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Tips to Improve your Accounts Payable process for Business Owners

Tips to Improve Your Accounts Payable Process for Business Owners

For any small business, managing accounts payable (AP) is critical for maintaining strong supplier relationships and ensuring the smooth flow of operations. However, accounts payable can become a significant source of stress if not managed effectively. Without proper processes in place, your business can face late payment penalties, strained supplier relationships, and cash flow problems. By improving your accounts payable process, you can gain greater control over your business’s financial health, avoid costly errors, and even unlock opportunities for better supplier terms.
At Bottrell Accounting & Bookkeeping, we specialise in helping businesses in Newcastle and Maitland streamline their bookkeeping and financial management processes. In this guide, we’ll explore essential tips and hacks to help you improve your accounts payable process, ensuring that your business stays organised, compliant, and financially healthy.

Our Newcastle & Maitland Offices:-

  • Newcastle Accountants & Advisors – 45 Hunter Street, Newcastle.
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How to contact us

  • In Person: Visit our conveniently located office at 45 Hunter St, Newcastle, NSW, 2300.
  • Online: Schedule a virtual appointment via Zoom or Teams for added convenience.
  • Mobile Tax Services: Benefit from the flexibility of having our expert CPA Newcastle accountants come to you for tax assistance.
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At Bottrell Accounting, we’re more than just consultants and accountants; we’re your strategic financial partners. Contact us today to discover how we can help you achieve your financial goals and secure a prosperous future .

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Accountant Newcastle – 45 Hunter St, Newcastle, NSW, 2300

Accountant Maitland – 93 Lawes St, East Maitland, NSW, 2320

Bottrell Accountants | Newcastle Accounting Firm | Maitland Accountants
Bottrell Accountants | Newcastle Accounting Firm | Maitland Accountants
Bottrell Accountants | Newcastle Accounting Firm | Maitland Accountants
Bottrell Accountants | Newcastle Accounting Firm | Maitland Accountants
Bottrell Accountants | Newcastle Accounting Firm | Maitland Accountants

Our Accounting Services

Taxation

Our experienced tax professionals at Bottrell Accounting ensure that your tax obligations are met efficiently. We also focus on maximizing your tax savings through strategic planning. Our services include:

-Personal Tax Returns: Accurate preparation and lodgement of personal income tax returns.
- Rental Property Tax Returns: Expert handling of tax matters related to rental properties.
- Business Tax Returns: Comprehensive support for business tax planning and compliance.

Bookkeeping

Maintaining organized financial records is crucial for informed decision-making. Our bookkeeping services cover:
- Bookkeeping Processing: Timely and accurate record-keeping for your business transactions.
- Bookkeeping Data Entry: Efficient data entry to keep your financial records up-to-date.

Cash Flow Management

Optimizing cash flow is essential for financial stability. Our tailored solutions include:
- Cashflow Forecast: Predictive analysis to help you manage cash flow effectively.
- 3Way Cashflow: Comprehensive insights into your inflows and outflows.

Payroll Processing

Let us handle payroll processing for you. Our services ensure accurate and timely payments to your employees while staying compliant with relevant regulations.

Financial Reporting

Financial Reporting Gain valuable insights into your financial performance with our comprehensive reporting services:
- Company Tax Accounting: Accurate preparation of tax-related financial statements.
- Business Tax Accounting: Detailed reporting for business tax purposes.
- SMSF Tax Accounting: Specialized reporting for Self-Managed Superannuation Funds.

Financial Control Services

Our financial control services help businesses establish robust systems and controls, ensuring accuracy, transparency, and compliance.

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1. Implement a Clear Approval Process

A well-defined approval process is critical to managing your accounts payable efficiently. When multiple people are responsible for approving payments or when approvals are delayed, invoices may fall through the cracks, leading to late payments or missed opportunities for discounts.
Steps to Implement a Clear Approval Workflow:
  • 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.
Tip: Document your approval process so that everyone in your organisation understands how invoices should be handled. A clear process reduces delays and ensures compliance with your business’s financial policies.
At Bottrell Accounting & Bookkeeping, we help business owners establish efficient approval processes, ensuring that invoices are reviewed and approved on time.

2. Use Cloud-Based Accounts Payable Software

Manual entry and paper-based processes are prone to errors and inefficiencies. Using cloud-based accounts payable software automates many aspects of AP management, from data entry to payment scheduling. This improves accuracy, reduces the risk of missed payments, and provides real-time insights into your accounts.
Benefits of Cloud-Based AP Software:
  • Automated Invoice Capture: Modern bookkeeping software, like XeroMYOB, 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.
Tip: Look for a solution that integrates with your existing bookkeeping system to ensure a seamless flow of financial data across your business.
At Bottrell Accounting & Bookkeeping, we help businesses implement and optimise cloud-based bookkeeping solutions, allowing for smoother and more efficient accounts payable processes.

