When it comes to running a business, it becomes crucial to learn some skills to manage Accounts Payable (AP) and Receivables (AR). Keeping track of what you owe and what your sales are can become a challenge, especially if you have to manage hundreds of different transactions every day.
This is where the two departments come into play: Accounts Payable (what you owe) and Accounts Receivable (what you owe). These two departments work in harmony to track money in and out.
Staying on top of these accounts brings a challenge that every business face. Doing that can significantly help businesses track their progress in the market.
Tips to manage accounts payable (AP) and accounts receivable (AR)
1. Review all accounts payable and receivable
Getting into the habit of reviewing all of your accounts payable and receivable can help you establish a solid foundation for your business. It also allows you to manage your cash flow effectively. Knowing if your payments are coming in on time can give your accounts a definitive structure.
Typically, trade payables relate to current liabilities (usually items that are expected to be settled within the next 12 months). Long-term debt is a liability that is generally not included in PAs. Although they are intended to be excluded from accounts payable, they should still be taken into account in cash flow management.
2. Beware of fraud
It is important to always be on the lookout for fraud, especially when it comes to accounts payable. This is where most embezzlement takes place. For this reason, we always recommend businesses keep an eye on their AR/AP. Tools like Paci can help you do that. Paci can help you track both AR and AP and leave no room for cheating.
3. Establish credit policies
It’s always good to offer credit policies to customers and use the credit with your own debts. One of the biggest challenges managers face is the time it takes to close a deal. That’s why it’s important for accounts receivable to set strict credit terms.
The most common action taken by the Accounts Receivable team is to give regular customers payment flexibility, while not being flexible for new customers. According to the Accounts Receivable Service Terms, the Accounts Payable Service pays vendors.
4. Always be organized
When it comes to financial management, staying organized is very important for businesses. When your finances are organized, you have the ability to track your cash flow receivables, which puts you in a good position.
Financial management software like Paci can help you do this. Such software allows you to control your money by tracking the incoming and outgoing funds of each transaction.
5. Benefit from automation
Automation is another great way to organize business finances. Paci allows you to set up automatic payments with an online banking feature. This feature also helps you avoid late payments.
6. Use reminders
Setting up reminders for accounts receivable and accounts payable can help you stay on top of your business finances. This is especially important if you haven’t set up an automatic payment.
7. Make solid payment terms
Everyone involved in a transaction should understand all payment terms. Knowing the payment terms can help remove any ambiguity about the amount, hidden fees, etc. This applies to both receivables and payables.
All of these tips will prepare you to stay in control of your accounts at all times. From recording all transactions to recalling accounts receivable and payable, your business can benefit from a solid financial structure.
Tracking AR/AP can also give you insight into how your business is doing. Luckily, there are many companies that can help you with accounting and bookkeeping services. Whether you run a startup or an enterprise, you should consider hiring a team of accounting professionals.