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Helpful Guidelines for Effective Accounts Payable 

   
2018-03-02 
Krista Perisho 
   
Keeping track of accounts payable can sometimes be a large obstacle for a company. When looking at your accounts payable, are you following the guidelines to the most efficient way to control them?

Vendors:

The very first step in creating a strong accounts payable system is finding out who your preferred suppliers will be. There are many ways to go about this, but the most beneficial way is going to help your business negotiate the best terms and optimize your working capital. To begin with, you will need to create a team of people who will be in charge of setting up your base of vendors. 

Now, this group can't just be the janitor, and your new hire. You need to make sure that the Chief Financial Officer, the Chief Procurement Officer, and other people that are key in the business are there to help narrow it down. This team of specialists will then develop a plan of attack by looking at the prospective vendors, and figuring out what you want from each of them. 

Then the fun part begins. You will be able to haggle the price of goods, or the amount of goods putting companies against companies, and trying to get the best deal possible on your end without destroying relationships with other vendors.

Purchasing:

When completing a purchase based on an agreement no one wants to accidentally overpay, or make duplicate payments. To avoid all of these tragic things from happening you should have an assigned team that is in charge of checking and double checking invoices with the terms of the agreements, and also cross checking the invoice with the company's books to make sure that you are paying the right amount, and that you have not already paid it. If you have a team that pays attention to the books, and all invoice matters that pertain to the purchase of a product your company will be able to check and recheck all of the necessary documents before payments are sent to the vendors, and the purchase is final.

Invoicing:

Keeping up with the purchase of materials is very important for a company. Invoices play an important role in the accounts payable process because without them your company would not know how much they need to pay, and to whom. The main points when processing invoices properly is to have a centralized location that is specifically for processing invoices. From there you should refuse to pay inaccurate invoices, and consult the supplier. However if the invoice is correct you should make sure that they are processed in a timely manner so that you do not have to worry about not having the funds to pay them off later. This will make sure that they are paid before the due date given by the vendor. Your company should rely on an AP aging list to help understand what invoices should be paid, and when.

Payment and Reconciliation:

Before you can manage any of your payable accounts you need to make sure that your financial reports and books are up to date so that you can reference the amount of money in the respective accounts, and determine when the proper timing would be for you to pay a vendor. If your books are not up to date you may not be able to determine the best purchasing option for your business. Once again, make sure that you are following up on invoices that have been unpaid in a timely manner, and be sure to reconcile outstanding payments in the most efficient way possible. This is by having the same group of people prepare and review all reconciliations so that there is a lower chance of a double payment. Don't forget! There are many payments that happen within your business and each and every one of them must be recorded.

To keep your business running smoothly you must stay on top of selecting the proper vendors to fit your needs, and paying them for their services in a timely manner with proper notation in your books. 

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