Accounts payable is the term used to describe money that one business owes to another. Typically, these include vendors who have provided goods or services to your company and extended credit of 30, 60, or 90 days. Keeping up with these payments is essential to stay in good graces with your vendor as well as protect your ability to purchase on credit in the future. You will also end up paying more in late fees and interest, impeding your company’s cash flow in the process.
Sometimes businesses have the best intentions of keeping up with accounts payable but fall behind due to using a manual entry system. A program such as QuickBooks saves time and money with its many features. One of these is the ability to track all bills payable this month and pay via Bill Pay or an online check. This ensures that your company remains up-to-date with all outstanding invoices.
Best Accounts Payable Practices When Paying for Services
When you receive an invoice in the mail or by email from a vendor, be sure to take the time to confirm that the hourly rate, hours billed, and service descriptions are all accurate. After confirming the details to your satisfaction, the next step is to enter the invoice into QuickBooks or another accounting program. If you prefer to continue using a manual process, you will need to create a new entry in the accounting journal to plan for the upcoming payment. You will also need to create a filing system to ensure timely payment of the invoice.
Placing Orders for Inventory
It’s common practice to create a purchase order when submitting a request to a supplier for business inventory. The purchase order should indicate a description of the items you wish to order, the price that you and the vendor agreed upon, and the quantity. Upon receipt of your items, be sure to check to ensure that you received everything the vendor will bill you for later.
It’s easy to do this automatically with QuickBooks using a feature called Receive Inventory. All you need to do is enter the purchase order number. You will want to hold off on this step and contact the vendor if the quantity received doesn’t match the quantity ordered.
Incorporate Three-Way Matching for Maximum Accuracy
Three-way matching means that you compare the purchase order, vendor invoice, and inventory receipt to confirm you received all goods ordered at the agreed-upon price. You start this process by comparing the inventory receipt and the purchase order followed by both documents with the vendor invoice.
Consider Outsourcing Your Accounts Payable
Perhaps you don’t have the time, skill, or desire to keep up with accounts payable yourself and can’t afford to hire an employee to do it for you. Doerhoff & Associates, CPA can be the ideal solution in this situation. We invite you to request more information today to learn about the many services we offer to help you run your small business.
