As a small business owner, managing your accounts payable helps you keep track of short-term debt, avoid incurring late fees, and stay on top of your cash flow. It involves creating a system, then streamlining your processes to meet payment deadlines and reconcile accounts. While accounts payable management was for many years a manual process, automation allows you to save time and money and reduce errors.

Proper accounts payable management can help you better manage your cash flow and improve your financial outlook. Here’s a quick guide to accounts payable management.

What is accounts payable management?

Accounts payable management is the system you use to ensure invoices are paid on time, in the correct amount, to the right vendor. When your records are accurate and up to date, you can easily see when short-term debts are due and how much you’ve spent purchasing goods and services on short-term credit.

Accounts payable management strategies for small businesses aren’t so different from the way you manage your personal finances. For example, you might pay for personal expenses on credit because you need the cash in your account for something else. Similarly, businesses can also strategically manage their finances to increase their cash reserves while making sure that payments are made on time.

When you have a good accounts payable management system, you’ll avoid incurring late penalties, enjoy better credit ratings, build good relationships with your suppliers, and even prevent fraud. Switching to electronic accounts payable systems makes it easy to track your spending, payments, and cash reserves.

Guide to accounts payable management

Here are some tips to help you manage your accounts payable:

  • Go digital: Accounts payable can be managed manually, but you’re way better off digitizing your data and processes. You’re less likely to experience human error, it’s cheaper and easier to store financial records, and you’ll have real-time insight into your company’s financial status. Making the switch to a digital system might take some time up front, but it definitely pays off in the long run.
  • Create a centralized and standardized system: Digitizing your processes also allows you to create a centralized and standardized system. If you have or plan to have other employees approve invoices and perform other accounting tasks, having a clear system in place makes it easier for everyone to do their job and reduces the likelihood of errors. It also makes training new employees a much more straightforward process.
  • Talk to your vendors: When you begin a relationship with a vendor or supplier, make sure to get to know their expectations. What are their payment terms? Are there early payment discounts available? Understanding your vendors’ expectations, standards, and procedures makes it easier to manage your flow of payments and optimize your cash reserves.
  • Automate your accounts payable system: Just as a digital accounts payable system is an improvement over a manual analog system, automation allows you to improve your process even further. With the right tools, you can automatically capture data from invoices, compare them to purchase orders, and make payments. This makes it much easier to stay on top of your debts—all you have to do is approve the invoice and the automated system takes care of the rest. Plus, you can earn early payment discounts from vendors, automatically reconcile records, and have clear, consistent records available for audits. Automated processes can save you significant time and money.
  • Prioritize invoices: While you always want to pay invoices by their due date, they don’t all need to be handled the same way, and they also don’t need to be paid immediately every time. When you’re creating an accounts payable management system, consider the payment terms, due date, and your cash flow needs. You might want to pay certain invoices earlier (such as those with an early payment discount), while others can be pushed back closer to the due date to maximize cash reserves.
  • Pay invoices in batches: Some companies with sufficient cash reserves and relatively predictable cash flow like to pay invoices in batches, rather than one at a time. As your automated system tracks invoices and enters the data into accounting software, you can group invoices together by due date, type, or other criteria, then pay them when cash reserves meet your predetermined requirements. It’s an effective way to save time, and avoid the fees some places charge for making automated payments. Just remember to notify your bank and vendors so you don’t mistakenly get flagged for fraud.
  • Use fraud detection tools: Your accounts payable software should include fraud detection tools, which help prevent duplicate payments and fraudulent invoices. Audit your invoices on a weekly or monthly basis to make sure everything is in order.
  • Take advantage of user controls: Most accounting and accounts payable software programs offer user controls, which prevent unauthorized employees and users from gaining access to your financial information and functions. These controls typically include audit logs, transaction authentication, and role-based access control.

Implementing these strategies will help your small business save money and time, build better vendor relationships, and keep accurate and up-to-date records. Plus, they simplify your reconciliation and auditing process and help prevent fraud—a worthwhile investment for any company.

Pay vendors effortlessly with North One Invoice Payments

With North One Invoice Payments, you can make effortless invoice submissions by uploading or forwarding unpaid invoices to North One via email and we’ll take care of the rest.

You’ll save hours a week and hundreds of dollars in bookkeeping fees with precise payments paid on the invoice’s due date. Plus, you can see all of your upcoming and completed invoice payments in one place, making it easy to stay organized and on top of your finances.

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