Understanding Accounts Payables: Tips and Best Practices

Introduction to Accounts Payables

Managing a company’s finances involves dealing with several transactions and obligations, one of which is Accounts Payable (AP). Accounts Payable refers to the money a company owes to its vendors and suppliers for the goods and services received but not yet paid for. As businesses grow, it becomes challenging to keep track of all the expenses, invoices, and payments. In this article, we will discuss Accounts Payable in detail and provide some tips and best practices to manage it effectively.
 
 

What is Accounts Payable?

Accounts Payable is a liability account that tracks the money a company owes to its vendors or suppliers. It includes all unpaid invoices, bills, and expenses that are yet to be paid. The amount payable is recorded on the company’s balance sheet and is considered a short-term liability.
 

Benefits of Proper Accounts Payable Management

Effective management of Accounts Payable provides several benefits to a company, including:

• Better cash flow management
• Improved vendor relationships
• Reduced late payment fees
• Accurate financial reporting
• Avoidance of duplicate payments

Best Practices for Managing Accounts Payable

The following are some best practices for managing Accounts Payable effectively:

• Establish a Systematic Process: Having a systematic process in place helps manage the Accounts Payable process efficiently. This includes having a standard operating procedure (SOP) for handling invoices, approvals, payments, and vendor management.
• Set up a Purchase Order System: Creating a purchase order system ensures that all goods and services are purchased and received according to the company’s policies and procedures. It also helps verify invoices received from vendors and suppliers, reducing the risk of fraudulent or incorrect charges.
• Use Accounting Software: Accounting software helps streamline the Accounts Payable process by automating invoice processing, approvals, and payments. It also provides accurate and real-time financial data, reducing the risk of errors and fraud.
• Perform Regular Reconciliations: Regular reconciliations ensure that the Accounts Payable records match the actual transactions and payments made. This helps identify any discrepancies, errors, or fraudulent activities and enables timely resolution.
• Monitor Payment Terms: Monitoring payment terms and due dates helps ensure that payments are made on time, avoiding late payment fees and maintaining good vendor relationships.
• Set up a Vendor Management System: Establishing a vendor management system helps maintain accurate vendor records, including contact information, payment terms, and performance history. This helps identify potential issues and opportunities for improvement in the vendor relationship.

Find a payment solution to help you

Using a payment processing solution like Veem can greatly reduce your AP workload. Here’s how.

• Approvals: Veem has a customizable approval workflow structure that you can create based on your business needs. Make it as simple or as granular as you need.
• Time management: Use payment tools such as recurring payments to manage your time and send payments on whatever timeline or schedule you need. Create payments in advance and have Veem send them to your vendors on scheduled dates that you set.
• Accounting integrations: If you’re using an accounting software like Quickbooks Online, Xero or Netsuite, you can integrate directly with Veem and have all your APs pulled over for easy bill payments. Once the payment completes, it will automatically reconcile with your accounting software as well.
• Reporting: If you’re not integrated with accounting software or just need additional reporting, Veem offers filterable reporting right from your transactions page. Filter and download a report to your device with all your payment information.
• Vendor management: Keep track of all your vendors information in your “My contacts” section of your Veem account. You can manage, filter and even mass upload new contacts. Use your My contacts section to refer other businesses as well, and earn referral credits.

Conclusion

Effective management of Accounts Payable is essential for any business’s financial health. Having a systematic process, using accounting software, setting up a purchase order system, and regular reconciliations are some of the best practices to manage Accounts Payable efficiently. Proper management of Accounts Payable not only helps reduce costs and improve cash flow but also strengthens vendor relationships and enables accurate financial reporting. Ready to start using Veem for your account payables? Sign up today!
 
 

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