Managing accounts payable
Just as the money flowing into your business is important, understanding and effectively controlling the money flowing out of your business is critical as well. Accounts payable refers to the money you owe suppliers for goods and services that you have used but not yet paid for (for instance, the ingredients a restaurant sources from its suppliers). The overall objective of a payables strategy is to keep cash in your business for as long as possible, to create stability and protection as the pandemic continues. By streamlining and staying on top of payables, you can achieve significant benefits and likely an immediate impact on cash flow.
Try to implement some of these common tactics to improve your cash flow position from payables:
- Track your bills and avoid late fees and interest.
- Understand the main payments you need to make.
- Try to stretch payments by offering to pay slightly more for additional time.
- Compare your invoices to purchase orders and statements.
- Investigate and appeal any discrepancies that you uncover.
- Establish payment agreements with your most critical suppliers, and reconsider other relationships.
- Eliminate costly credit by consolidating debts where possible.
- Use financing for major asset purchases that must go forward, rather than draining cash.
- Understand where you have struggled to meet your financial commitments in the past.