Six must read tips for accounts payable best practices

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By Proformative

We are living in times when there is a ‘best practices’ module in every field. Accounting is a field with written rules (IFRS etc) that must be followed at all times. However, in addition to such rules, there are some other practices that one can follow to further improve the accounting procedures. Explained below are six such accounts payable best practices that every company should follow.

 

Have a clear cut policy

It is very important to have a clear cut policy regarding everything related to accounts payable. It is very crucial to have a well-explained, concrete policy so that there is no vagueness. A policy basically serves like a manual that one can refer to in case any problem arises.

If every accountant/clerk uses the method that suits him/her the best, there will be havoc in the office making it difficult for managers to manage things. With well-explained policies, it is easier to streamline and gauge work.

Some suggested policies include:

• Entering invoices individually and making sure they are logged before approval.

• All invoices having account codes and special handling notes on them.

A business can make policies according to the nature of the business. However, they should always follow accounting guidelines.

 

Have a strong communication process

It is very important to have a strong chain of communication. The policies you prepare must be communicated well to everyone who should know it. There is no point in preparing policies if they are not communicated properly.

Everyone should know his/her job well so that perfection can be achieved. Every point such as method of filing and approving invoices should be clear cut. They should be written in such a way that it is easy to comprehend so that there is no possibility of confusion. 

Additionally, stay in touch with the vendors too. A good option is to send them a welcome letter informing them of the information you need to process their invoices etc. Vendors will also appreciate such a move as it gives them a feeling of security, as they know that the other party is working towards clearing the payment.

 

Have the right person for the job

It is important to have the right person doing the right job. Firstly, the individual who is entering the invoices should differ from the individual who is signing and approving the invoices.  Such a move will help reduce the risk of cheating or scams. Always choose the person who knows the job well and is interested in putting efforts.

 

Always double check

Human errors are very common. It is important to keep an eye on things and double check every figure before noting it down. Additionally, every invoice is required to be noted down as billed, even if the company is not planning to pay the whole amount. In such a scenario, a credit note should be matched and entered against the bill.

 

Avail discounts

More often than not, you might be in a position to avail discounts. The secret lies in paying attention to every invoice and seeing if you are eligible for any discount. Sometimes, vendors offer discounts (such as cash discounts, which are generally based on paying the amount within a specified time) that can help you save money.

 

Gather all the necessary documents

It is important that you keep all important documents (invoices, deposit slips), as they may be needed at a later stage for confirmation or other purposes. Additionally, try to make all the payments from original invoices. However, if this is not possible, make sure you verify your records for the amount and invoice number.

In addition to this, make sure of the presence of a W-9 on file for every vendor before you make the payment. This move will save you from year-end hassle that one has to bear in the preparation of 1099s. You may end up paying hefty fines for a lack of compliance with 1099 requirements for reporting.

Implement these account payable practices in your business and you will find an improvement in your company’s workflow. These points will not only help you keep a tab on everything, but you will also be in a position to save money by cutting down on penalties and availing discounts. The key lies in having well-defined policies and making sure that they are fully implemented.

Sources: wikipedia.org, proformative.com