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The proper management and payment of supplier bills is vital for every business. The accounts payable process helps manage these payments.
Having a good accounts payable process in place is important for the management of cash flow. It will also help maintain good customer and supplier relationships. Getting it wrong can expose you to fraud and financial losses.
There are many ways to set up and manage your accounts payable process. This article will cover how to manage both domestic and international payments.
|📝 This article will cover:
|This piece has been written in collaboration with Esther Friedberg Karp, an esteemed bookkeeper and QuickBooks ProAdvisor.
Accounts payable is a current liability account. It shows an amount payable by a business to suppliers for purchases of goods or services.¹
The accounts payable process handles the recording of supplier bills for goods and services. The process also covers payment to those suppliers for those bills. This involves the management and payment of all bills received.
The process also handles the different payment methods available. This includes making sure international bills get paid in the correct currency.
Accounts payable is not only about processing payments. It also involves authorizing them. All bills get checked to ensure they are correct, error-free, and not fraudulent.
You will often hear both the terms accounts payable and accounts receivable, both of which are necessary when running a business.
Consider the case where a business sells goods to another company. The seller will record the sales invoice amount as accounts receivable. The purchaser will treat the incoming supplier bill as accounts payable.
Accounts receivable is a current asset account. The selling company records that it has the right to collect the amount from the customer.²
Accounts payable, as mentioned earlier, is a corresponding current liability account. In this case, the customer records in their records that they owe the amount to the supplier.
|Read more about accounts recievable vs payable
The accounts payable process is well established. There is a defined accounts payable workflow in use with many companies.
This accounts payable workflow gives a structure for receiving, checking, tracking, and paying bills. The main goal is to pay only legitimate and accurate bills.
The accounts payable workflow includes the following steps:
Bill processing. Receiving and checking a supplier bill is very important. This should establish if the bill is genuine. It will also ensure that the payable sum is correct, and matches any purchase order (PO) in place (if purchase orders are used).
Bill Approval. If the bill is genuine and correct, it gets approved for payment. Some businesses have an accounts payable team controlling this.
Payment Authorization. The appropriate authority authorizes the payment.
Payment Execution. This uses the payment method, currency, and other details specified in the bill. The bill should also be marked as paid, to avoid duplicate payment.
Having well-defined accounts payable processes and workflows is important. Managing them well will lead to a smoother and more streamlined experience. With poor management, they can be an everyday hassle.
The following tips may help improve your accounts payable procedures:
Define a standard accounts payable process. This will give everyone a common framework to follow. It will also help teams with communication and process management.
Aim to improve the process. Following an accounts payable workflow will help identify problem areas or bottlenecks.
Don’t delay payment. Some companies delay bill payments to maximize cash flow. This is rarely the best strategy. It can damage supplier relationships and goodwill. It can lead to more difficult dealings or stricter terms. Paying early can improve relationships and take advantage of discounts.
Use the accounts payable process to better manage company cash flow. More accurate cash flow predictions can improve liquidity and increase profits.
Establish a clear process for international payments. Payments in a different currency can cause delays and incur costs. Using a payment service such as Wise Business makes sending payments easy. You’ll also get the real mid-market exchange rate.
Consider using automation software to streamline the process. Manual processes can introduce errors or delays.
These errors or delays can have disastrous effects on the company’s image as well.
Appearing unprofessional can lead to repercussions, such as suppliers choosing not to do business with a company. They might impose lower credit limits and more restrictive payment terms (such as Cash On Delivery), or even higher prices.
Those repercussions can make it harder and more expensive to do business, and can in turn put an additional strain on the company’s cash flow.
Of course, the company can look for an alternate supplier, but that takes up valuable administrative workload. It is possible that another supplier might be even harder to work with, or another supplier might not exist.
|🔍 Want to explore automation software options? You can read about QuickBooks and Xero to see how they could help your business.
If the accounts payable process is manual, there is a chance of human error. This error could happen at any of these checkpoints: bill checking, processing, or payment. A high workload can also lead to delays.
Accounts payable automation can reduce and streamline these manual processes. This can speed up bill processing, reduce errors and fraud, and even lower costs.
Software company Avidxchange carried out a survey of US businesses in 2021. This demonstrated the reliance on manual billing and the popularity of automation. 52% of businesses had recently suffered bill processing delays.³
46% of business leaders expect that at least 50% of accounts payable processes will go digital in 2021.³
To put some context into cost savings, Goldman Sachs carried out some research in 2018. This research showed up to a 60% to 70% net saving when moving from manual to automated bill processing.⁴
If you have international bills to pay, not only can you pay them at the real mid-market rate with Wise, but now you can also sync Wise with QuickBooks.
- You can see your unpaid bills in real time and pay them seamlessly from your ‘Bills’ page on Wise.
- Your bill payments and any other Wise transactions will be synced, matched and categorised in QuickBooks for simple reconciliation.
- Once connected, all bills you create in QuickBooks Online will automatically sync in real time to Wise, where you can choose which ones to pay.
- They'll also be categorized into the right accounts. If no bill is found, each payment will simply be added as an Expense.
Sound amazing? See for yourself how much time and hassle you can save.
A streamlined accounts payable process can increase business efficiency. Figuring out how to streamline international payments can be a tricky part of the process, though.
Wise Business can help with international bill payments. With a Wise Business account, you can make international payments in one click. This could be to suppliers, customers, or overseas contractors and employees.
👉 Looking to learn more about accounts payable tools? Find out more below!
- Coupa Competitors and Alternatives
- Laserfiche Competitors and Alternatives
- Fleetcor Competitors and Alternatives)
- SAP Concur Competitors and Alternatives
- Docuware Competitors and Alternatives
- Procurify Competitors and Alternatives
- AppZen Competitors and Alternatives
- Basware Competitors and Alternatives
- Esker Competitors and Alternatives
- Nanonets Competitors and Alternatives
- Paddle Competitors and Alternatives
- MineralTree Competitors and Alternatives
- Spendesk Competitors and Alternatives
- Account payable definition and meaning | Collins English Dictionary
- Accounts receivable definition and meaning | Collins English Dictionary
- Invoice Processing Delays Affecting More Than 50 Percent of Businesses
- Global Technology B2B How the next payments frontier will unleash small business
All sources checked October 5, 2021.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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