How to ensure efficient accounts payable

As a finance manager or entrepreneur, you know how important it is to have well-organised records. Not only is it required by law to keep business records, it is also crucial to ensure that a company is financially sound. An important part of business records is accounts payable. This process helps you keep track of your payment obligations and helps keep your cash flow healthy. 
In this blog, you will read what accounts payable is, why it is important, how it differs from accounts receivable and how to manage it efficiently. We also share practical tips and show you how our tools can help you streamline your financial processes. 

What is creditor administration?

Accounts payable is all about keeping track of all the outstanding invoices you still have to pay to your creditors. These could include suppliers, service providers or other parties. Your invoices payable are debts that are on the credit side of the balance sheet and are part of your organisation's liabilities. 

Accounts payable administration serves several purposes. It ensures that you always have insight into outstanding invoices and payment terms. It also contributes to cash flow management, reliability and creditworthiness, strong relationships with suppliers, accurate accounting, cost control and budgeting and planning.

The difference between a creditor and debtor

To understand accounts payable properly, it is useful to have a clear understanding of the difference between debtors and creditors. 

Creditors meaning: These are the parties to whom you owe money. These can be suppliers who have provided services or products for which you still have to pay. Suppose you have a web developer build a website for your company and they send you an invoice, the web developer is your creditor. Creditors are listed under payables on your balance sheet because you have yet to pay them. 
Debtors meaning: These are customers who have yet to pay you for goods or services rendered. For example, if you have created social media posts for a company and you send the invoice, this is your debtor until this customer has paid. Debtors are listed under assets on your balance sheet because they represent future income. Read more about how to make a good accounts receivable can set up. 

Why is a good creditor administration important?

Good accounts payable has several advantages: 

1. Better financial planning: You have insight into your future obligations, which helps in planning expenses. 
2. Relationship management: By paying on time, you maintain good relationships with your suppliers. 
3. Cost control: Ignoring payment deadlines can lead to reminders, fines or even legal proceedings. 
4. Overview: Structured records prevent invoices getting lost or paid twice. 

How do you manage your creditor administration?

Follow the steps below to manage your accounts payable efficiently: 

1. Check incoming invoices: Check each invoice carefully. Are the details correct, such as amounts and deliveries? Were the goods or services delivered as agreed? This way, you avoid overlooking errors. Note: These days, fake invoices are a regular occurrence. Therefore, check your invoices extra carefully. 
2. Keep an eye on payment deadlines: Pay attention to agreed payment terms with your suppliers. Most companies use a 30-day term, but this can vary. Especially if your supplier is a small business, shorter terms of 21 or 14 days are common. By noting deadlines in your records, you will avoid late payments. 
3. Plan your payments: Make sure you plan payments so that you always have enough cash.  
4. Check the payment method: Most payments nowadays go through iDEAL. But, some organisations have specific requirements, check these on the invoice or in the purchase conditions.

What happens after a creditor payment?

When you pay an invoice, it is reflected in your balance sheet. The debt disappears from the credit side and your cash and cash equivalents on the debit side nemen. By keeping your records up-to-date, you can immediately see the impact on the financial condition of your organisation.

What happens if you forget to pay an invoice?

Forget to pay an invoice? Then you get one or more payment reminders of your creditor. Do you pay dan still do not, a reminder will follow. If you continue to default, then your creditor may start collection proceedings. This can be detrimental to your business reputation. So it is essential to keep your accounts payable in order. It prevents unnecessary stress and keeps your relationships with suppliers good.

Tips for efficient creditor administration

• Digitise your administration: Switch from paper receipts and Excel sheets to a user-friendly system. This will save time and provide more overview, among other things. 

• Work with automatic reminders: Many accounting programmes offer the option of setting reminders for payment deadlines. 

• Create a weekly routine: Reserve time each week to update your accounts payable. 

• Communicate clearly: Discuss payment terms with your suppliers and be transparent if you cannot meet a payment on time. 

How can SimpledCard help you with creditor administration?

With our mobile claims management tool you can easily manage, approve and pay expenses. This prevents messy claim flows and gives you real-time insight into expenses. Thanks to a fully digital process, you work more efficiently and keep control of cash flow, contributing to smooth financial management. 
In addition, you can link SimpledCard to your accounting programme. In this way, you maintain a uniform workflow, your expenses are immediately entered correctly and you thus keep a good overview of your accounts payable. 

Opt for mobile claims management

Want to make your financial administration more manageable? Find out how you can save time, avoid errors and gain more insight with our claims management solution.  
Read more about Mobile claims management with SimpledCard or contact us directly for more information.  

FAQ

What is accounts payable?
Accounts payable refers to keeping track of all outstanding invoices you still have to pay to suppliers, service providers and other parties. It helps you keep track of your payment obligations and contributes to healthy cash flow management.
What is the difference between a creditor and a debtor?
A creditor is a party to whom you owe money (e.g. a supplier), while a debtor is a customer who has yet to pay you for goods or services delivered.
Why is good accounts payable important?
It offers benefits such as better financial planning, cost control, maintaining good relationships with suppliers and avoiding mistakes such as lost or double-paid invoices.
How can I manage my accounts payable efficiently?
Make sure you check incoming invoices properly, monitor payment deadlines, schedule payments and use digital systems that send automatic reminders.
What happens if I forget to pay an invoice?
Failure to pay an invoice can lead to reminders, reminders and possibly debt collection proceedings, which is damaging to your business reputation. It is essential to keep your records in order to avoid this.
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