How to best manage your accounts receivable and accounts payable
How to manage accounts payable
Bills from vendors are first recorded as money owed. They’ll then go through an approval process, to make sure the goods or services were received. Once approved, payment is scheduled according to the vendor’s payment terms. The longer your payment terms are, the better for your cash flow. On the other hand, it’s nice to take advantage of early payment discounts if they’re on offer. When payment is made, the books are updated to show the bill isn’t owed anymore.
Remember your balance sheet? It’s also called your statement of financial position. It’s best to ensure the amount of money owed to you as accounts receivable is more than what’s owed by you as accounts payable.
Modern accounts payable management
You can enter bills into your ledger by typing them in or by emailing them to your accounting software. There are also clever software apps that read and extract data from bills and automatically send it to your accounting software. The accounting software creates the book entry and helps you schedule payments, then updates your ledger when the bill is settled.
How to manage accounts receivable
Decide how long customers will have to pay your invoices and commit to it in writing. Share and agree on those payment terms before doing business with anyone new. Create and send invoices as soon as a sale is agreed (include the agreed payment terms on the invoice). Watch your bank account for payment and follow up immediately if they miss the due date. You can get more tips on accounts receivable in this Xero Invoicing Survival Guide or this Quickbooks article on grouping account types.
Modern accounts receivable
Invoices can be created quickly on apps and sent with immediate payment options like credit and debit cards. Smart software can even check your bank for payments and keep a watch list of unpaid invoices for you. Learn more about Quickbooks online invoicing.