For most modern businesses, accounts payable is one of the most high-stakes tasks there is. Every business needs to pay back what it owes, and managing payments promptly is essential to keeping your business in good standing with your suppliers.
A good accounts payable system is crucial to avoiding liabilities on your book for too long, avoiding the risk of tarnishing your business’ reputation, or putting a strain on your relationships with your suppliers.
Here we’ll cover everything you need to know about accounts payable.
What Is Accounts Payable?
Accounts payable (AP) refers to short-term debt that your business owes to its creditors. Essentially, AP keeps track of transactions made between companies and ensures debts don’t go unpaid. Certain debts include short-term debts that are ideally paid off within a year. Long-term debts such as mortgages are not included in accounts payable, as they are typically separate liabilities.
AP accountants should look for ways to save your company money by negotiating discounts and balancing the timing and the flow of cash. Here are three best practices for ensuring your AP department does everything in its power to help your business perform optimally.
#1: Maintain Strong Connections With Suppliers
Business is all about human relationships and the ability to form connections. When it comes to accounts payable, this is especially important. Establishing strong relationships with suppliers will lead to more leeway when it comes time to pay, and you’re more likely to receive discounts and land successful negotiations.
#2: Review Reports on a Regular Basis
Reviewing data on a regular basis is vital to the integrity of your business. Business reports help provide insights into your business, and are a great way to evaluate your business’ overall health, diagnose future problems, and keep tabs on cash flow. Financial visibility can help you make informed decisions on the best course of action to take in any given situation, as well as help you identify bottlenecks and hangups along the way.
#3: Automate When Efficient
Business is a tricky tightrope to walk, and this is especially true for finances. Fortunately, technology has come a long way when it comes to business automation—but in order to take advantage of it, you need to know when it’s best to utilize it. In essence, automation can cut costs, improve efficiency, and decrease fraud. It’s ideal for generating reports and monitoring analytics, but sometimes, it’s best to let a human handle it. You need to analyze whether each process of automation is worth it in the long run.
Getting Accounts Payable Right Is Crucial
Accounts payable is one of the most important tasks of your business to get right. A poor accounts payable process can set you up for damaged relationships with your suppliers, as well as fraud. Luckily, our accountants at Banks, Finley, White & Co. know a thing or two about Accounts Payable, and can help you keep your business in good standing. Contact us today for more information about finances.