Seven Best Accounts Payable Best Practices
These are some of the most frequently asked NetSuite questions our CPAs have come across.
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Accounts Payable
Accurate accounts payable transactions boosts the overall creditworthiness of your business and leads to cleaner accounting processes.
Accounts Payable
Accurate accounts payable transactions boosts the overall creditworthiness of your business and leads to cleaner accounting processes.
Understanding How Accounts Payable Affects Your Business
If running a growing business is your top priority then finer details around accounts may not be your core focus. Yet it is a very important part of any successful business. If you’re unsure whether your accounts payable are being handled efficiently, our team of Outsourced Accountants can help. We can help you manage the tedious tasks you’re ready to hand over.
Understanding How Accounts Payable Affects Your Business
Having constant cash flow ensures operational efficiency, in which accounts payable (AP) plays a significant role in building a company’s credibility and success. For understanding, an apprehensible accounts payable definition is money owed to suppliers for goods or services on trade credit. In business law, it is a short-term debt your company may owe for products received or a separate business department of accounting.
Some accounts payable examples include bulk office supplies purchased on a trade credit with a vendor, weekly services along with the likes of sanitation services, etc. Suppose your business falls behind on monthly payments because you have insufficient cash flow, it will affect your credibility. Suppliers, creditors, and even investors will consider non-payments as delinquent which may affect your credibility in the analysis process. Evaluating your financial position is essential for investors and creditors when considering investing or opening a line of credit.
While paying your bills is an account payable process, it is also a financing source with incentives if offered by your suppliers. If your company is not paying its bills promptly, you become a risk, and a supplier may stop extending credit to allow you to purchase products and services. Keeping payments current has the benefit of potentially building a successful business and attracting investors when you want to expand. Learn the impact accounts payable has on your business and why an accounts payable manager can be key to improving cash flow within your business and maintaining healthy vendor relationships.
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- Payment duplication is common in accounts payable and can go undetected without the expertise of an AP manager who analyzes and verifies transactions.
- Erroneous or misdirected payments may be paid to the wrong vendor when a business doesn’t have adequate accounts payable processes in place.
- Inflated payment amounts could slip through on invoices due to internal fraud should the unfortunate event occur in which an employee deceptively works with vendors.
- Fraudulent accounts payable and disbursements would be seen as misappropriations of the company’s assets, whether by an internal employee or management.
- A good accounts payable system encourages prompt payments and responses to customers’ inquiries. This encourages creditworthiness and maintains good working relationships with vendors.
- A healthy accounts payable system ensures the audit process runs smoothly when auditors request paid invoices from random vendors to detect inaccuracies.
- Accurate accounts payable transactions lead to a cleaner accounting process.
- A solid AP system creates constant cash flow within the business, and
- Encourages fraud avoidance.
Why an Efficient Accounts Payable System is Important for Your Business
Accurate cashflow
Promotes creditworthiness
Cleaner Accounting
Smoother Auditing Process
Encourages Fraud Avoidance
Are you receiving money owed to you by clients on time, and do you pay your creditors on time?
Are you receiving money owed to you by clients on time, and do you pay your creditors on time?
Steady cash flow is extremely important for the successful operation of any business. Accounts receivable is the payment your company gets from its customers to purchase goods or services on credit. Accounts payable refers to the money you owe suppliers for goods or services on trade credit.
Handling the responsibilities of AP for a startup business is complex, especially in knowing is accounts payable a debit or credit. When an AP manager records AP transactions, the asset or expense account regarding the purchase is a debit. Once paying the accounts payable, the manager will debit AP and credit the cash account, using accounts payable software such as:
Bill.com is one of the reliable accounting tools that give businesses an easy way to get a handle on AP, and keep things ticking over smoothly in this regard. Bill.com allows you to pay bills, get paid, and send invoices with minimal effort. The best part is that it is designed to integrate with various accounting software platforms such as QuickBooks or NetSuite. This means that making use of Bill.com not only allows you to manage payments due by automating the process, it also links with your accounting software, allowing the transaction recording process to be automated.
Business owners may not be aware that AP and AR can affect balance sheet entries and the account payable turnover ratio level. Measuring how quickly you make payments to vendors or creditors through trade credit is the accounts payable turnover ratio for calculations. To calculate the turnover ratio, the manager will need to determine the average AP by adding the opening and closing balances, then dividing the result by two.
The computation of the AP turnover ratio is the net credit purchases divided by the average accounts payable total. Investors and lenders may use ratios to determine your creditworthiness as part of the evaluation process before an investment or extending credit to you. If there is a high ratio, it could mean you make timely payments, but a low ratio may reveal untimely or delinquent payments
AP Internal Controls
Establish AP internal controls that will limit access to your accounting software and help identify inefficient processes.
Automated Technology
Utilize paperless automated technology to eliminate excessive paper waste with manual invoicing.
Accurate Information
Keep your suppliers’ information updated to make they receive payments on time.
Protocols that detect duplication
Create safe protocols that will automatically detect payment duplication. At Fusion, our CPAs have built bespoke NetSuite integrations. Contact us to find out if we can help with an integrations solution for you.
Invoice Organization
Invoices organization and prioritization for easily tracking payments scheduled for payment by the due dates.
Fraud Detection
Set up fraud detection in the accounts payable management system for flagging AP transactions.
Standardized Payment Terms
A Chart of Accounts (COA) is a breakdown of all accounts and transactions in the general ledger of a company and organizing them into subcategories. It provides a comprehensive overview of your organization’s financial structure and account classifications and can be accessed within the Financials module. Follow the following path to access the COA:
- Go to Lists > Accounting > Accounts.
- Follow the detailed instructions as outlined in the NetSuite Help Centre.
What is an Accounts Payable Manager Responsible For?
An accounts payable manager’s job description comprises a variety of responsibilities, including tracking all your expenditures, payments, invoice statements, and purchase orders. Managing all AP activities, including prompt payments to your vendors, would form part of the duties of an accounts payable manager. Other responsibilities include verifying data and journal entries, comparing the AP management system reports, preparing accounts analysis, and producing monthly reports.
At Fusion CPA, our accounting professionals understand how AP affects your company, and are equipped to handle accounts payable transactions. We can help you create an efficient AP management system that would allow you to keep track of transactions to be able to easily detect fraud or suspicious billing and transactions. Outsourcing this service can help you reduce costs and ensure payment promptness to help keep your records accurate and up to date.
Our Services Can Scale With Your Business
We also have CFOs on our team to assist you with business growth when you’re ready to make the most of your business’ potential.
We are outsourced bookkeepers, CFOs, and entrepreneurs who are passionate about offering our clients a lasting relationship to help their business grow.
After our accounting services stabilized your finances, we can use your company’s accounting data to determine your profitability, as well as business forecasting.
Our Services Can Scale With Your Business
We also have CFOs on our team to assist you with business growth when you’re ready to make the most of your business’ potential.
We are outsourced bookkeepers, CFOs, and entrepreneurs who are passionate about offering our clients a lasting relationship to help their business grow.
After our accounting services stabilized your finances, we can use your company’s accounting data to determine your profitability, as well as business forecasting.
