Five checks for your accounts payable process

You find the client, complete the work, and send the invoice. And then you wait for the monies to come in. At this point, however closely you monitor your accounts receivable process, there is an element beyond your control. And not knowing when that money will arrive in the account can play havoc with your cashflow.

So let’s look at the other side of the equation: the money that has to leave your account. Because, even if yours is a purely service-based business that has no raw materials to pay for, there will always be expenditure. And this, the accounts payable process, is something you can control, which puts you in a strong position regarding cash flow and lines your business up for future success.

Here are five simple ways to keep on top of your accounts payable:

  1. Start by finding out just who your suppliers are – who are you making regular payments to? Remember that the regularity may be monthly, quarterly, annual, or sometimes even longer: a website domain name, for example, may be locked in for five or ten years, and the renewal can come upon you quite unexpectedly. These tend to be smaller amounts, which shouldn’t cause a problem, but, big or small, track down all your outgoings, so you have a clear picture.
  2. Review all your supplier agreements – payment terms, discounts and penalties, delivery charges, etc. Just because you are a loyal customer does not necessarily mean you are getting the best deal. 
  3. Check whether there’s a discount available for prompt payment – you may need to ask for one – and if there is, check whether it will benefit you. Check, too, that your business is not incurring late payment penalties
  4. Make a particular effort to check all the small monthly outgoings. Annual payments often offer considerable savings. But it can be awkward when all the annual renewal fees fall together, so it’s worth seeing if you can stagger them through the year to smooth the peaks of your outgoings.
  5. Review your payments process and ensure your bank payments are carried out often enough to tie in with invoice due dates. You don’t need to pay an invoice the moment it hits your inbox, but most banks will allow you to set up future-dated transactions to ensure invoices don’t get put to one side and forgotten about.

By reviewing the terms of each of your suppliers, tracking your regular outgoings and watching your payment process, you can ensure that the money stays in your account as long as possible and that there’s money there when you need it. 

Reviewing the accounts payable process is just one of the ways you can improve your business cashflow. If you’d like to learn about other ways and work to future-proof your business, why not get in touch?