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

One of the most common accounts payable mistakes businesses make is failing to adhere to agreed-upon payment terms with vendors. Not only can this lead to late fees and interest charges, but it can also harm your relationship with key suppliers. It’s important to understand and negotiate payment terms upfront and then stick to them consistently.
Key Aspects to Consider When Establishing Payment Terms:
  • 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.
Tip: Regularly review your vendor agreements and payment terms to ensure they continue to support your business’s cash flow and operational needs.

4. Regularly Reconcile Your Accounts Payable

Reconciling your accounts payable regularly helps you ensure that all invoices are accounted for, payments are up to date, and no discrepancies exist between your records and your supplier’s statements. Regular reconciliation allows you to catch errors, such as duplicate invoices or overpayments, and helps avoid cash flow problems caused by outstanding liabilities.
How to 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.
At Bottrell Accounting & Bookkeeping, we provide reconciliation services that ensure your accounts payable are accurate, up-to-date, and compliant with Australian accounting standards.

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5. Implement Early Payment Discounts

Taking advantage of early payment discounts can improve your cash flow and reduce your overall expenses. Many suppliers offer a discount for paying invoices before the due date, typically 2-3% if paid within 10 days. By taking advantage of these discounts, you can reduce the cost of goods and services while maintaining a positive relationship with your suppliers.
How to 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.
Tip: While early payment discounts can be beneficial, always ensure that paying early doesn’t strain your cash flow. Only take advantage of discounts when it makes sense for your business.

6. Streamline Invoice Approval with Automation

Managing the flow of invoices through multiple levels of approval can slow down the accounts payable process. Delays in approving invoices can result in late payments and damage supplier relationships. Automating the approval process allows you to streamline this workflow and ensure timely payments.
How to Streamline Invoice Approval:
  • 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.
At Bottrell Accounting & Bookkeeping, we assist businesses in setting up automated approval systems that save time and ensure that no invoices are missed or delayed in the process.

7. Ensure Accurate Data Entry

Errors in data entry can lead to costly mistakes, such as overpayments, underpayments, or duplicate payments. It’s essential to ensure that your accounts payable data is accurate from the moment an invoice is entered into your system.
Best Practices for 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.
Tip: Automating data entry as much as possible not only reduces errors but also saves time that can be better spent on higher-value tasks.

8. Establish Strong Vendor Relationships

Building and maintaining strong relationships with your vendors can benefit your business in several ways. Good relationships can lead to better payment terms, faster resolution of disputes, and even priority treatment in times of supply chain shortages.
Tips for Building 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.
At Bottrell Accounting & Bookkeeping, we help business owners manage their vendor relationships by ensuring timely payments and accurate bookkeeping, which strengthens supplier trust and keeps your business running smoothly.
Bottrell Accountants | Newcastle Accounting Firm | Maitland Accountants

9. Monitor Cash Flow and Plan for Future Payments

Effective accounts payable management isn’t just about processing invoices on time—it’s also about managing your cash flow effectively. By monitoring your business’s cash flow and planning for upcoming payments, you can avoid cash shortages and ensure your accounts payable process runs smoothly.
How to Monitor Cash Flow and Plan 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.
Tip: Regularly reviewing your cash flow and adjusting your payment strategy based on anticipated income can help prevent cash shortages and ensure your business stays financially healthy.
At Bottrell Accounting & Bookkeeping, we provide cash flow management services to help small businesses plan for future payments and maintain a healthy balance between income and expenses.

10. Outsource Accounts Payable Management

For many small businesses, managing accounts payable in-house can be time-consuming and prone to errors, especially if you’re juggling multiple tasks as a business owner. Outsourcing your accounts payable management to a professional bookkeeper can streamline the process, ensure accuracy, and save you valuable time.
Benefits of Outsourcing Accounts Payable:
  • 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.
At Bottrell Accounting & Bookkeeping, we offer comprehensive accounts payable management services tailored to the needs of small businesses in Newcastle and Maitland. We ensure that invoices are processed promptly, payments are made on time, and your cash flow is optimised for business success.

11. Regularly Review and Optimise Your AP Process

No accounts payable system is perfect from the start. It’s important to regularly review your process and look for areas that can be improved. This can involve reducing manual steps, streamlining approval workflows, or renegotiating payment terms with suppliers.
How to Optimise Your Accounts Payable 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.
Tip: Consider conducting an annual audit of your accounts payable process to identify inefficiencies and areas where automation or outsourcing could improve your workflow.
Conclusion: Improve Your Accounts Payable Process with Bottrell Accounting & Bookkeeping
 
Managing accounts payable efficiently is essential for maintaining strong supplier relationships, optimising cash flow, and ensuring your business runs smoothly. By implementing strategies such as automating your invoicing process, establishing clear payment terms, and regularly reconciling accounts, you can streamline your AP process and reduce the risk of errors or delays.
 
At Bottrell Accounting & Bookkeeping, we specialise in helping small business owners in Newcastle and Maitland optimise their accounts payable processes. Our expert bookkeepers provide end-to-end support, from setting up automated payment systems to ensuring compliance with Australian accounting standards.
If you’re ready to improve your accounts payable process and take control of your business’s financial health, contact Bottrell Accounting & Bookkeeping today. Let us handle the complexities of accounts payable so you can focus on growing your business with confidence.