4 Best Accounts Payable Practices For Small Businesses

 Accounts payable has always been a repetitive back-office function. Businesses consider it necessary but view it as back-office work that needs to be completed. But as the CFOs and other finance executives have appreciated the value of AP and its benefits to organisations. Business owners have started pushing the AP department and employing best practices. Especially small businesses should strive to maintain a strong AP department. Small business accounting services help transform the overall AP process the organizations follow. 

The accounts payable process ensures that accurate, timely, and error-free payments are made. An AP department receives all the invoices, and that data needs to be addressed with accurate payments and cost center data. After that, the invoices are matched against the purchase orders and involve a few more steps. This whole process can either be done manually or through automation. However, small businesses can adopt certain practices to eliminate or minimise issues in the AP process. Let us highlight some practices that can be adapted to better the AP process: 

 

1. Organising invoices- A small business should keep track of what needs to be paid and what is essential to manage the business's cash flow. All the business invoices should be properly organised based on due dates and payment terms. In addition, the small business owners should match the invoice against the purchase orders and receipt of goods (if applicable). 

 

2. Automation software- A small business can lessen the burden of manual invoice processing by automating the AP process. The process of invoices is time-consuming, and automation handles all the steps automatically. Automating the AP process helps to eliminate unnecessary delays, costs, and manual errors committed by human intervention. 

 

3. Fraud detection- Money-related matters are prone to errors and fraud. The sources of fraud can be cyber criminals, suppliers, or even existing employees. Especially with a paper-based approach, the chances of fraud become even higher. AP automation helps to mitigate such risks by following a rigorous approval tracking system and a clear audit trail. The real-time visibility into the data helps to catch discrepancies and red flags. 

 

4. Using KPIs- A perfect way to measure the performance of any business process is through key performance indicators. The KPIs evaluate the business's current performance compared to the previous ones. The AP department can set specific goals and use KPIs to measure how the department performs with the new or revised processes. 

 

Final words 

Not just the above, small businesses can adopt measures like keeping suppliers' information, standardising terms of payments, etc., to ensure a smooth accounts payable process. These practices constantly improve the AP process and help businesses to gain better control. On top of it, AP automation is another way to move the AP department to the next level. Small businesses can survive and thrive in the long run with lesser errors and frauds. 

What Are The Top Accounting Mistakes You Should Avoid As A Business Owner?

 As entrepreneurs begin their businesses, they often try to manage their accounting to save on costs. Keeping track of every penny of revenue, expense, tax, and vendor payment is difficult and time-consuming. It's easy to make business mistakes, costing you a lot of money. 

 

This article is provided to help you prevent these mistakes, including accounts receivable and payable, which business owners are most likely to make, and, more importantly, how to avoid them. Here are some of the most common accounting mistakes business owners make in their day-to-day operations. 

 

1. Lack of organizational skills 

A great deal of organization is needed when it comes to bookkeeping. You must record all purchases, save or digitize receipts for future references, and calculate taxes, among others. The danger that you will miss an important transaction or lose a receipt if you're not tracking and storing information properly is that you may run into trouble with the IFRS during tax season. 

 

2. Failure to follow a regular accounting schedule 

When you run a business, you have a lot of obligations, and updating your books and managing accounts receivable may be the last thing on your mind. Setting a regular schedule is the key to adding current income and expenses. Even though it is ideal for entering your transactions in the database daily, you should at least enter them weekly. 

 

3. Failing to reconcile the accounts regularly 

If you are recording cash flow in your accounting books, you will want to ensure that that balance is reflected in your bank account while recording it in your books. There is likely a discrepancy between the two, and the issue must be corrected immediately to prevent it from worsening. It is also beneficial to conduct periodic reviews of your business' bank accounts versus your books so that you can catch any fraudulent activities that may have taken place. 

 

It doesn't matter if you are handling your accounts or if you have your accounting handled by a specialist. Accounting errors in processes like accounts payable can cause severe issues for your business. This is a problem that should be addressed before it grows worse. 

How Do Outsourced Accounting Services Improve Financial Performance?

 Nowadays, small and medium businesses have to get a leg up on the competition by laying the right foundations as fast as possible. Small and medium businesses must keep a lean structure and make the most of their resources. That's where outsourcing accounting services come in. 

 

Accounting expertise is paramount for improving and maintaining financial stability after the pandemic. It's tough for any business to find accounting expertise. Outsourcing is the only way to make financial performance more affordable. How do you do it? Find out here: 

 

5 ways outsourcing your accounting will improve your financial performance and lower your overhead costs: 

 

1. Eliminates the cost of hiring and training 

 

Getting the job done requires many skills developed from education, certification, mentoring, and experience. The accounting and finance positions have been tough to fill for years, and they've gotten even tougher now. 

 

2. Offer flat-rate salaries over expensive ones 

 

Outsourcing accounting services lowers the cost of hiring new resources, but the benefits don't stop there. Using the right cost model can save you even more time and money. 

 

3. Save on office space with outsourcing:  

 

Accounting and finance are notorious for wasting office space on tedious work. By outsourcing these functions, businesses can reduce operational costs by eliminating manual storage, scanning, and data entry processes. It allows small and medium-sized firms to remain lean and operate more efficiently while simultaneously reducing their real estate costs to overcome capital constraints. 

 

4. Pay based on work volume:  

 

Outsourced accounting services can be better when you choose the right cost model. A flat fee is good for businesses with steady workloads, but pay-by-volume is best for seasonal businesses. Paying by volume allows businesses or CPA firms to scale effortlessly.  

 

5. Leverage technical infrastructure while saving on their costs:  

 

Automation, accounting software, and other technical tools like FreshBooks bookkeeping can help businesses save time and money and improve accounting performance. Outsourcing allows them to use cutting-edge technological infrastructure at a fraction of the cost, making it even more profitable.