Why not learn more about Businesses?

Managing Your Accounts Payable Properly A healthy working capital is..

Why not learn more about Businesses?

Managing Your Accounts Payable Properly A healthy working capital is very essential to any business. And this is especially true if your business is either or small or medium size. Properly managing your accounts payable can help free up and protect your working capital. There are some best practices that can help you manage your accounts payable properly. Account payable policies and procedures document are very important to a business. Facilitating employee training, helping establish a consistent response to routine situations, and creating a framework for appropriate delegation of responsibilities are the benefits of having a written policy. There should be an identification of incompatible duties and the implementation of the appropriate segregation of these duties. For example, if someone is assigned to authorize invoices for payments, he should not have the ability to edit vendor master files, and the same is true the other way around. Where possible, someone else should be appointed who is not involved in the accounts payable process so that he can monitor changes to vendor master files.
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Where possible, purchases should only be made from pre-approved vendors. The reason for this is to be able to negotiate more favorable terms.
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When new vendors are added to your system, you should send them a welcome letter. 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. You should comply with 1099 reporting since there is a hefty find for non-compliance. All vendor invoices should be received by the accounts payable department. There is proper recording made by the department before they are sent for approval. This minimizes the incidence of lost and missing invoices. Do not enter vendor invoices as a batch. If you want to facilitate the resolution of variances and provide a better audit trail, then you should enter each invoice separately. Specific procedures for processing vendor invoices should be established, and this includes assignment of invoice number (where vendor invoices are unnumbered or in case of internal documents such as employee expense reimbursement), and entering invoice numbers. 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. As part of new vendor set up procedures, default general distribution codes should be defined. There should be codes to all vendor invoices before posting. This will reduce the possibility of errors. A timely payment of vendor invoices is important and if there are available discounts, it should be taken advantage of. If you get discounts you can save more money and if you pay invoices in a timely manner, you will avoid fees and have better negotiations with the vendor.