This is the first in a series of articles explaining why good accounts payable practices (often known as “purchase ledger”) can help your business and save you money. Many businesses see the payment of their suppliers a necessary but time consuming evil. Everyone wants to see money coming into their organisation rather than going out. Indeed some businesses make a point paying their suppliers as late as possible.
We’ll try to explain why this might not be the best way of handling accounts payable in your business.
Paper invoice are a necessary part of doing business in 2011. We haven’t yet got to the point where we can automatically receive all invoices into our accounting systems; even if we could, would all businesses know what to do with them? Therefore receiving paper invoices through the mail and managing them in the office remains a burden. For many companies, the process of handling paper invoices hasn’t much changed in 25 years or more. Someone opens the envelope, stamps it, puts it in a folder and passes it to a manager to approve. Some more advanced organisations might now at least take a scanned electronic copy, but the principle remains the same – it is a manual and time consuming way of doing things.
Small Changes Go a Long Way
Businesses don’t go bankrupt purely through having an inefficient accounts payable process. Why go through the hassle of changing?
Start by to scanning your accounts payable invoices. Fast efficient office scanners have really come down in price recently, you may even have a photocopier or MFD with a scanner attachment that is woefully under used. Creating electronic copies will at least mean you have a back-up if something disastrous should happen to your hard copy files. (See our good scanning guide for details on how to effectively scan for accounts payable).
Once you’ve scanned your invoices, where should you store them? Invoices are important files for legal and tax purposes, you won’t want to lose them. It’s probably not wise to keep them on the same hard drive as your accounting system (in case your whole system should fail – you might not be able to recover anything which could be very serious and expensive to resolve!). Back them up regularly to an external disk or DVD; ideally keep the backup offsite. An even better solution would be to backup to a cloud storage solution where they are stored in a secure data centre.