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7 Tips To Improve Your Company’s Accounts Payable And Receivable Control.

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7 Tips To Improve Your Company’s Accounts Payable And Receivable Control.

These Are The 7 Tips to Improve Your Company’s Accounts Payable and Receivable Control.

 

 Having trouble managing your accounts payable and receivable? Then read our article and learn easy-to-apply tips!

Every company basically works with two financial streams: income and expenses. We can also divide them into two processes, being accounts receivable, responsible for the amount that enters the cashier, and accounts payable, responsible for the money that goes out. These two concepts are essential for any business owner or professional dealing directly with finance.

In practical terms, accounts payable refer to the financial obligations that the company assumes with its suppliers. Accounts receivable, on the other hand, are the amounts expected by customers who have not yet paid for the goods, products or services purchased.

In this sense, the revenue that comes in is, of course, what keeps the organization’s activities going, allowing it to function. However, once the money is in cash, there needs to be methods to control expenses as well and keep costs to a minimum and as manageable as possible. Learn the 9 financial education tips for entrepreneurs.

In addition to representing business success, the company’s good financial health is a basic requirement to remain well in the eyes of the market. Not having control over accounts payable and receivable can mean great danger to the business. And when it comes to company money, it is essential to be able to predict what obstacles are to come to avoid headaches and even losses.

To help you, we have separated in this article the 7 Tips to improve your accounts payable and receivable control.

7 Tips to improve your accounts payable and receivable control

 

These Are The 7 Tips to improve your accounts payable and receivable control.

1. Have established processes and flows

Professional performing the processes and flows of payments and receipts

It is vital for an industry or finance department to implement processes to record, monitor and control the entries payable and receivable. 

Effective financial management requires the implementation of manageable processes and controls to provide accurate information about the business. These controls are important, both to calculate working capital and to schedule payments, receipts and also to reduce taxes. For these reasons, the initial step that must be taken for a good financial control is to define how the entries that take place in the cash register will be grouped, in order to always have classified and coherent records with their processes. Only then will it be possible to detail all the financial transactions.

Getting started with this control is not difficult, just start with the categorization of inputs and outputs, making it possible to identify the income and expenses of the business. You can organize your company’s debits and credits through:

• Cost Center Plan : The cost center plan represents a division of the company or organization that you want to manage. In many cases, cost centers are segmented into departments, but this division can also be based on business units, projects or branches. Check out in this article, what is a cost center and its importance .

• Chart of Accounts: The chart of accounts is a structural model of groupings of company accounts, with the objective of classifying and establishing a standard that identifies their inputs and outputs for analyzing entries.

2. Control everything that must be paid and received

Secondly, you should keep a record of your business accounts, so you can identify all the obligations for a given period, and then you will know exactly how much you have to pay and what you have to receive at that time. With this control it will be possible to know how much you spend and how much you earn.

It is important to record all transactions involving amounts with the finance department as this will help to maintain a consistent cash flow and avoid any kind of mishap such as overpaying your suppliers or not receiving payment from your buyers.

Both those responsible for receipts and those responsible for payments should consult about sales and purchases that affect the business. Because if there is an increase in demand, the receivables department can communicate with accounts payable to order more items. Likewise, in difficult times, accounts payable can reduce supplier purchases until sales improve.

Therefore, in order to have a careful and disciplined control, it is necessary to implement routines, to ensure that everything that is happening is recorded, and in this way these records will serve as input to generate information that allows the manager to see if the planning carried out is in accordance with the results being achieved.

3. Make a financial plan

In day-to-day operations, the company’s financial activity is fundamental, and having a plan – regardless of the size of the business – is an essential practice for a successful trajectory, as well as for those who want to see their company grow and stand out in an increasingly diverse market. increasingly competitive. What often happens, however, is that managers neglect this essential step, and that they end up facing a series of problems.

Making a financial plan is the same as enabling a long-term vision to better balance the accounts and prevent cash from being compromised with payments that precede receipts. With good planning, you can take actions such as negotiating deadlines for payment of suppliers, already estimating receipts.

