Six Best Practice Account Payable Tips for a Smoother Cash Flow

Watching the cash balance is one of the most frequent activities of a small business owner.  Besides making sure you have enough cash for payroll and bills, there is another huge opportunity you can benefit from: lowering the cost of processing your bills.  It can be expensive and time-consuming to process bills and handle the paperwork involved.  We’ll take a look at a few of the many ways you can streamline your accounts payable processing costs in this article.

Opportunity #1:  Use the Accounts Payable feature in QuickBooks

Entering bills in QuickBooks, saves you time and helps you monitor your cash flow better – even if you don’t have many bills.  This article explains why and how to use it. 

Opportunity #2:  Go Digital

The Intuit Payment Network (IPN) is a best-kept secret when it comes to sending and receiving money.  It’s free to set up your account, and it’s also free for your receiver to set up an account.  All you do is add your bank account, and you can easily transfer funds between the two accounts just by knowing the receiver’s email address.

The receiver of money only pays 50 cents per transaction, so when you have a large transfer of funds, it’s totally worth it.  It saves you postage, check stock, envelopes and the related mailing labor.  You could even increase your payment by 50 cents so that your receiver receives exactly what you owe them.

Another way to go digital is via PayPal.  Fees vary, and are usually paid by the receiver.

Opportunity #3:  Get Control

When it comes to finances, it’s never a good idea to mix business and personal, especially when it’s coming out of the same bank account.  Keep separate accounts for business and personal, and your bookkeeping costs will go way down.  Do the same thing for credit cards as well.

If you’re comfortable with credit cards and you can maintain control of your spending, it saves accounts-payable time when you can charge everything you spend on business to your credit card as long as you pay it off every month.  Using your card is faster at checkout than writing a check these days, so you’ll save time on errands as well.   And for those of you who like to use your credit card points, your points add up faster!

Opportunity #4:  Automate

Put recurring expenses such as utilities, rent, accounting, and other monthly bills on bank draft or autopay if the vendor has that option.  This will save you a huge amount of time, supplies, and postage.  You can also be more accurate with the timing of the payment which will allow you to keep your money for as long as possible until the due date arrives.  You can also automate bills and charges in QuickBooks by using the “memorize” feature, as discussed in this article.

Opportunity #5:  Verify

We hope you never pay bills that aren’t yours or overpay a bill, but it can happen.  To avoid it as much as possible, implement a matching process on all your payables, especially those related to inventory.

  1. Start with a purchase order for supplies, job materials, inventory and even subs. Click here for “how-to”
  2. Review the packing slip when you receive materials and/or inventory
  3. Verify the vendor’s invoice (or bill as it’s referred to in QuickBooks) against the PO and packing slip.

Before any vendor invoice is paid, those three documents should be matched line by line – for quantity, price, and description — to ensure you ordered and received what you paid for.  Only then should your bill be approved.  This will ensure that you don’t pay a fraudulent bill, you don’t pay for out-of-stock that didn’t ship and that you paid the correct price you agreed to in the first place.

One more step – whoever signs the check or authorizes the payment should

  1. Verify that the payment is to the correct vendor, for the correct amount. I have seen data entry personnel misread a bill and then overpay that bill, which definitely hurts cash flow!
    •  If you sign the checks, ask for the bill(s) and any statement(s) along with the check so you can easily verify.

Please feel free to reach out and ask us about this if you’d like to know more.

Opportunity #6:  Tell Yourself a Little White Lie

There’s an old saying:  “robbing Peter to pay Paul.”  If you’re always moving money around form one checking account to another to cover bills and payroll, you’re not the only small business owner who juggles funds.  It takes up valuable time to make all these transactions, and then it costs to record them and track them.

Reduce all that by telling yourself a little white lie about your bank balance.  If your bank balance is $10,000, tell yourself it’s only $5,000 (or whatever amount makes sense for you).  That way, you’ll always have a cushion in your account that will help you reduce transfers.  There are several ways to set this “little white lie” up in your books.

More A/P Ideas

These are only six of many ways you can reduce your processing costs and save time on accounts payable processing.  Give these six accounts payable ideas a try, and if you’d like to know more, please reach out and let us know.

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2 Responses to Six Best Practice Account Payable Tips for a Smoother Cash Flow

  1. Caryl Anne says:

    I agree that it’s best to automate bills that have the option. To me, this helps save time, stress, and money. I say money because there have been a few times when I forgot to pay a bill or thought I paid a bill and this lead to a late fee and other charges. This type of automated feature helps to insure oneself that bills are paid and paid on time. That’s for sharing!

  2. loura says:

    I really appreciate that you present the reporting requirements in a brief and concise way.

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