With Great Power Comes the Electricity Bill.
Make sure your Accounts Payable is managed effectively.
On the first day of working with a new client, the local power company showed up to turn the power off due to non payment. Fortunately the service man was kind enough to give us one day to get everything worked out. My client was perplexed as to why the bill had not been paid. The answer was that the checks were sitting in one of the many piles of paperwork on my client’s desk. You know that pile of paper that just keeps growing as you put out the fires of the day but you never seem to get to. My client did not have a clearly defined bill paying or accounts payable process which was costing the company money not only in late fees, credit problems and wasted productivity time.
Here are some tips and best practices to help you manage paying your bills:
- Always pay from original invoices and verify that you have received the product or service in good working order.
- Ensure you have a policy about how invoice numbers are to be entered. If you have a number of employees all using their own rules about entering invoice numbers (like what to do with leading zeros), it will be difficult to track down anything. Also, having a policy helps if there isn’t an invoice number.
- If you have a large organization the person entering the invoice should be different from the person approving the invoice who should be different from the person signing the check. Have a defined system of processing, printing and mailing checks.
- I can emphasize this enough never pay from a statement.
- All invoices should have the account coding written on them as well as any notes about special handling.
- Embrace technology, especially if you are a one person or two person business. You can set up the vendors using your bank online bill pay system, and then update the amount every month. This will save you time, postage, envelopes, stamps and ink.
- Many small businesses pay all their invoices with a credit card with the objective of getting points. While this can be effective, it does take a lot of discipline. In order for it to be effective you need to pay off the credit card every month.
- Watch your payable’s carefully to take advantage of any discounts being offered by vendors. It can add up to a nice sum by the end of the year.
- Be sure to set up terms with your vendors so that you can manage you cash flow. Avoid paying invoices early unless there is a clear benefit such as a discount. Setup invoices in your system to pay on the due date.
Above all review your accounts payable frequently to ensure your cash flowing and you are not overdrawing your bank account.
No what matter what size your business is, paying bills will always be part of it. Whether it’s the occasional order to pay for or a fully staffed accounts payable department managing thousands of invoices. By implementing best business practices you can streamline your accounts payable process and be prepared for future growth.