Wholesome working capital movement is of paramount significance to all companies. That is very true for small to medium sized companies. Accounts payable, when correctly managed, could be an efficient technique to free up and defend working capital. Listed below are ten finest practices for accounts payable administration:
1. Develop a written accounts payable coverage and procedures doc. A written coverage: (a) facilitates worker coaching, (b) helps to determine a constant response to routine conditions and, (c) might create a framework for an applicable delegation of duties.
2. Determine incompatible duties and implement applicable segregation of those duties. For instance, staff who authorize invoices for cost shouldn’t have the flexibility to edit vendor grasp recordsdata, so too, staff who can edit vendor grasp recordsdata shouldn’t be allowed to course of vendor invoices. The place attainable appoint somebody, not in any other case concerned within the accounts payable course of, to watch adjustments to vendor grasp recordsdata.
3. The place attainable make purchases from pre-approved distributors solely. This might assist negotiate extra favorable phrases.
4. When new sellers are added to the system, you’ll want to ship a brand new vendor welcome letter. The letter ought to element the place invoices should be despatched and any info essential to course of vendor invoices similar to the finished w-9 varieties, that are wanted for the annual preparation of type 1099. There are hefty fines for non-compliance with 1099 reporting.
5. Have all vendor invoices despatched to the accounts payable division, the place they need to be logged, earlier than they’re despatched for approvals. This process reduces the incidence of misplaced and lacking invoices.
6. Don’t enter vendor invoices as a batch. As a substitute, enter every bill individually as this facilitates the decision of variances and supply a greater audit path.
7. Set up a selected procedures for processing vendor invoices, together with the project of bill numbers, (the place vendor invoices are unnumbered or within the case of inner paperwork similar to worker expense reimbursements) and coming into bill numbers.
8. The bill quantity needs to be entered as billed. Debit memos and changes needs to be posted as separate transactions as this facilitates account reconciliation and backbone of variances.
9. Outline the default basic distribution codes, the place attainable, as part of new vendor arrange procedures. Code all vendor invoices with relevant basic ledger codes earlier than posting. Each of those procedures scale back the opportunity of errors.
10. Pay vendor invoices well timed and benefit from any reductions obtainable. Accounts can add as much as vital money financial savings, and persistently paying invoices well timed may help keep away from the outlay of money for late charges and curiosity and, set the premise for the negotiation of higher vendor phrases.