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Accounts Payable Tips for Small Businesses

4 Accounts Payable (AP) Tips for Small Businesses

Published on:  
December 30, 2022

As a small business, you may have a smaller volume of invoices than a large corporation. With so many invoices to process, it is easier to make mistakes. Thus, it's essential to have a system that can help you keep track of invoices and minimize errors. However, you still need to ensure that your Accounts Payable (AP) process is efficient and accurate.

 Fortunately, several invoice automation software solutions are available to help streamline your AP process. These solutions can help you save time and money by automating invoice management. 

Small businesses' accounting procedures must include AP automated invoice processing solutions to ensure you pay the funds you owe to people or companies as soon as possible.  

 It's never too early to consider how your company will manage its accounts receivable. The Accounts payable department of many small businesses comprises a single person, for whom accounting may be just one of many tasks they handle. 

The advice provided below is all targeted at small businesses, but it will be helpful to you as your business grows. One person might be sufficient when your company is relatively small, but your requirements will change as it expands. You can avoid much trouble later on when you have more to manage by getting all of your accounts payable processes and policies in order now.

This blog will discuss four tips for small businesses to improve their Accounts Payable process. We will also recommend a few invoice automation software solutions that can help you save time and money.

1. Start automating

Paying money for automated invoice management software may seem unnecessary for a small business with few accounts to maintain. There are a few reasons it's worthwhile to spend the money on it even if you manage just fine without it.  

First and foremost, if you choose the appropriate software now, you can end up with something that will grow with your company and be helpful to you for a very long time. Today, most business accounting software is offered as a cloud-based SaaS and is available on a subscription basis.

It implies that you can modify your subscription as your business expands by adding new features and functionalities. The importance of this continuity and the potential long-term savings is essential.

In addition to providing continuity, automated systems are more effective and less prone to mistakes than humans. Even a minor error in your accounts receivable department could significantly impact you if it causes you to pay a supplier late or, even worse, provide false information when you file your taxes. 

When your staff makes no mistakes, it is simple to ignore the potential for financial and other consequences. Nobody is perfect, so eventually, someone on your accounts receivable team will make a mistake. The likelihood of human error rises as the number of invoices they must process increases. By implementing automated reports payable procedures, you can maintain a lifetime error rate of as little as possible.

Finally, automating your accounts payable with the software will free up your staff and allow them to utilize their time more effectively. The resulting increases in productivity will be advantageous to your entire company.

2. Establish a paperless workplace

Going paperless has more benefits than preserving the environment, though that is a welcome side effect. Each paper invoice you process costs you time and money; getting rid of them will result in savings on both counts. Digital invoices are processed much more quickly and easily, allowing you to get the most out of your new automated systems. A paperless approach to your accounts payable processes will reduce or eliminate unnecessary work for your staff, as automation does.

Not only is a digital workflow more dependable and effective, but it also allows you to do away with large filing cabinets and better use other storage space. Finding space for all the documents you need to keep for your records as your business expands can be a logistical nightmare.

3. Create a regular schedule for auditing

 One of the reasons accounts payable is crucial is because it enables you to determine how much money remains for spending after deducting the amount you owe to creditors. Although using an automated digital workflow to process your accounts payable will significantly reduce the possibility of errors, no system is fault-proof. Remember that even a seemingly minor mistake in your accounts payable can substantially affect your financial reporting, not to mention your daily planning.

Accounts payable mistakes may give you a misleading impression of your current cash flow. Additionally, it's critical to identify errors as soon as they occur so you can decide whether they are a one-time occurrence or the result of incorrectly configured software.

Your workflow should ideally have safeguards that stop common mistakes like someone entering a number incorrectly. A good accounting program will notify you of fraudulent invoices and flag any others for manual review.  

Since your company is still tiny, conducting regular account reconciliations and a more thorough annual audit should be relatively easy. While a comprehensive audit of your company's financial records might necessitate hiring a professional accountant, most business owners should be able to make sure that their accounts payable are accurate.

Many small business owners believe this accounting work belongs to larger organizations with in-house accounting teams. The majority of accounting software will have tools that make it simpler for you to perform daily auditing and reconciliation on your own so you can keep a precise record of your cash flow.

4. Get your group ready for expansion 

If it tries to grow too quickly, even the healthiest and most prosperous small business will crumble under its weight. When there is a significant increase in trade volume, the accounting procedures and workflows that are perfect for small businesses may no longer be applicable. If you believe your company is expanding steadily and a near- to mid-term expansion is likely, you should get your accounts payable team ready.

When you approach a new supplier or investor, APA certification shows that your company manages its finances and makes timely payments on its debts.

Conclusion:

In conclusion, these are four tips for small businesses who want to improve their accounts payable process. By automating data entry, leveraging technology, and enhancing communication, small businesses can save time and money on their Accounts Payable process. Please share this article with your network to help them improve their Accounts Payable process.

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