New small businesses and entrepreneurs fast scrutinize that the accounts payable process can turn into a monster. If it isn’t handled properly, unpaid bills pile up and get paid late, development vendors angry and possibly damaging the business’ credit rating.
Once a consistent course is developed, the accounts payable process can go smoothly. If you are in firm by yourself and cannot afford to hire outside help, here are ten tips to help design a consistent accounts payable process:
1. Purchase accounting software with an accounts payable module. In today’s firm and computer world, some may wonder why this even needs to be a hint in a list such as this. Surprisingly, Internet study indicates that up to one-half of micro businesses (defined as under ten employees) do not use accounting software, instead using spreadsheets or even paper ledgers.
The advantages of using accounting software with an accounts payable module are huge and far outweigh the cost and learning curve. When used correctly and consistently, the software will serve several foremost functions: a reminder as to when bills are due; a generator of payments; and a recorder of payments into the checking register. The time savings alone over doing these functions manually warrant the purchase of accounting software.
2. Utilize the vendor’s auto-debit or auto-charge feature, if available. Utility companies, and other types of associates who have recurring payments, often offer auto-debit or auto-charge services. When used, the amount due is automatically deducted from the firm checking account, or expensed to the firm credit card, on the date shown on the invoice. Often, the paper invoice is still mailed, but sometimes the seller insists on emailing invoices when this assistance is activated. Whether way, the invoice is ready for viewing before the amount is deducted or charged. When used in conjunction with accounting software, the amount can be post-dated into the checking register or credit card register. If the firm has a good and consistent cash flow, this course saves time and money by avoiding the bill cost process altogether.
3. Utilize the software’s internal “bill pay” feature, if available. QuickBooks, for example, offers a “Bill Pay” highlight that is very reasonable and easy to use. Once established, bills are paid electronically agreeing to the software user’s authorization. The bill cost assistance takes the authorized amount from the designated bank account, then Whether issues a paper check to the vendor, or electronically transfers the money to the vendor’s account. The low monthly fee is not much more than the cost of postage and paper check printing.
4. Enter unpaid bills in a timely manner. Do not delay entering unpaid bills into the accounting software. Waiting too long to enter them can follow in late payments, finance charges, and inherent damage to the firm credit score.
5. Enter unpaid bills correctly. It is very foremost to scrutinize the bill and enter the literal, seller name, bill due date, and invoice number. Entering an incorrect due date will follow in a cost occurring sooner or later than necessary. After entering them, stamp them as “Entered” or “Posted” using a rubber stamp with red ink. Be sure to write on the bill the date they were entered.
6. Organize unpaid bills. If there are many bills, design them in an alphabetical file ideas to make them easy to locate. However, a small amount of bills may be located in a single file.
7. If cash is tight, resolve your cash flow before paying bills. straightforward cash flow reports are easy to generate in Excel. Start with the actual amount of cash ready to pay bills. Comprise amounts in checking accounts, savings accounts, and lines of credit. Subtract bills that need to be paid immediately. If there is not a comfortable cushion of cash left over, sell out the the amount of bills to be paid.
8. If cash is tight, recap with any vendors who must be paid late. No seller appreciates being paid late, but they do appreciate open communication. If you must pay a seller late, let them know, and let them know a exact date you plan to pay them. Then, make every effort to pay them by that date.
9. Pay bills on a consistent timetable. design a quarterly timetable to pay bills - weekly is a good and base choice.
10. After they are paid, stamp them correctly, then file them. Buy a rubber "Paid" stamp, and use it on each bill that has been paid. Write the check amount (or cost method), date paid, and amount paid on the bill. File them agreeing to how they appear on the tax return. In other words, file Utilities together, file Office Supplies together, file tour and Entertainment together, etc. This makes them easy to find in the event of an audit.
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