As a business owner, in your quest to improve marketing and sales and meet your
monthly revenue quota, it’s easy to lose track of something as simple as how keeping
track of your payables and expense report is essential for the success of your business.
It’s estimated that a third of new businesses fail within a decade. There are essentially
four reasons for this depressing statistic: a lack of research, a lack of capital, a lack of
customer service, and a lack of efficient financial management. So, neglecting accounts
payable can put your business in peril over the long run.
A Sign of Growth
The reason you went into business for yourself is because you were motivated by a
passion for your product or service and were willing to take a leap of faith. You believed
that you could develop and deliver what you envisioned. While it’s a wonderful thing to
focus on what you do best, it’s also important to plug any holes in your ship as you
voyage into new worlds of opportunity.
If you’re either overwhelmed by your bills and keep getting reminder notices, it’s a sign
that your accounts payable needs a major overhaul. It may be time to retire your Excel file
keeping method and overreliance on your business checking statements to keep track of
your payables.
If you keep running your business inefficiently, you’ll lose the goodwill of your suppliers. It
could result in big problems in the future. All aspects of your business thrive on goodwill
and when this starts to slip due to not paying your bills on time, your accounting system
needs some urgent care.
In a way, it’s a positive sign: your business has grown. Now, you need to focus on how to
increase business efficiency, improve balance sheet accuracy, and renew service
provider faith. Paying your bills promptly is an important aspect of running a reliable
business.
How to Create a New Structure
If your business is at a point where you are receiving more bills than you have time to
focus on paying, you should consider using automated expense reports.
If you now have a few employees and a lot of business, you may not have time to keep
track of cash flow. In this case, you may want to consider getting someone to handle your
books. However, you still need keep your fingers on the books on a regular basis.
Before you hire someone, you should already be doing the following three basic things:
1. Entering all bills that come into your accounts payable filing system each day. This
activity includes making a note of when the bills come in and when they’re due and
commenting on any other relevant information.
2.Logging business credit card expenses the same day these payment methods are
used.
3.Training all employees to be adept at filling in expense reports.
3 Big Advantages of Improving Your Accounts Payable
Paying your bills promptly has far more benefits than keeping your business suppliers
from discontinuing the services you need to run your business. Streamlining your
accounts payable system can also prevent fraud, notice trends in your business, and
simplify auditing.
Let’s take a closer look at each of these three benefits:
1. Preventing fraud.
If you’re not keeping an eye on your numbers, you could be paying a check twice or be
the victim of employee embezzlement. For companies small, medium, and large, their
Achilles heel is their accounts payable system.
2. Noticing trends.
You may be surprised to find that your business has some discernible trends. For
example, you may be spending more during one season than another, you may be
spending more in some categories than others, or you may be relying on some vendors
more than others. Spotting these trends can be used to prevent weaknesses in your
business from getting worse. They can also be used to maximize previously overlooked
opportunities. However, you can’t take action on a trend until you notice it.
3. Simplifying auditing.
Taxes can become overwhelming if you’ve just changed accountants or are using a new
accounting application just before tax season. Auditors tend to focus on your expense
reports to figure out how your business is running.
Conclusion
Unless payables are out of control, they will not become urgent. Consequently, you may
not notice them. However, this simple piece of accounting can be a crack in the dyke of
your business, especially if your company is growing at a rapid rate and the little things
tend to be pushed aside to focus on the big picture.
