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Today's article is about helping you streamline your accounts payable process. Save time and money by making sure your A/P process is as efficient as it can be.
Save Time and Money by Streamlining Your A/P
with These 7 Tips!
New small businesses and entrepreneurs sometimes discover that the accounts payable process (also known as A/P) can turn into a headache.
If it isn’t handled in an orderly fashion, unpaid bills pile up and get paid late. This can making vendors angry and possibly damage the businesses credit rating.
Here are my best tips to help you develop a consistent A/P procedure
1. Utilize your vendor’s auto-debit or auto-charge feature.
Many companies now offer this service. It is especially useful when you have a bill that is normally the same amount from month to month, such as utilities, telephone, insurance, cable, internet services, etc.
The amounts are automatically deducted from the business’ checking account, or charged to the business credit card, on the date shown on the invoice. Often, the paper invoice is still mailed, but sometimes the vendor insists on emailing invoices when this service is activated. Either way, the invoice is available for viewing before the amount is deducted or charged.
To enter these into QuickBooks, post-date them into the checking register or credit card register. If your company has a good and consistent cash flow, this procedure saves time and money by avoiding the bill payment process altogether (which is normally "Enter Bills," then "Pay Bills," then mailing checks, etc.).
2. Get signed up for QuickBooks Online Bill Payment service.
This is a great service for any business that issues a lot of payments to vendors every month.
Once the service is activated, you will continue to use the "Enter Bills" window in QuickBooks. Then, when you use the "Pay Bills" window, QuickBooks does two things:
- Records the bill payment into your check or credit card register as a BILLPMT type.
- Authorizes the actual payment. Electronic payments or paper checks are created by the bill payment service. Electronic payments happen within two business days. Paper checks are created and mailed by the service, and arrive to your vendors within five business days. All of the payments are drawn on your bank account.
This saves time because something that previously required two, three or even four steps now only requires one. Plus, the low monthly fee is just a little bit more than the cost of postage and paper check printing. Follow this path in QuickBooks to learn more:
Banking > Online Banking > Learn about Online Bill Payment
3. Enter unpaid bills in a timely manner.
Be sure to enter your unpaid bills very regularly, at least once a week if not more often. This enables you to run Unpaid Bills reports on a regular schedule so you can keep track of them all on a single report:
Reports > Vendors & Payables > Unpaid Bills Detail
Waiting too long to enter them can result in late payments, finance charges, and possible damage to the business credit score.
4. Enter unpaid bills correctly.
It is very important to examine the bill and enter the following information correctly:
- Correct vendor name. It's too easy to create a duplicate name. Be sure you spell the vendor's name right in QuickBooks.
- Bill due date. Entering an incorrect due date will result in a payment occurring sooner or later than necessary.
- Invoice number. Enter this in the "Ref. No." area of the "Enter Bills" screen.
After entering them, get a rubber stamp with the words "Posted" or "Entered," then stamp the bills with it. Be sure to write on the bills the date they were entered.
5. Determine your cash requirements before paying bills.
Simple "cash requirements" reports are easy to generate in Excel. After all of the bills are entered, create an Unpaid Bills report:
Reports > Vendors & Payables > Unpaid Bills Detail
Next, determine the actual amount of cash available to pay bills. Include amounts in checking accounts, savings accounts, and lines of credit. Be sure to use the "book balance" for checking account amounts, and not the "bank balance."
Subtract bills that need to be paid immediately from the cash you have. If there is not a comfortable cushion of cash left over, reduce the amount of bills to be paid.
6. Pay bills on a consistent timetable.
Establish a regular timetable to pay bills. Weekly is a good and common choice but longer or shorter intervals are fine. The idea is to pay the bills regularly, at whatever consistent interval works best for your business.
7. Filing ideas for paid vendor bills. After they are paid, one idea is to file them by vendor name. This is a very common choice.
Another option is to file them according to whichever account they posted to in the Chart of Accounts. The advantage here is if the company gets audited, it will be easy to locate all of the receipts for a specific category.
I hope you enjoyed this article on A/P. It's based on all my years helping clients just like you.
P.S. I need your help. Do you know people who need help with A/P? Please forward this newsletter to them. Thank you!
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