6 Steps to Improve your Cash Flow Position with Effective Accounts Payable Management

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6 Steps to Improve your Cash Flow Position with Effective Accounts Payable Management

Do you want to expand your business? Do you want to improve the goodwill of your business? Then, you have to pay your debts on time.  

That’s because if you don’t clear your debts timely, you won’t have adequate funds to expand your business, and your market reputation will definitely get a big dent. Now, it is not very hard to achieve your business expansion goals.  

When you have fully organized your cash flow system, you can effortlessly financially secure your business. And, for proper cash flow positing, you just have to align your accounts payable management system.  

How?  

Let’s read out the full article to know what is cash flow management and how accounts receivable, and payable improve it.  

What is Cash Flow Management? 

Cash flow management is a simple process of tracking, monitoring, and analysing the cash flow of the business. The main objective of cash flow management is to have more inflow of cash as compared to the outflow.  

Cash is a king. Whether you want to keep your business smoothly running or expand, you need surplus cash in your hands. Effective cash flow management is based on three elements – accounts payable, accounts receivable, and shortfall. In short, one effective cash flow management answers three things – 

  • What do your customers owe to you? 
  • What do you owe to your vendors? 
  • What is the difference between the monetary amount owed by you and the available funds? 

Steps to Effectively Manage Cash Flow System  

Never forget that your AP plays a significant role in floating your business. If you owe more than to your vendors as compared to the funds available or accounts receivable, your business is in serious danger.  

Thus, our accounts payable outsourcing services are mainly projected towards improving your cash inflows. We use different tactics to strengthen accounts receivable and payable structure to enhance the cash flow efficiency. But, some of the tested and effective accounts payable management steps to improve cash flow management are – 

Identify your Own AP mistakes 

Business owners must have knowledge of what will happen if they fail in accounts payable management. They need to have a clear idea on how slow invoice processing and unsatisfactory payment terms can impact their financial health. Businesses need to prepare a list of all the AP mistakes so that they can avoid them. Some of the common accounts payable mistakes are – 

  • Not issuing purchase orders immediately after each order.  
  • Do not confirm deliveries on time.  
  • Can’t accessing vendor contracts easily.  
  • Accepting discounts without calculating the cost of capital outlay.  
  • Incorrectly recording suppliers’ details into your database.  
  • Problem of sending duplicate invoices and many more.  

If you are repeatedly making mistakes in the accounts payable management, it is a huge risk for your cash flow. For example, if you have sent a double invoice to your vendors, it will overcomplicate your work as you have to cancel one invoice, and then you will receive your payment. It will unnecessarily prolong your payment clearance.  

Thus, you have to identify your mistakes related to your accounts payable system and fix them instantly. This way, you can make a smooth cash flow system.  

Automate your Accounts Payable System  

If you are still following the traditional method of managing invoices through paper, it makes the follow-up process a lot more difficult. You won’t know exactly how much money you owe and to whom you owe the most.  

Thus, you should use email or the latest automatic accounting software to manage your payables. When you have all your invoices stored up in one place, you can check whom you have to pay and from whom you have to receive – this way, you can settle up your payables against your receivables. And, if your receivable side is shorted than payable, you need to change your business tactics asap.  

Adopt Strategic Management  

AP team should collaborate with purchase, accounts receivable, and other related departments to prepare a strategic working capital culture. In the accounts receivable and payable, lots of things come down to invoice processing. Whether invoices are issued and processed in a timely manner or not– it has to be a vital concern for AP teams.  

A company needs to opt for a management strategy that defines how accounts payable should be effectively managed to optimize cash flow management. Many businesses prefer to design a custom strategy to manage AP because the structure and needs of every business are different. At CapActix, we also prefer to design a custom AP management strategy. Although opting for some common strategies won’t be the wrong move either.  

Put your Accounts Payable on Priority  

Profit is the main priority of your business. But, you should not make it your priority; you have to make accounts payable, receivable, and shortfall your priority. If you stay focused on improving the cash flow management of your business, your profits will automatically improve. You have to keep your payable management’s main focus and keep profits on the back burner.  

For instance, when you are clearing your payments on time, you will get a fair idea about your current cash flow. If you are facing a shortfall in cash, you can make a plan to reduce your expenses before things go out of hand. You can cut down your purchase orders and focus on improving your revenue.  

You can make a plan to improve your cash flow or revenue only when you get a fair AP view. That’s why make accounts payable management your main priority. 

Outsource Cash Flow and AP Management Services  

If you want to reframe your AP strategy, you can make cash flow and AP management your business’s main priority by accounts payable outsourcing services. With the outsourcing company’s help, you can customize your AP management and make it your business priority. Furthermore,  accounts payable outsourcing services is an economical solution.  

Delay Some Payment  

Sometimes, you need to think smartly and delay some payments to maintain a significant amount of cash in hand. When you have good relationships with some vendors, you can request them for a delay in payment. If your vendor is alright with late payment clearance, there’s nothing wrong with it. So, use your good relationships to maintain a healthy cash flow.  

Wrap Up 

Cash flow management is the backbone of your business. With a tight grip on your accounts payable management, you can ensure that your inflow and outflow cash system moves in sync. Thus, you should check your accounts receivable and payable management regularly to keep your cash flow in the right direction.  

If you are looking for competent accounts payable outsourcing services to manage your cash flow, contact with CapActix team  

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