Any Company or individual buys items on credit that has to be paid within a short time. This amount that has to be paid within a short term is known as Account Payable. In Australia, companies consider accounts payable as “current liabilities” and aims in paying to avoid “default”.
Example of accounts payable is of consumers of utilities (Broadband, cable TV network, electricity, and telephone). End of the month or after certain duration, bills are generated with a certain due date. Consumers have to pay the “accounts payable” amount stated in bills within the due date.
Methods for manage accounts payable aptly:
Twice a month is adequate for check runs. The accounting officer should create the check runs using a backup of invoice. These should have been already approved by department heads. Ultimately, the check run should be checked and signed by the top level executive.
Ensure the most important invoices are paid to keep in check of accounts payable. Train appropriate staffs to deal with and manage accounts payable. One can pay part of the large amount or delay in paying vendors with tolerant due dates.
2. Use Technologies:
Companies are advised to seek the services of outsourced accounts payable individuals and Organisations. They ensure the account payable software is properly installed and configured for correct transactions of cash. Always avoid all errors involved in paying modes like check numbers for vendors paid.
3. Negotiate Vendor Terms:
Even though account payable comes with a due date, one can call and negotiate with the vendor. Sometimes, one can avail special discounts offered by the vendor. If there is a financial crisis within the Company, then it is best to inform the vendor.
4. Reduce Chief Financial Officer’s Influence:
In most organizations, the CFO is the only officer who is authorized to sign checks and more. The accounting officer should run accounts payable, check invoices that require payment, print checks, and others. Ultimately, the accounting officer should take all documented items to the CFO to check and sign.