Top Tips for SME Owners for Keeping Track of Accounts Payable and Receivable

Cash flow management is a crucial aspect in keeping a business afloat, even more so if you’re a small and medium enterprise (SME) owner. This is because, unlike larger corporations, SMEs have smaller capital and thus require a more constant stream of revenue to manage daily operations. Thus, any errors in your accounts payable (AP) or accounts receivable (AR) can easily disrupt your cash flow and take a huge toll on your business.

One way to ensure you’re always on top of your cash flow management is keeping close track of your AP and AR. Here are some tips to do so efficiently.

1. Send Out Clear and Accurate Invoices

Your AR is the money you’re expecting to receive from customers who have purchased a product or service. It’s thus important that the invoice payment you’ll be issuing to each customer is clear and contains complete information about the transaction to avoid any confusion or delays. Note that if you’re a service-oriented business such as a travel agency, you’ll need to include service fees in your breakdown as well. Accurate invoices allow you to keep better track of your receivables and know how much revenue you can expect, which makes it easier to plan ahead for your other expenses.

Small business

If you think your current billing system isn’t up to par with the demands of your business, then let Maya Business help you out. Maya Invoice makes creating online invoices a breeze with user-friendly customizable templates that you can send out via email to facilitate quicker payments. With the right tools, you can make processing your receivables much more efficient.

2. Make Payments in Batches

AP or accounts payable refers to the money your business owes to suppliers and vendors. Staying on top of your AP ensures that you maintain good relations with your suppliers and also helps you avoid late payment fees. That being said, paying for invoices you’ve received each day can be stressful as an SME owner. Not only does it take a lot of time to process, but it can also deplete your cash flow fast.

To better keep track of your payables, consider scheduling your payments in batches. That means setting a particular time—perhaps each week or each month—when you’ll be settling your payables so you can give it your full attention. This approach can also be better for your cash flow as you can wait out some receivables first before making your batch payment. Of course, this also means keeping close track of the deadlines of the multiple invoices you have so that your batch payment will still make it before each AP’s due date.

3. Improve Your Payment Approval System

Having a payment approval system is important to keep track of the money that goes in and out of your business. However, an inefficient or unnecessarily complicated approval process can likely lead to errors or late payments.

Review your current payment approval workflow and see if there are particular steps that can be streamlined or even removed entirely. Do small payables really need to go through your approval first or could that instead be delegated to your staff? See how you can make the process faster without sacrificing transparency. If you run a business with multiple agents involved, such as a travel business or anything sales-related, then also make sure that the approval chain is clear to everyone to avoid confusion and minimize mistakes.

4. Enable Multi-Currency Support for International Payments

There are businesses that deal with both local and international suppliers. In such cases, a tracking system that can record payments in different currencies is crucial. It should also take into account exchange rates to make account records more accurate.

One example of such a business is a travel agency that offers travel packages. While the receivables of travel agencies are often in the local currency, their payables can include other currencies as well because they book international flights or hotels abroad as part of their packages. Hence, having a payment tracking system with multi-currency support makes it easier to keep track of cash flow, whatever currency it may be in.

5. Follow Up on Past-Due Receivables

When you’re expecting a large number of AR from multiple customers, it’s easy for some of them to slip through the cracks. Such cases can be especially problematic for businesses that handle high-value transactions such as travel businesses. For smaller travel agencies, any missed payments can even threaten the financial stability of their operations.

To ensure your receivables are in good order, keep a close eye on the due dates you’ve given, and don’t forget to follow up on them if the deadline is close and has passed with no payment made. You may opt to use billing tools to automatically remind you of due dates so you’ll know which customers to follow up on.

6. Utilize Specialized Software to Manage Payables and Receivables

Technology can be a big help in keeping detailed and accurate records of your AP and AR. Fortunately, there are now specialized software and applications you can acquire for your business to make payables and receivables much easier to manage. Some even allow you to automate recurring payables such as rent and utilities, which saves you time from having to process it each month. Digitizing your invoices and recordkeeping also makes file organization more convenient compared to having everything manually processed, something that can be prone to human error or confusion.

As a small business, missed receivables or penalty fees due to late payments for your payables can cause serious problems for your cash flow. Improving the processes involved in tracking your AR and AP saves you from the headache of having to deal with such issues. With the help of the pointers in this article, you can make sure that every bill is paid and received accordingly and ensure that your business is running smoothly.

Top Tips for SME Owners for Keeping Track of Accounts Payable and Receivable

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