Tips to Improve your Accounts Payable process for Business Owners
Tips to Improve Your Accounts Payable Process for Business Owners
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Accountant Newcastle – 45 Hunter St, Newcastle, NSW, 2300
Accountant Maitland – 93 Lawes St, East Maitland, NSW, 2320





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1. Implement a Clear Approval Process
- Designate Approval Roles: Establish who in your business is responsible for approving purchases and payments. Depending on the size of your business, you may have different levels of approval for different invoice amounts.
- Automate Approval Flows: Use your accounting or bookkeeping software to set up automated approval workflows. This way, invoices are sent to the correct person for approval and tracked throughout the process.
- Set Thresholds for Automatic Payments: For smaller expenses, consider automating payments without needing individual approval. This helps reduce administrative workload and ensures payments are made on time.
2. Use Cloud-Based Accounts Payable Software
- Automated Invoice Capture: Modern bookkeeping software, like Xero, MYOB, or QuickBooks, automatically imports and captures invoice data, reducing the need for manual entry.
- Real-Time Reporting: Cloud-based platforms provide real-time data on your accounts payable, allowing you to monitor outstanding payments and cash flow easily.
- Automated Payment Scheduling: Many systems allow you to schedule payments in advance, ensuring they’re processed on time without the need for manual intervention.
Accountants Newcastle – 45 Hunter St, Newcastle, NSW, 2300
Accountants Maitland – 93 Lawes St, East Maitland, NSW, 2320
3. Establish Vendor Payment Terms and Stick to Them
- Negotiating Better Terms: When you start working with a supplier, negotiate favourable payment terms, such as extended due dates or early payment discounts. Many suppliers will offer a small discount (e.g., 2-3%) if you pay invoices early.
- Align Terms with Cash Flow: Ensure that your payment terms align with your business’s cash flow. If your cash flow is tight, negotiate longer payment periods with your suppliers.
- Tracking Payment Deadlines: Use your bookkeeping software to set up alerts for upcoming payment deadlines to avoid late payments and missed discounts.
4. Regularly Reconcile Your Accounts Payable
- Match Invoices with Purchase Orders and Receipts: Ensure that every invoice matches the original purchase order and the goods or services received. This three-way matching process helps you verify the accuracy of each transaction.
- Review Aged Payables Report: Generate an aged payables report regularly using your bookkeeping software to see how long invoices have been outstanding. This report helps you prioritise payments and identify any overdue invoices.
- Resolve Discrepancies: If you find discrepancies between your records and the vendor’s statement, reach out to the supplier promptly to resolve the issue before it becomes a larger problem.
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5. Implement Early Payment Discounts
- Identify Eligible Invoices: Review your supplier contracts to identify which vendors offer early payment discounts.
- Plan Payments to Maximise Savings: Schedule payments to take advantage of these discounts without affecting your cash flow negatively. Ensure that your bookkeeping system flags early payment opportunities so they aren’t missed.
- Prioritise Invoices Based on Discounts: When planning your weekly or monthly payments, prioritise invoices with early payment discounts to maximise your savings.
6. Streamline Invoice Approval with Automation
- Automate Approval Workflows: Use your bookkeeping or accounts payable software to create automated approval workflows. Invoices can be routed to the appropriate approvers based on amount, department, or vendor, and once approved, they’re automatically processed for payment.
- Set Approval Limits: Establish different approval limits for employees based on their roles. For example, managers may be able to approve invoices up to a certain amount, while larger expenses may require the owner’s approval.
- Reduce Bottlenecks: Ensure that approvals aren’t delayed by having a backup approver in place for key team members who may be on leave or unavailable.
7. Ensure Accurate Data Entry
- Use OCR Technology: Many bookkeeping software platforms offer Optical Character Recognition (OCR) technology, which automatically reads and inputs invoice details into your system, reducing the chance of manual data entry errors.
- Double-Check Entries: For businesses that handle manual data entry, implement a double-check process where a second team member reviews the input for accuracy before processing payments.
- Centralise Invoice Collection: Ensure that all invoices are sent to a single email address or processing point to avoid lost or duplicated invoices.
8. Establish Strong Vendor Relationships
- Communicate Regularly: Keep open lines of communication with your suppliers. If you’re facing cash flow issues, let them know in advance rather than missing a payment deadline.
- Pay on Time: Consistently paying your invoices on time builds trust and may lead to better payment terms or discounts in the future.
- Negotiate Favourable Terms: Strong relationships may give you leverage to negotiate longer payment terms, which can help you manage your cash flow more effectively.

9. Monitor Cash Flow and Plan for Future Payments
- Create a Cash Flow Forecast: Use your bookkeeping software to generate a cashflow forecast that outlines your expected income and expenses for the coming weeks or months. This will help you anticipate when funds will be available and plan payments accordingly.
- Schedule Payments Strategically: Align your payment schedule with your cash inflows to avoid draining your cash reserves. Pay invoices as close to the due date as possible without incurring late fees, unless early payment discounts are beneficial.
- Prioritise Critical Payments: In times of tight cash flow, prioritise payments to critical suppliers—those whose goods or services are essential to keeping your business running. Communicate with other vendors to request extensions or negotiate new terms if necessary.
10. Outsource Accounts Payable Management
- Accuracy and Efficiency: Professional bookkeepers handle data entry, invoice approval, and payments with precision, reducing the risk of errors or missed deadlines.
- Time-Saving: By outsourcing, you can focus on running your business while your bookkeeper manages the complexities of accounts payable.
- Cash Flow Management: A professional bookkeeper can help you monitor your accounts payable and cash flow, ensuring that your business remains financially stable and payments are prioritised effectively.
11. Regularly Review and Optimise Your AP Process
- Review Approval Workflows: Periodically assess your approval process to ensure it remains efficient as your business grows. You may need to adjust approval thresholds or streamline the number of people involved in the process.
- Automate Repetitive Tasks: Identify any repetitive tasks that could be automated to save time and reduce errors. Automation can significantly reduce manual work, allowing you to focus on more strategic activities.
- Seek Feedback from Vendors: Ask your suppliers if there’s anything you can do to improve the payment process on their end. This could help strengthen your relationships and ensure smoother transactions.