efficient.
Regular reconciliation and audit processes
Keep your finances accurate by regularly reconciling and auditing your records. Periodic reviews of your AP records not only help catch discrepancies and prevent fraud but also ensure that you’re following financial regulations and best practices. This proactive approach boosts the reliability of your financial data and builds trust with everyone involved in your business. And, with Forwardly, workflow automation is enabled through 2-way data sync with your accounting system, allowing for automated reconciliation.
Ensure timely payments
Keep your cash flowing and your vendor relationships positive by making timely payments. Use a reliable system that tracks payment due dates and sends reminders on time. This not only prevents late payment fees but also builds goodwill with vendors, opening opportunities for favorable terms and discounts. Consider leveraging instant payments and automatic payments feature to streamline this process further and ensure your payments are always on time.
Vendor communication and negotiation
Nurture strong relationships with your vendors through open communication. Regularly discuss and negotiate to improve invoice payment terms, secure discounts, and strengthen overall collaboration. Don’t hesitate to renegotiate vendor payment terms, even if they’re initially set at net 30, 60, or 90 days. Regardless of the terms, a simple call can often open the door to adjustments that better suit both parties. Effective communication ensures both parties are on the same page, leading to a smoother AP process.
AP made easy with Forwardly
Explore the advantages of a streamlined Accounts Payable through efficient invoicing, quicker bill payments, and automated approval workflows. Take the first step with Forwardly to utilize instant payments, automated approval workflows, automated reconciliations, ensure timely payments, and improve your vendor relationships. These practices are your pathway to a more efficient AP operation, positioning your business for long-term success in a competitive market. Don’t wait; start your transformative journey today with Forwardly to ensure your business has a smoother, faster, and more prosperous future.
