Accounts payable are bills and other payable to be paid by businesses. As a matter of fact, the only thing paid business that is not considered a debt is salary. Everything else is included in the category, making it an important aspect of your business.
The accuracy and completeness of the company’s financial statements depend on the debt-payable process, the efficiency and effectiveness of the accounts payable process will also affect the company’s cash position, credit rating and relationship with its suppliers.
Implementing a reliable debt system will produce the accurate financial information you need for short and long term planning. Here’s what you need to know about following your business debt.
Tracking accounts payable
Accounts payable, sometimes abbreviated as A / P, are tracked monthly for many small businesses, but as the business grows, it is better to make it a weekly task to take advantage of early payment discounts and complete the credit due to inventory returns. It is useful to keep a record of a debt in the event of a payment dispute, to remind a business invoice smoothly or in circulation, or as proof of expenditure on tax time. These records can be saved manually or with accounting software.
Working with debt requires great attention to detail. Each invoice needs to be verified for accuracy, billing date and payment date, and then entered correctly into a general ledger or accounting software. Based on our research, here are some general tips for preparing your debt and helping the process run smoothly:
- Work from original invoice when possible. Multiple invoices are sent electronically – print once and then fill in emails to minimize confusion.
- Use the same login system at any time. Each vendor has their own invoice system but specifies the invoice number in your system to be consistent. Determine methods, such as using leading zeros, and obey.
- Enter each invoice individually. This includes some monthly invoices from the same supplier. If there’s a dispute, you’ll want to be able to track it on your system easily.
- Get the invoice approval from the right person before entering it. The person who approves the invoice must be different from the one who entered it. If you are a sole proprietor and do your own bookkeeping, this may not be possible, but it still has a clear approval and feedback process. Keep solid notes to support each.
- Look for early payment discounts to save money. This can increase until the end of the year. Some vendors offer a small percentage of invoices if you pay them within a certain period of the invoice date, as in ten days. If you usually only work with debt once a month, consider a system where you identify early discount payment opportunities when an invoice is received and pay for it separately from the monthly stack.
- Cash flow is important for small businesses. A solid debt monitoring and payment system gives you a clear picture of your spending on your income, enabling better business decisions.