The Accounts Payable Playbook

How to Be Smart with Your Cash

If accounts receivable is about getting paid, then Accounts Payable is all about how you pay. It’s the money you owe to your vendors, suppliers, and service providers. And while it might seem like a simple task, managing it strategically can be a game-changer for your business's cash flow. Being smart with your accounts payable isn't about being a slow or bad customer. It's about controlling the money going out the door so you have enough cash on hand to run your business smoothly. Here is your playbook for being a pro at accounts payable.

1. Create a Centralized System 🗂️

The first step is to get organized. You need a single, consistent system for all your bills and invoices. Whether it's a designated folder in your accounting software, a cloud-based app, or even a physical file holder, every single bill should go to this one place. This prevents you from missing deadlines or accidentally paying a bill twice.

2. Know What You Owe 📋

You can't manage your cash if you don't have a clear picture of your upcoming expenses. As soon as you receive a bill, make sure you know: • Who you owe • How much you owe • When it's due. Enter the bill into your accounting software immediately. This allows you to see all your upcoming payments in one place and avoid any surprises.

3. Pay Strategically ⏳

This is the golden rule of accounts payable. You should almost never pay a bill the moment you receive it. Instead, schedule the payment to go out on its due date. For example, if a bill is due in 30 days, schedule it to be paid on day 29 or 30. This allows you to hold onto your cash for as long as possible. The money stays in your bank account, earning interest (if you have an interest-bearing account), until the very last moment.

4. Negotiate Better Terms 🤝

Don't be afraid to ask for longer payment terms from your vendors. For larger, recurring expenses, a simple phone call can make a big difference.

• Instead of standard "Net 30" (due in 30 days), ask for "Net 45" or even "Net 60."

• If a vendor offers a discount for paying early (e.g., "2/10 Net 30," which means 2% off if you pay in 10 days), you can weigh the value of the discount against the benefit of holding onto your cash longer.

5. Reconcile Every Bill 🧾

Before you pay, double-check everything. This is another crucial part of reconciliation. Compare the invoice with your original purchase order or receipt to make sure you were billed for exactly what you received. This prevents you from paying for items you never got or being overcharged. It's also a good idea to regularly compare your records with the vendor's statement to ensure you haven't missed any bills and that all your payments have been correctly applied to your account.

By following these simple steps, you'll be able to manage your accounts payable with confidence, ensuring you have enough cash on hand to keep your business running smoothly and efficiently.