Regardless of enterprise size, as a business owner or operations manager, effective accounts payables management is key to effective cash flow management. No business wants to incur the cost of having to grow a staff of people to receive, categorize and schedule bill due dates. It’s simply not scalable.
When examining your accounts payable processes, it’s common to think that retiring payables early is a wise cash management strategy; however, it turns out that paying bills ahead of time is actually not the best way to maintain positive cash flow. There are other, more productive, ways to maintain positive cash flow.
But what exactly are these ways, you ask?
An effective business solution is a reliable E-Procurement software system – one that can efficiently streamline the accounts payables process by removing systemic redundancies that result in additional human error and consequently increase labor costs.
How Does E-Procurement Software Do This?
Once a packing slip/waybill is uploaded into your system, all of the important information is organized with ease. Everything from the name and number of items to their condition and quality is conveniently organized. One of the most useful features is the ability to enter the anticipated due date into your E-procurement software, and have a sorting process alert you to pay your bills on the dates they are actually due.
When the invoice arrives, your system will match that invoice against the packing slip previously uploaded, while automatically searching for any errors or possible discrepancies.
If that wasn’t enough, there’s so much more that an E-Procurement software can do! It can run a weekly report that gives you “real time” information about receivables and payables, including a highly useful notification about any bills that may be coming due the following week. You can also manually change when you want to pay bills, as some companies allow bills to be paid within a grace period, penalty-free.
Also, your procurement software solution must take into account any incentives offered by your vendors that may add up to significant savings for scheduling payments differently than the standard terms. This frees up a tremendous amount of time for your accounting team to focus on increasing levels of operational efficiency, rather than spending large amounts of time buried in GL (general ledger) and traditional accounting duties.
What is an Electronic Funds Transfer?
Another way your procurement solution will save your business time and money is by choosing to pay your bills online, through Electronic Funds Transfer (EFT). Setting up a regular weekly payment schedule, allows your business to choose which bills to pay and by what method the payment is to be sent.
Depending on the sophistication of the procurement solution, your business can choose to have an electronic (paperless) transfer made, or a check printed, along with the mailing and return label and envelope. The benefit of choosing to use the EFT payment strategy, in addition to the positive impact on the environment through the use of less paper, is that the transfer of funds will take place instantaneously on the date scheduled while being reconciled with your bank statement at the same time.
All in all, it’s obvious that best practices in the area of cash flow management are an absolute must for any business owner and manager wishing to operate an efficient and healthy enterprise. With many fixed costs including labor and the deployment of human capital, the effective implementation of successful procurement tools and strategies will make your current labor assets much happier and efficient, saving your business both time and money.