3 Accounts Payable Best Practices

BY Eddy Hood In Small Business Accounting On Jun 27, 2019 With 1 Comment

The accounting industry is often romanticized as an exciting and debonair world busting at the seams with intrigue that could rival any Bond film. While that’s 100% accurate, it’s also true that there are some aspects of accounting which are slightly less appealing than 1960’s Sean Connery. Accounts payable may not be the sexiest part of business, but it is crucial nonetheless.

accounts-payable-practices

What is Accounts Payable?

Accounts payable (AP) can be both an accounting entry in financial reports denoting short-term debt owed by the company to creditors or suppliers as well as a department within a business responsible for handling relationships and payments with the aforementioned creditors and suppliers.

Basically, AP keeps track of transactions made between companies and ensures debts don’t go unpaid. AP accountants should also look for ways to save the company money by negotiating discounts and balancing the timing and flow of cash for optimal operational spending. Here are three essential tips for ensuring your accounts payable department does everything it can to help the business perform optimally.

 

1. Establish Strong Relationships with Suppliers

Business, much like life, is all about making connections. This is especially true for accounts payable. Better relationships with suppliers lead to more leeway when it comes time to pay and a greater chance at receiving discounts and having successful negotiations regarding contract terms. Vendor relations should never be ignored as stronger relationships make the entire AP process run smoother.

 

2. Generate and Review Reports Regularly

Every time I get to talk about analytics at work I have to pinch myself to make sure I’m not dreaming. Reviewing data on a regular basis is every little boy’s or girl’s dream. On the off chance it’s not your idea of the best time ever, let me convince you otherwise.

Financial visibility provides insights into your business, helping you make informed decisions on your best course of action is in just about any situation. Analytics help to take the guesswork and the stress out of decisions. Keeping tabs on cash flow will help ensure problems occur infrequently and are caught early.

You can identify bottlenecks and trends in your business while reacting to the information you find from reviewing reports and metrics. Fraud is much easier to identify thanks to familiarity with reports and the consistency of operations that are obvious from constant reviews. Furthermore, you can reduce compliance risk with the detailed audit trail you’re generating.

 

3. Automate When Viable

Businesses are a complicated affair, and this is especially true for finances. Luckily, technology has come a long way in recent decades when it comes to business automation. The key to utilizing automation to your advantage is finding the best places to make use of it. Businesses have many opportunities to employ automation, but automation isn’t the answer to all situations.

Automation is ideal for generating reports and monitoring analytics, but sometimes, a human touch is required. Automation can save money and time while reducing errors, but it’s important to analyze whether each process you want to automate is actually worth the cost of automation.

 

4. Save Yourself the Headache

This one is a bonus tip from your friends at Ignite Spot. Avoid the frustration and expense of house breaking accountants for your in-house accounts payable systems and just hire Ignite Spot to manage your vendors, pay your bills, and get you discounts. We have the knowledge, experience, and tools necessary to make sure your finances and bookkeeping are kept in better shape than Daniel Craig’s abs. Find out how outsourcing your accounting work can help your business grow and then get in touch with us today to get started.

Featured image by Freddie Collins on Unsplash

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My name is Eddy Hood. I've coached over 500 businesses on how to become more profitable. I'm the Founder & CEO of Ignite Spot, and I have mad parallel parking skills.

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