Role of Accounts Payable in Cash Flow Management & Two Common AP Mistakes Made by Small & Medium Businesses

//Role of Accounts Payable in Cash Flow Management & Two Common AP Mistakes Made by Small & Medium Businesses

Role of Accounts Payable in Cash Flow Management & Two Common AP Mistakes Made by Small & Medium Businesses

Poor cash flow management is one of the most common reasons why the majority of the small businesses experience turbulence, de-rail and eventually fail. According to research, poor cash flow management is responsible for the failure of more than 82% of the businesses in the United States alone.

Role of Accounts Payable in Cash Flow Management & Two Common AP Mistakes Made by Small & Medium Businesses

Role of Accounts Payable in Cash Flow Management & Two Common AP Mistakes Made by Small & Medium Businesses

If you are a small and medium business that is aiming for growth it is imperative to adhere to best cash flow practices to effectively control the cash-flow for smooth functioning of your business.

Cash Flow Management & Accounts Payable

At its core, positive cash flow is a function of effective and streamlined Accounts Receivable and Accounts Payable process. While Accounts Receivable is associated with cash flowing in, it naturally plays a crucial role in the cash flow process. But at the end of the day, there are many variables in the line and you may not be able to completely control the money that is set to flow-in.

A Streamlined Accounts Payable – A difference between the red line & black Line:

Unlike Accounts Receivables, Accounts Payable gives you complete control over the money that flows outsides and hence an AP process has a greater impact on your cash flow.

An optimized and streamlined Accounts Payables gives you immediate benefits in the form of reduced cost in invoice processing, account reconciliation and payment schedules to help you enjoy cash for longer periods to help you plan ahead of time.

More often than Accounts Payable is the area most small and medium business falter and this naturally sets a chain reaction leading to cash flow problems and hassles to maintain positive cash flow.

Having worked as a remote accounting firm with hundreds of small and medium business across, our Accounts Payable Specialists at Outsourced Bookkeeping have identified that Accounts Payable has always been the weakness of their cash flow management.  If you are one of them, then this blog is here to help you improve your Accounts Payable process by making a few minor tweaks. In a two-part series – thus article deal with the two common Accounts Payable mistakes that are commonly overlooked by the small and medium business and part-2 deals with simple work-overs that can help you rectify the mistakes and improve your Accounts Payable and ultimately, your cash flow.

So here are the two common Accounts Payable mistakes committed by the small and medium businesses:

Lax negotiating terms with vendors:

Majority of the small and medium business still view Accounts Payable as a back-office accounting service and the down-side? It becomes a tad difficult to optimize the AP function with a strategy if the C-suite is not involved in the process. Take vendor negotiation, for example, most businesses do not try for appealing negotiating terms, even do not review or update the terms  and when they finally do, majority of the business has already hit with loads of issues which impact other parts of the operations too.

Vendor negotiation with the right terms and conditions helps unlocks many opportunities to control the cash out-flow. Working closely with strike appealing negotiation terms and closely reviewing them periodically, can help you optimize your AP process by not only saving money but also helping you control the cash flow to your advantage.

Lack of automated Accounts Payable process:

Given how critical efficient Accounts Payable turns out to be for cash flow, increased visibility of the Accounts Payable is extremely important for better cash flow management. Having a streamlined system that tracks the invoices at every step, provides key insights, gives real-time access with quick-search database help monitor the cash flow with greater control an automatically paves way for optimal cash flow management.

While automating Accounts Payable makes it possible for a small and medium business to reap benefits, majority of small and medium businesses may not have expertise, resources or budget to reap benefits from automation of Accounts Payable. If you are one of them, you can easily solve this problem by outsourcing your Accounts Payable Process to remote accounting firms like us folks at Outsourced Bookkeeping.

Being one of the best back-office accounting firms in the business, Outsourced Bookkeeping has been actively helping small and medium business with dedicated and remote accounting services for years now. Our accountants are Accounts Payable Specialists with rich experience and expertise and access to the advanced Accounts Payable software and tools that are essential to optimize the Accounts Payable process. If you are a small and medium business looking to outsource Accounts Payable, you can contact us here: https://www.outsourcedbookeeping.com/

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