Tips to Streamline and Upgrade Your Accounts Payable and Receivable Process
Accounts payable and accounts receivable are two departments which need to be constantly tracked for the smooth functioning of any business. Accounts payable (assets you owe) and account receivable (assets you are owed) are both responsible for keeping track of the money coming in and going out of your organization. Combined, they both hold the key to the success of your business.
Managing AP and AR effectively can at times get difficult for companies. It is important to remain constantly updated with the functioning of these accounts as it helps to maintain a consistent cash flow and avoid any kind mishaps such as overpaying your suppliers or not getting paid from your buyers. In this article we have listed some of the tips on streamlining accounts payable and also provide some tips to upgrade accounts receivable process.
Top 5 Tips to Streamline and Upgrade Your Accounts Payable and Receivable Process
Accounts receivable and accounts payable are two of the main indicators of a company's overall cash flow. It is very critical as it indicates the financial health of the company. Efficiently managing and tracking them is of utmost importance not only to assess the overall company performance, but also to help the decision makers to make critical business decisions. To make things easy we have listed some of the tips on streamlining the accounts receivable and accounts payable process -
Reduce Transaction Cycles
By reducing the transaction cycle for goods bought or sold you can help reduce a lot of extraneous costs for your company. Longer transaction cycles may result in lower cash flow as in such cases a company usually waits for their buyers to pay which can then be used to pay its suppliers. Therefore, short timelines need to be created for receivable and payables so as to streamline the procedure. Departments need to be trained to issue purchase orders, invoices, and other documents on certain days of a week or month.
Follow Up with Old Accounts
It is important to record all transactions made within your company and issue statements regularly, but it is equally important to stay updated with old accounts and check if everything is cleared. If anything is pending, then immediate action needs to be taken in order to settle that particular transaction and set the books in order. A policy can be set up which indicates the maximum period it should take to clear a customer's account.
Create Credit Policies
Transactions which take too long to close can be frustrating to owners and managers alike. Your receivables department therefore needs to establish certain credit policies which may vary for different clients. Regular customers with a good credit rating can be given greater flexibility but the same need not be provided to first time clients. Similarly payable departments need to pay the suppliers as soon as they receive the goods in a good condition, thereby reducing liability.
Communicate Well Between Departments
Sometimes it gets tough to keep track of payables and receivables and juggling the two can go out of hand. To make the coordination between the two departments easier, it is advised to have better communication between the two. Both the departments must consult each other on sales and purchases which affect the company. If there is an increased demand, the receivables department can communicate to the payables to order more items. Similarly in tight times, payables may look to reduce the procurement until things get better.
Track Everything Easily with Automation
Tracking payables and receivables on a daily basis can be a cumbersome task for most businesses. The processes involved in the creation of invoices, receipts, purchase orders, shipping orders, receipts, and other financial documents are varied and impossible to be on top of every day. Even if a single document is lost, it can create problems for the company down the line. The best solution is to use automation software which will automate all the transactions and simplify the tracking process, thereby reducing human errors.
These tips can prove to be very beneficial in juggling the two processes within every company, be it big or small. The balancing of AP and AR in any company can be tricky and needs to be carefully analyzed and planned. By following these simple tips, every company can manage to easily keep a track of all the steps in the process and improve their cash flow, save considerable amount of money and time, and build great customer relationships.
Streamline Your Accounts Payable and Receivable Process with Flatworld Solutions
Flatworld Solutions has been providing top quality accounts payable and accounts receivable services and a host of other financial services to clients around the world. Our experience of over 15 years in this industry has helped us to understand different businesses and cater to their specific needs. Our financial data security and privacy measures ensure that all the data you share is completely safe with us. Our cost-effective AP and AR functions help to improve cash flows, save time and money, and improve the quality and flexibility of the processes.