Accounts payable is a type of short term debt that a business owes to the suppliers for the purchase of goods or services, but it is not so simple and straight, and that is why organizations thrive to identify the best and most suitable practices for payable management to smoothen their functioning. Today use of technology has provided solutions to many problems but still there are lot of issues those need attention and priority to be resolved.
Establishing direct relation of store with accounts payable is one of the best practices that companies can adopt in payable management. If a company has a 30 day contract with supplier for payments, the date of receipt of goods shall be treated as the day from when those credit days shall be counted. This not only provides complete utilization of credit limit by the company but also company does not have to pay for damaged goods and wait for the claim to be settled by the supplier later. Once goods are received in stores and checked by the authority only after that invoice shall be listed for the payment on its due date.
Segmenting suppliers according to their offers is another best practice adopted by many large and medium organizations in payable management. The suppliers who offer more credit or offer more discount on cash payments or early payments may not appear to be helping in improving the cash flow of the company but certainly can contribute substantially in increasing profit margins. Better communication with the suppliers regarding supply of goods and payment mode and duration also helps immensely. Payments made through banks or purchase cards offered by many banks also provide good deals which saves valuable money over a considerable period.
Processing of invoices take too much time and effort and also raise hindrances in scheduling the payments. The use of technology like OCR has provided solution to it to a large extent, it also reduce extra man power required for this work. Fast processing of invoices also helps in establishing realistic payment schedules with the suppliers. Best practices like categorizing scheduled invoices, recurring invoices and casual invoices along with invoices against purchase orders also helps in improving invoice processing even if company is not using any software for payable management.
Stepping up the security to avoid frauds and illegal payments is best practice in accounts management which is now given utmost importance by the companies. With the use of software in the functioning of companies instances of frauds and false payments have increased, communication with the employees and avoiding access of any one person to the payment module helps in reducing the risk. Companies using software for accounting shall make sure that software contain effective security and checks, issues access rights before allowing the use of payment module. Regular reconciliation of check book is the best practice in account payable that also helps in avoiding instances of frauds and false payments. Regular audits, manual or computerized, help in improving the functionality of the company and also reduce chances of errors and mistakes in accounts payable management.