A/P: You've Gotta Pay to Play
As the old adage goes, "You've got to spend money to make money." While it would be nice if that weren't true, it really is the case.
So, as a Small Business owner, keep in mind that if you want to be successful an important part of running your business is effectively managing your Accounts Payable (A/P). You ought to know how much of your money needs to go out, where it needs to be sent, and when it has to get there.
In the early days of your business, when everything could be done on the back of an envelope, setting up an A/P system may not have seemed that vital. As your business grows, though, it's really important to have a process in place that can scale with your growing success.
You can track your A/P on paper, in a spreadsheet, or use an accounting software program on your computer or online. It really doesn't matter. What matters is that you're tracking it. Knowing where you're at with payables not only gives you valuable insight into your financial health, being on top of your bills is key to maintaining a solid reputation with your suppliers.
And, if you receive more than one or two bills a day (or even a week), I highly recommend using software and automating the bill paying process as much as possible.
A/P NUTS & BOLTS
In its most simple form your payables spreadsheet should have columns for the following:
Total Amount Due
Type of Expense
It's also a good idea to include columns for the date the invoice was issued and your account number.
Having another column for a more detailed description or notes is helpful for jogging your memory later on. After all, if you're going to track the data, adding a little more information now won't take much longer and it could prove to be a real timesaver later.
THE A/P PROCESS
Once you've got your system in place it's time to set up your bill-paying process. I strongly encourage you to enter all invoices and expenses as soon as possible, ideally on the day you receive them. This will decrease the chances of anything going missing or getting lost and therefore not getting paid.
As for paying bills, prompt payment goes a long way towards building a solid relationship with your suppliers. Even so, there's no need to write checks or make payments every day. I suggest you dedicate time at last once a week to sit down and pay your current bills, or schedule them in advance if you're using an online system.
TIME TO DELEGATE?
Has your Accounts Payable gotten complex enough that you're spending more time than you should paying bills instead of making money? If so, it's probably time you considered delegating some of those duties either to an assistant or a bookkeeper. You might also want to consider finding a good accountant who can act as an advisor and keep an eye out for any costly errors.