When it comes to cash flow, we all know how important invoicing is. For the vast majority of business owners, it’s the invoices receivable that earns the most attention. And fair enough, we all rely on incoming revenue to keep things ticking along.
However, playing favourites with invoices and failing to create great habits and awareness of your payables can have devastating effects on your cash flow. Luckily there are some easy tips you can implement right now that will have an immediate impact on the efficiency of your accounts payable process. Here are our top picks:
Make the process a priority
For many SME business owners, it’s all too easy to receive an invoice amid an unceasing onslaught of emails, check the amount and due date, then swiftly move onto the next thing intending to come back to it before it’s due.
Try very hard not to do this.
Implementing a non-negotiable payment process that starts the moment an invoice is received not only sets the expectation that payables are as crucial as receivables in terms of processing, it also maximises your lead time for verification and approval. By avoiding a rush for approval, you minimise the risk of human error through data entry or rushed checks which can be costly in the long run.
Embrace technology and automation
Sure using technology to organise your payables might seem like a no-brainer, but for plenty of enterprises, manual bookkeeping is still business as usual. Granted it can be daunting to change your processes and learn a new system, and no one wants to add more technology to the mix unless it’s worth it. But trust us, accounting software is most definitely worth it.
Look into trusted software such as MYOB and get familiar with its features. Here are just a few ways accounting tech can revolutionise your payables:
- If you log all invoices as they come in, you can run reports for future time frames giving you an instant overview of what’s coming up, allowing for a more accurate and strategic financial decision making power.
- Choose between creating automatic payment approvals, or set up an automated approval process to improve efficiency.
- Receive automated reminders when payments are due (if you have chosen not to set up automatic payments).
- Keeps all receipts, invoices and purchase orders in one place.
- Reduces currency conversion issues if the software supports multiple currencies so you can accept invoices from international suppliers with much less hassle.
- You can assign GST and Withholding tax support to each supplier so you can automatically calculate GST when preparing tax reports.
This only scratches the surface, and the great thing about invoice automation is you can make it work for exactly what you need – whether it’s just basic invoice payments or to service a full payables department. It’s worth investing in software that will work best for you and your industry and set it up for your specific business needs.
Get very (very) clear on your payment terms
If this piece of advice is starting to sound familiar, good; it’s an essential weapon in your cash flow arsenal. Each of your suppliers will have specific payment terms. Some may offer discounts for early payment and conversely some will have penalties for late payments.
If you’re using software, make sure you add the payment terms for each supplier in their account profile and schedule reminders if you want to make use of the discounts.
You can save a lot of money by taking advantage of any early payment discounts, but more importantly, you can avoid unnecessary costs and adverse credit reporting by ensuring you don’t slide into late payments.
Train and empower your employees
With so many moving parts in business accounting, it’s only natural that there are errors. Some are unavoidable, but plenty can be avoided by engaging your staff to help streamline processes and accounting governance. Not only can training help avoid costly mistakes, but it can also help free up your own time to work on other areas of the business.
If you have an accounting team or finance support invest in their training and development. Upskilling your team to improve their proficiency in your accounting software will help the transition to technology if it’s a new process, and if you’ve been using it for a while begin to use more functions like deep dive analytical reports to gain insights into your business trends.
If you don’t have a team or employee that takes care of your accounts, then invest in yourself through an accounting course. There are plenty of short courses online that can help you improve your financial knowledge. Knowledge is power, and in accounting, knowledge is also money!
If you’d like to speak to an OnDeck loan specialist about how a short term business loan could help you cover outstanding invoices or streamline your payables, call us on. Call 1800 676 652