A lot of articles focus on the accounts receivables of the business. Receivables are an important element of financial statements, but one cannot ignore the payables. The account payable balance can have a direct impact on the cash flow of the company. A lot of daily activities connected to AP may be slowing down your overall efficiency. To keep things simple, we'll first glance at the common issues with AP processing. After that, we will look at ways you can improve your small business and startup's account payable.
Are you having these problems with your AP?
-Paper processing or heavy reliance on paper invoicing
-Time consuming or ineffective invoice approval process
-Issues verifying if payments are made on time
-Data and transaction security verification
-Multiple suppliers accounting and invoicing systems
A lot of these matters could lead to inefficiencies- such as losing out on early payment discounts or paying penalties. Furthermore, a lack of digital processing can make data analysis a painful messy process. Below are ways in which startups and small businesses can improve their accounts payable
1. Object Character Recognition
Also called OCR, this enables you to get the details of the invoice by simply scanning. Simply put, you can now get any printed or written text in a machine-readable format. This way you can save the data on your computer rather than just scanning the picture. A lot of small businesses use scanning and end up saving the image. The image may be a good record but you still need to put that data manually in Quickbooks or any software that you're using.
2. Detailed workflows and plans
The biggest issue your small business can encounter is a lack of direction when the situation arises. Talk with your accounting team and have a comprehensive step-by-step process in place for the actions to be taken when the need arises. Your accountants or bookkeepers should know exactly what needs to be done when the invoice comes up. For example- you may be tempted to avail yourself of discounts for making payments within 30- 90 days. In that case, ask yourself how much that may inhibit your cash flow. In short, every business is going to be different, but a set procedure saves you from confusion.
Cognate works with small businesses to find a tailormade financial strategy that suits their operations.
3. Centralized data management
If you have a bigger team, then ensuring that invoice data is entered into an online system can help in information management. This way you and your suppliers can simultaneously track the ongoing invoices, processes, or any payments that have been made. Proper data management and giving data access to multiple people can provide the AP department with better data supervision and control.
4. Outsource the process
Proper AP management requires investment in IT. There are a few nuances to the whole setup process which may not be easy for small businesses. A good way to go about this is to outsource the process to a third party. Outside service providers are well-equipped professionals that can help you save a lot of time and money. A lot of the above-stated tasks such as workflow creation, invoice data upload, and OCR can be outsourced for a flat fee.
AP is an essential element of cash flow management. When trying to improve the process ensure that you do the following
-Find an appropriate payment method for your organization
-Record every single purchase or order
-Weekly record verification to avoid month or year-end overload
-Ensure that your invoices meet all contractual agreements.
Wondering where to start? Perhaps Cognate can be a good fit here. We are a one-stop shop for all your back-office needs (accounting, bookkeeping, taxes, payroll, or HR management) The best part? You don't have to juggle multiple vendors anymore. Everything is streamlined in one place. If this rings a bell then get on a call today.