Actionable tips to manage your accounts payable process
- •Your accounts payable
- •Your accounts receivable
- •So, what’s the difference?
- •How the accounts payable process works
- •Our top tips for managing your accounts payable process
- •Track your due dates and to improve cash flow
- •Put your expense management on autopilot
- •Airwallex helps you improve your accounts payable process
Human beings crave structure. We love systems, patterns, and repetition.
The same goes for your business’ finances. The act of improving your accounts payable processes will allow you to gain control over your business’ cashflow, and allow you to put a structure around how you make your payments.
And with this structure comes growth.
In this article, we’re going to guide you to improve the management of your business’ accounts payable process and provide you with actionable tips that you can implement now and over the course of the year.
Let’s start by defining what we mean by "accounts payable".
Your accounts payable
This is the money that’s owed by your business to other entities, whether it’s to pay your suppliers, pay for services, or cover your bills and other liabilities. Your accounts payable typically covers short-term debts that you can pay off within the year—anything longer than this, like a loan or a mortgage, aren’t included.
Your accounts receivable
This is money that’s owed to your business for your services or the products you sell, from your customers, clients, or elsewhere, that hasn’t yet been paid. As soon as you send your customer or client an invoice, this means that sum of money is now part of your accounts receivable until it gets paid.
So, what’s the difference?
Essentially, accounts payable is your outgoing funds—the amount of money you owe—and your accounts receivable is your incoming funds—the amount of money that’s owed to you.
How the accounts payable process works
Accounts payable can become a murky world if you dive too deeply into it, so we’ll keep it simple.
Your accounts payable process takes place in three steps:
1. A purchase order is completed
This is a list of the items or services you’re paying for. This will include the prices, any terms or conditions that govern the transaction, and the timeframe for payment.
2. A receiving report is processed
The supplier makes a record of the goods or services that they provided to you, and the amount of money that you owe them. This report will go into specific detail about the goods or services, so it’s important to read this carefully to ensure you’re getting what you paid for.
3. You receive and process the invoice
Your supplier will then send you the invoice for their services or goods, and your business will process it. Much like the point above, it’s important to read this invoice carefully and ensure that what they’re saying they supplied actually matches what you received.
4. You pay the invoice
Once you’ve checked and processed the invoice, it’s time to send money through for payment.
Our top tips for managing your accounts payable process
Centralise your payments to a single account
Consolidate all your finances to ensure all your money comes into and goes out of one central business account. This way you’ve only got one account to keep track of, and all your cash flow is tracked against this one location. This makes it much easier to monitor and provides you with one source of truth when it comes to your business’ finances.
Track your due dates and to improve cash flow
As we’ve said before, good cash flow management is essential in growing your business. Actively tracking the due dates of your invoices means you know exactly when each one needs to be paid, so you’re able to take better control of your payments.
Paying your invoices and debts on their respective due dates means that you can delay payment until it’s absolutely necessary, ensuring you keep money in your account for longer. This means that you have funds available should you need them, and if your account generates interest, you’re able to make a little extra money just from having this money stay in your account. Granted, it’s not much, but each little bit does add up.
Tracking your due dates also means you know when and why money is leaving your account. Without this structure, making irregular and ad hoc payments for your invoices means you’ll never accurately understand how and where your money is being spent. Tracking these dates, and understanding the regularities and patterns behind them, means you’ll better understand your business’ turnover, and even enable you to forecast your future cashflow.
Airwallex makes it easy to pay your invoices on time with our International Payments. You can use your International Payments to pay your suppliers anywhere in the world, in up to 34 different currencies, within 1-2 business days. You can schedule your payments so that you pay your invoices just before their due dates, keeping your cash flow consistent.
Have a clear authorisation process
Without a clear authorisation process, payments can get made without your oversight, errors can occur, and your budget will go out the window. A defined authorisation process improves accountability as there’s always a clear and traceable chain of responsibility. If a payment gets made, it must go through at least one approval—or even better, two.
Double sign-off means there’s even less chance of making payment errors and ensures a higher level of scrutiny than simply the team manager or department head.
Where this double sign-off occurs depends on your business. It can be authorised at a by-department level, for smaller payments, or with your finance department for larger, irregular spending.
It’s always good to get a second set of eyes over your work, so why wouldn’t you do it with your finances? This ensures that all payments receive the level of approval they need and that you can always ensure that the right amount of money is leaving your business, for the right reasons.
Pay your invoices in larger batches
Think about your payments for a minute. Every time you make a client payment, you’ve got to log into the platform, create the payment, check the details, receive approval, and send the payment. While it might not seem like much at the time, each minute you do this adds up.
Say you make these payments once a day (at a conservative estimate). If you consolidated this time and made all your payments in one large batch, once a week, you would effectively reduce the time spent making your payments by up to 80%.
Making large batch payments simplifies your accounts payable process. If all your payments are made at once, it just becomes easier.
With Airwallex, you can bundle all your payments together, and make your weekly pay run a breeze. It’s easy to do: just log all your payments into one CSV file, upload it to your Airwallex platform, and you’re good to go.
Instead of making small payments here and there, you’re able to get it done all at once, in one hit. You can pay in up to 34 currencies, across all your invoices, all in one simple file list. Once you’ve got your template sorted, all you need to do is add in your payment details, and the rest can take care of itself.
Put your expense management on autopilot
Organising and collating all the receipts for your monthly payments can sometimes be as easy as reaching into your file for that month. Other times, it can be like pulling teeth. Finding and collating all the receipts for all the payments you’ve made can make the end of the month a nightmare.
There’s a better way. By integrating your payment systems with your accounting platform you’re able to put your expense management on autopilot. Each time you make a payment, the details and expense elements for that payment are tracked and logged, reducing the double handling, and ensuring a clear record is kept.
Airwallex can help you achieve this. Our business accounts are quick to set up, easy to use, and can be and can be set up to automatically sync with your Xero account. You can also track each and every purchase you make, down to the individual employee with our feature-loaded debit cards.
Empower your team to make purchases, approve expenses on the go and ensure all transactions are within policy. Easily reconcile all outgoing payments with your bills, expenses and invoices without having to switch between tools.
Airwallex helps you improve your accounts payable process
Your accounts payable processes don’t have to be a looming monthly nightmare. We’ll help you make them easy.
Get in touch with us to book a free online demo, and discuss how Airwallex can help streamline and improve how you manage your finances.
Our products and services in Australia are provided by Airwallex Pty Ltd ABN 37 609 653 312 who holds AFSL 487221. Any information provided is for general information purposes only and does not take into account your objectives, financial situation or needs. You should consider the appropriateness of the information in light of your own objectives, financial situation or needs. Please read and consider the Product Disclosure Statement available on our website before using our service.
How to minimise foreign exchange costs in business