Accounts payable is one of the most important business functions, affecting many areas, including vendor relationships, purchases, cash flow, and working capital. Therefore, accounts payable management is important because it helps you understand how money flows through your business. It also exposes any issues with working capital and cash management. Whiz Consulting official said, “If you don’t have a handle on your accounts payable cycle, it can leave you scrambling to make payments each month.” Whiz Consulting offers accounting and bookkeeping services to businesses from various industries and is a well-known name in the field of outsourcing. They have teams of expert professionals using their knowledge and experience to help businesses efficiently manage their processes. We recently talked to some senior officials of Whiz Consulting and asked them about the importance of accounts payable management. This article will explain what they have to say about accounts payable and why you should care about managing accounts payable. 

What is Accounts Payable? 

Accounts payable represent the invoices received from vendors/suppliers for the credit purchases made by the business. In the world of business, money is like water. It can be a critical resource for operations, but if you don’t control how it flows, it can turn into a flood that damages everything. The same is true with cash flow: when you don’t manage it, it can cause damage to your business. In fact, a large percentage of insolvency issues can be linked back to cash flow issues. The central function of accounting is to track and manage the flow of money through your business. That is why accounts payable is a normal part of the accounting cycle. “Improper or no accounts payable management can lead to severe financial losses to a business and, sometimes, even its closure,” says Whiz Consulting’s executive 

Why is accounts payable management important? 

The first thing to remember about accounts payable is that it is not “personal” money. That means that it is not yours and is not included in your net worth as an individual. However, it is a critical part of the operation of your business. The amount that you owe is a reflection of the work that your company has done. Wherever there is a purchase, there must be a cash outflow. If your payment cycle is too long, or you fail to make payments, it will damage your relationships with your vendors/suppliers, affect your future purchase plans, and also negatively impact your reputation in the market. A bad reputation leads to reduced customers, ultimately causing business failure. 

Tips for efficient accounts payable management 

Develop a cycle with your payments and vendors 

Your first step in improving accounts payable will be to develop a cycle with payments and vendors. Figure out the timing of each payment, and you can start to get a sense of the overall cash flow of your company. While you might think that the timing of payments is mostly in the hands of your vendors, it is important to remember that you have a role in the overall process. As a general rule of thumb, you should not take a payment that has been agreed to by your customer. If you need to make a payment, it should come from your business operations — not from a customer payment. 

Track vendor performance 

Once you have a good sense of the timing of each payment, you can start to track performance. As per Whiz Consulting’s officials, “One of the best ways to do this is to use good accounts payable management software.” You can use a metrics tool to track payments, cash flows, and profitability — and then use the information to help improve the process. If metrics are not your thing, you can also use a tool like Xero to pull all of your payment data and create a spreadsheet that you can use to track performance. 

Balance sheet analysis:  

Find cash and the right balance between liabilities and assets. One of the best parts of an accounts payable cycle is that it allows you to analyze the balance sheet. You will want to find the right balance between your operating liabilities (liabilities that will be paid out of current revenue) and your fixed assets (assets that have a long-term life). 

Conclusion 

Efficient accounts payable management is essential for keeping your cash flow in check. Though it may seem overwhelming, it can be done with a few quick tips and some practice. You can use accounting software or hire an outsourcing accounts payable services provider to manage everything. Outsourcing service providers specialize in managing these complicated but important business functions. Whiz Consulting is a third-party accounting and bookkeeping service provider helping businesses efficiently manage their different business functions, including accounts payable. They have teams of experts with years of experience and knowledge of handling various business functions to ensure they are accurate, on time, and represent the true picture of a business’s financial position. 
https://www.whizconsulting.net/us/services/accounts-payable-services/