The Essentials of Businesses – Breaking Down the Basics

Managing Your Accounts Payable Properly A healthy working capital is very essential to any business. This is especially true for small or medium sized businesses. You can free up and protect your working capital when you properly manage your accounts payable. To properly manage your accounts payable, here are some of the best practices you can consider. Account payable policies and procedures document are very important to a business. The benefits of having a written policy is that it can facilitate employee training, help establish a consistent response to routine situations, and create a framework for appropriate delegation of responsibilities. You should be able to identify duties that are incompatible and the appropriate segregation of these duties should be implemented. As an example, an employee who authorizes payment invoices should not have the ability to edit vendor master files, and vice versa. Someone else should be appointed where possible, who is not involved in the accounts payable process in order to monitor changes to vendor master files.
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There should not be any purchases unless it is from pre-approved vendors, only where possible. With this, you could negotiate more favorable terms.
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there should be a new vendor welcome letter send to new vendors that are added to your system. New vendors should be informed on where to send their invoices and other information needed to process vendor invoices like the completed w-9 form which is needed for the annual preparation of the 1099 form. If there is non-compliance with 1099 reporting, there are hefty fines for it. The accounts payable department should receive all vendor invoices. There is proper recording made by the department before they are sent for approval. This minimizes the incidence of lost and missing invoices. It is not good to enter vendor invoices as a batch. it is best to enter each invoice separately so in cases of variances, it facilities its easy resolution, and proves a better audit trail. Specific procedures for processing vendor invoices should be established and followed like assignment of invoice number and entering them, even where the vendor invoices are unnumbered or in case of internal documents such as employee expense reimbursement. IT should show that an invoice amount is billed when it is entered. There should be a separate posting for debit memos and adjustments so that in case of variances it can facilitate account resolution and reconciliation. The default general distribution codes should be defined as part of a new vendor set up procedures. All vendor invoices with applicable general ledger codes should be coded before posting. With this, there will be reduction in the possibility of errors. A timely payment of vendor invoices is important and if there are available discounts, it should be taken advantage of. Discounts can give you money savings, and paying invoices in a timely manner can free you from having late fees and makes way for better negotiations with the vendor.