How to Do Accounts Payable

Logging accounts payable

Some companies handle accounts payable with a dedicated department equipped with state-of-the-art accounting software. For others, accounts payable is tracked by the owner in a spiral notebook. Regardless of complexity, scale and technological investment, the basic process remains the same. By tracking vendors, payment amounts and payment due dates, the business can forecast and control spending to better use its financial resources. A systematic approach to accounts payable allows intelligent spending. A chaotic approach makes planned spending impossible.

Things You'll Need

• Accounts filing system, computer or paper
• Calculator or spreadsheet
• Calendar, paper or electronic
• Pencil and scratch paper

Instructions

1. Log information for every vendor that serves your business. Include at least name, address and main contact phone for the business. Include also extension and email for your main point of contact and his direct supervisor. Enter this information into your tracking system.

2. Log information about each account with each vendor. This includes at least an account number, total balance on the account, minimum payment amounts and dates, applicable interest rates and any other notes you need to pay the bill. Enter this information into your tracking system.

3. Open your calendar and enter payment due dates for each account going forward a minimum of six months. For accounts with a finite number of payments, such as installment loans, go forward six months or to the end of the payments, whichever comes first.

4. Twice per month, forecast upcoming bills and other expenses against company revenue to confirm that you will have enough money to pay the bills. If there's doubt, contact a vendor to make arrangements for a late or skipped payment. If you need to do this regularly, rotate through several vendors so each vendor experiences the problem as an isolated incident.

5. Pay bills as each due date comes up on the calendar. If you have automatic bill pay through your bank, consider setting up automatic payments for convenience.

6. Once or twice per year, audit all vendors to check for errors, confirm optimum pricing and perform general upkeep such as updating contact information. This may also be an opportune time to ask for discounts or other advantageous arrangements due to being a long-term customer.

Tips & Warnings

• Handling accounts is a vital part of successfully operating a business. It's also time-consuming and not something many entrepreneurs are terribly good at. If your business can afford it, hiring a bookkeeper is almost always a worthwhile investment.

References

• "Small Business for Dummies"; Eric Tyson; 2007
• "Getting Things Done;" David Allen; 2001
• "The E-Myth Revisited"; Michael Gerber; 1998