Planning aims to achieve the goals that your company wants to achieve in the future. Normally, there will be a prioritization of what is strategic for your company and it is a good start to define how much each “account” will represent in the budget.

From these estimates attributions, you will be able to align the financial planning of the business with the planned objectives to be achieved by the organization as a whole, from there, follow a direction that can effectively increase your company’s earnings and make it grow. front of the market.

4. Hold daily conferences

There are some routines that need to be carried out daily so that the company is sure about the progress of the financial and the conference of values ​​is one of them. Tracking the movement of values ​​allows the company to know exactly how its numbers are doing.

Here are some of the conferences that should be held daily:

• Banking conference : This control is based on checking how the company’s bank account transactions are going, analyzing all credit and debit cards. Through bank reconciliation, it is possible to monitor how the company’s commitments are being settled.

• Cash flow : Having a detailed analysis of the movement of what happens in cash is a must for the business manager. Following everything that comes in and everything that goes out, it is possible to understand the variables that surround the sale of products, working capital and purchase from suppliers, which are examples of events that will be present at this conference.

Without this, carrying out strategic planning based on opportunities is an almost impossible task because the enterprise does not have a real idea of ​​its expenses and investments.

5. Build reports

As a business, you need the reliability of financial data to gain a better understanding of your current and future status. It takes a proactive approach to managing your company’s finances, and financial reporting helps with that. Through the reports it is possible to take long-term actions through short-term financial statements. 

A robust financial report communicates critical financial information covering a specified period through period-by-period financial statements. Reports are powerful tools you can apply to increase your internal business performance. A data-driven financial report is also an effective means of staying current with any significant progress or changes in the status of your finances, and helping you measure your results, cash flow and financial position.

Used correctly, your company’s accounts payable and receivable aging reports can provide valuable insight. They are extremely useful solutions for managing cash flow. Financial reports that you can view daily, weekly, monthly and yearly will help with management and strategic planning.

Here are some examples of reports:

Income statement : indicates the revenue that a company has earned during a certain period of time and shows its profitability. 

Cash Flow Statement : Details a company’s cash flows during certain time periods and indicates whether a company made or lost money during that period.

6. Use Management software

Management software is responsible for unifying all of a company’s processes, including sales, inventory control , and financial activities and project management. In the financial module of the management system, it is possible to perform real-time analysis or access management reports of the company’s current results.

The management system also allows the management of payments and receipts in a much more dynamic and automated way. In addition, it is possible to control the records of customer information and the monitoring of movements through extracts. The management system will undoubtedly optimize the entire process and make it even more reliable.

In addition, with the use of a computerized system, typing errors and rework end up being reduced or even eliminated, which in turn, reduces costs and increases productivity. 

7. Automate financial management

With the advancement of technology, it is impossible to think of a financial control that is carried out in notebooks, spreadsheets or any written form. There are several simple tools available on the market to assist financial managers in monitoring corporate finance.

Tracking accounts payable and receivable on a daily basis can be a daunting task for most companies.

Here are some examples of automations:

Conciliator : One of the daily checks that the manager needs to do is the monitoring of billing receivables. A system to reconcile receipts of slips serves to carry out this entire conference automatically, managing to obtain reliable results from the bank and thus reducing the appearance of errors in interest amounts, fines and discounts granted. 

Messaging service: A computerized system can also send invoices automatically through customer registration and their respective e-mails, and quotes for products to its main suppliers.

Conclusion

In this article, it was mentioned that effective financial control requires good tools and a set of good practices applied in the day-to-day business. Good practices combined with an efficient tool such as ERP software that has the financial control module integrated with the other processes that take place in the company is essential for successful management of an organization’s finances.

From the convergence of data in its background, a business management software will be able to show the business manager a broad view of the situation of your business, the amounts that can be used, the customers that are in debt, and those that must be benefited from good payment practice. 

These tips prove to be very beneficial for both processes within every company, be it large, medium, or small. Balancing income and expenses in any business can be tricky and needs to be carefully analyzed and planned.

By following these simple tips, all companies can easily manage their finances and follow every step of the process, improving their cash flow, saving a considerable amount of money and time, as well as building excellent relationships with their customers and suppliers.

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