Make your accounts payables work for you

Payables are all the ways your business spends cash, from buying inventory and office equipment to paying employees and taxes. How do you keep your costs down in light of all the different ways cash can leave your business?

An important goal should be to make sure cash inflow exceeds cash outflow. Start with planning your payables so they’re predictable — and maximize them to their greatest potential.

Get an overall snapshot of your outgoing cash flow. Here are a few practical things you can consider:
• Log the date and source of all payments to find out what you’re spending and how often
• Note any patterns, seasonal trends or other contributing factors that might be affecting your cash flow
• Track your outgoing cash flow in a report
• Review expenses and suppliers regularly to lower costs
• Set expense budgets for your employees
• Use a credit card for expenses to slow the payment process
• Consider payment terms as well as price when choosing suppliers

A good working relationship with your vendors can help with the management of your cash flow.
• Establish good communication. Let your suppliers know your general financial situation and product and service needs.
• Consider early payments. Find out if potential vendors offer discounts for paying early. It could positively affect your bottom line.
• See if they’ll work with you. Extending payment due dates can help you with your cash flow.
• Focus on more than the price. The lowest price may not always improve your cash flow, but more flexible payment terms might.

Optimize your payment schedule. You’ll reap the benefits of having more money in your account, earning more interest and being better positioned to make timely payments that will keep your vendors happy. Here are a few tips you can implement:
• Make sure receipts and invoices are in one central place. A ledger sheet can help you assess your situation at a glance.
• Strategize your payments. Take full advantage of creditor payment terms by determining when payment is due (30, 60 or 90 days). Electronic payment methods are perfect for fulfilling this obligation. Timing your payments this way keeps cash in your business longer and enhances overall cash flow. You’ll have more cash on hand to meet other obligations such as rent, utilities and payroll.
• Keep cash flow budgets and forecasts current. You will always know where you stand, which will help you make informed decisions about timing your payments throughout the month.

Accuracy is key when it comes to cash outflow, so it’s a good practice to try and update your accounts every day. An automated account payables process or software can be useful in this area.

Make sure you match invoices against your purchase requests or purchase orders before you process payments. Also, keep a running list of invoice disputes and resolutions. Take notice of any patterns you may notice from invoice to invoice. If the same vendor is involved, you can work together to quickly resolve the issue.

It’s a simple fact: You need cash to make your vendor payments. Staying on top of your potential income will better equip you to meet your own obligations.

Before the first invoice is paid, every vendor should supply you with a W-9 form. The IRS requires it, mainly to establish a paper trail, and it gives you all the contact information you need to pay them. This may also protect you from illegitimate vendor expenses.

Many small businesses do not have a formal purchase order system. That’s okay as long as you have a clearly defined procedure for purchases so that all employees know the authorization process.
• Choose the right employees for specific account payables duties. Have a system for managing which vendors are approved and where your invoices and checks are going.
• Protect your business against fraud. Never have one person handle it all. Separate the responsibilities for preparing invoices, writing checks and processing payments among multiple employees.
• Cross-train and rotate employees. This gives multiple employees experience in account payables and the ability to cover absences. It may also discourage theft.

Timing is key to making the most of your cash. A good practice may be to defer the payment of sales commissions until you’ve received the cash from the customer. This protects you from paying cash out before it comes in. Some companies set policies, such as paying commissions on the tenth of the month provided the customer has paid. The same logic applies to bonuses: It is ideal to pay bonuses during the time of year when cash balances are high.

Speed up your outgoing cash flow. Plan and forecast your payments. Streamline your payroll process. There are many new and established solutions available to help you with your account payables.
Consider contacting a business banker to discuss the best options and solutions for your business.

Gain speed, reliability and convenience. Consider electronic payment solutions such as Automated Clearing House (ACH), Electronic Funds Transfer (EFT) and Online Banking. Benefits also include:
• Lower costs. Electronically processed check transactions cost five times less than a paper check.
• Security. Automatic and electronic debits can reduce the number of people who come in contact with your information, and they cannot be misplaced or lost in the mail.
Electronic payments enable you to initiate a payment online or by phone and remit it electronically to your vendor. You’re also able to monitor your transaction details and manage your account conveniently online. Many options include the ability to transfer foreign currencies.

As a small business owner, implementing an automated payroll disbursement system can save time, trim costs and may help you stay on top of all your legal and regulatory responsibilities.
• Consider direct deposit. Pay your employees by crediting their existing bank accounts. This helps eliminate check issuance and processing expenses. It can also serve to streamline reporting and enable you to manage funds from your desktop.
• Look into employee payroll cards. These are similar to debit cards. Simply make an ACH direct deposit to each employee’s payroll card. This gives them quick and easy access to their funds at ATMs, bank teller windows and merchants worldwide.
• Streamline employee compensation terms. Whether you’re tracking employee hours or paying overtime, health plan premiums and 401(k)s, having these tasks automated can save you a lot of time and effort.

Using small business credit cards and timing your purchases correctly can help you enhance cash flow. No-interest credit cards can provide up to a 90-day interest-free window in some cases. Always be aware of the billing cutoff date for your credit cards.
Also, consider cards that pay you back. Many credit cards offer rewards programs, and accumulated points can be used for a variety of business uses, including travel and office equipment.

Planning well, strategizing and forecasting can serve to help you better manage your account payables.

Also, keeping up with the latest advancements could really pay off. Many new technology solutions, like electronic payments and automated employee payroll, may help you streamline and speed up your process, save you money every month and free you up to run your business.

Cash outflow will always be a necessary part of your business. But staying ahead of these activities could make all the difference — both with your vendors and your bottom line.

Need help getting started? Take a look at the different cash management tools you can use to help run your business more effectively and efficiently.

Treasure Coast Business is a news service and magazine published in print, via e-newsletter and online at by Indian River Magazine Inc. For more information or to report news email


As Bank of America’s Small Business Banker for the Treasure Coast, Christina Hunter is committed to understanding what makes businesses unique. By focusing on a company’s priorities, she provides financial solutions that help grow, manage and protect their business. Christina’s involvement in our community gives her a firm understanding of the local market. As a long-time resident, she is involved with many professional and charitable organizations and is on the board of directors at House of Hope.