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Managing accounts payable (what you owe) and accounts receivable (what your customer owes you) is essential to any business. Staying on top of your accounts can mean the difference between overpaying or not being paid as agreed.
Here Are Three Tips to Help You Successfully Manage Your Accounts:
Tip #1: Shorten Transaction Cycles
The shorter your transaction cycle is for items bought or sold, the more you can avoid low cash flow and workflow bottlenecks. It’s a good idea to establish consistent timelines for receivables and payables. For example, implement a company policy that you’ll pay invoices within 30 days of receipt and you’ll receive a payment within 30 days of sending an invoice. You may have to make some exceptions, but this will keep things consistent for your company. Additionally, consider issuing invoices or purchase orders on the same day each month to establish a routine.
Tip #2: Maintain Open Lines of Communication
Regularly check in with your vendors and clients to ensure timelines continue to work for both parties. For receivables, keep track of aging accounts and reach out to your vendor or client to set up payment. If you need to extend your time for payment on the payables side, talk to the other party to set up a reasonable payment option to avoid fees.
Tip #3: Work to Automate Your Accounts
The quicker you get paid, the easier it is to manage your payables. See what you can do to set up ACH payment or direct deposit to ensure on-time payments on both sides. Plus, it’s easier to manage because you can create invoices, receipts, financial statements and more when you can automate.
Managing accounts payable and accounts receivable is critical to determine the financial health of your company. Implementing these tips will help you know where you stand at all times and allow you to make smarter business decisions.
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