Make Your Company’s AR and AP A-OK

If you’re an entrepreneur, are there two aspects of running a business that are so closely related, but so diametrically opposed in satisfaction, than your accounts receivable and your accounts payable?  

After all, with accounts receivable, it’s people sending you money, and what’s not to like about that? Everyone loves getting money! Whether it’s a minor reimbursement or a significant payment, accounts receivable is the part of accounting everyone likes. 

Accounts payable on the other hand…well, see above – that’s all about making someone else’s day. And make no mistake, you have to do it. Falling behind on your accounts payable is a great way to trash your company’s reputation.  

While the two processes may be at the opposite end of the satisfaction spectrum, they are like the intro to Law & Order: “two separate, but equally important groups”. Accounts receivable keeps the money coming to keep business running smoothly, and accounts payable makes sure you’re keeping up your commitments and avoiding letting payments slip that could cause costly penalties later on. 

It’s vital that your business has a handle on both processes, because if one or the other, or both, break down, any chance at short-term growth will be severely hindered. In other to keep both on track, we’ll give you three pieces of advice for each: 

Accounts Receivable

A few years ago, a writer for Entrepreneur made a startling discovery: "When I was consulting small businesses on their finances and business plans (now decades ago), I learned, what was to me, an incredible fact: Most businesses are profitable. They actually do generate more sales that are higher than their expenses. However, profitability and cash flow are two very different things. I was, and remain, amazed at how many profitable companies are strangled by negative cash flow." 

In order to keep cash flow strong, here are a few ways to run your accounts receivable to keep cash flow strong: 
 

1: Be Proactive: 

If you sit around waiting for your clients to miss a deadline before contacting them, you’re making a mistake. Accounts receivable isn’t about waiting for late payments and then getting in touch with the client, it’s about making sure payments are made as quickly as possible. Make sure your clients understand when payment is due and remind them at least once or twice as the deadline approaches, as long as it’s not done in a way that alienates them. If the deadline does pass without payment, your team needs to try to collect payment as quickly as possible – the longer the clients drags their feet on payment, the harder it is to collect payment at all.  
 

2: Don't Forget to Get Paid, and Make it Easy To Do So: 

You’re reminding your client to pay, they’re responding and understand the deadline and everything is going smoothly – except your payment process is a mess and the difficulty in collecting payment from your client is more your own fault than theirs.  

To prevent a scenario like that, you need an internal numbering or invoicing system to make sure nothing falls between the cracks and gets missed, and your entire team needs to be well-versed in how it works. An electronic system like Qount streamlines the entire process and automates much of your accounts receivable to take the guesswork out of it and makes it easy for your clients to stay on top of their billings.  

3: Create Incentives: 

It’s a simple truth: incentives work, both on the positive and negative side of the ledger. On the positive side, create incentives for clients to pay their bills. Offer a small discount, no more than 5%, on bills that are paid within a week for instance, on a 30-day billing cycle. While that may cost your business some money in the long run, it does provide a short-term infusion of cash. On the flip side, create penalties when the customer pays late, whether that’s a lump sum penalty fee or adding a fee to their next order. Sometimes, a little prodding can go a long way.  

The experts and software at Qount can help your accounts receivable process in the following ways: 

A Tech-Driven Central Hub
Best-in-class technology enables easy tracking and management of multiple invoices from one central platform. Receive and apply payments from your customers in just a few clicks. 

Enhanced Visibility
The easiest and most transparent accounts receivable solution for overcoming your business's cash flow gaps. 

Security
Our security measures include user authentication and data encryption. 

Take Control of Your Cash Flow
Automated invoicing and web-based workflows provide real-time insights into your accounts receivables and cash flow. 

Reporting & Analytics
Export custom reports for insights on improving the efficiency of your invoice-to-cash cycle times. 

Audit
The audit log records your business's complete transaction history. 

Get Paid When You Need To
View and manage your outstanding invoices and proactively take action on your accounts receivable. 

Portal
An online self-service invoicing and customer payment portal. 

Lower Operating Costs
Our improved accounts receivable process gains efficiency by use of modern technologies. 

Accounts Payable 

1: Simplify, Simplify, Simplify 

Most businesses do one or two check runs per month, and we advise something similar, provided you’re staying within deadline for all of your payments. Make sure your accounting staff has invoices lined up and ready to go back to should there be a dispute internally over a particular cost before it’s too late. That also goes for approvals from department heads – should a dispute arise, there will be a paper trail outlining how the decision to proceed with the purchase was made. The monthly/bi-monthly check runs are also a practical matter for the company’s executives – most would rather go through the process of signing checks and viewing invoices once or twice per month than doing it repeatedly throughout a week or a month.  

2: Categorize Your Vendors 

Does one of your vendors have particularly onerous late fees or penalties as part of their accounts receivable system? Is there a client you might have been late paying once previously and you want to make sure it doesn’t happen again in order to maintain a healthy relationship? What about vendors who offer discounts for paying early (as we mentioned above)? Whether it’s a function of maximizing cash flow availability for your business or maintaining/strengthening relationships, your staff should be able to recognize situations where certain payments take on an added degree of importance.  

As the website Accounting Coach writes, "A poorly run accounts payable process can also mean missing a discount for paying some bills early. If vendor invoices are not paid when they become due, supplier relationships could be strained. This may lead to some vendors demanding cash on delivery. If that were to occur, it could have extreme consequences for a cash-strapped
company." 

3: Automate 

Cloud practice management solutions enable you to automate your accounts payable processes and mitigate all the issues that can derail your accounts payable system: lost invoices, employee errors, missed deadlines, etc. The cloud also helps you to conduct a comprehensive analytical review of your systems and processes, to ensure that your cash flow remains consistent and your vendor relationships stay healthy.