Broaden your understanding of the accounts payable process to allow your company to track and settle payments. This streamlines the procurement...
7 Strategies for Dealing with Overdue Payments
Overdue payments could be detrimental to a growing business and must be closely monitored. Learn about different strategies to deal with aged payments.
A business in its growth phase should closely monitor its accounts payable to avoid incurring overdue payments that could be detrimental to its overall function.
But with small business owners overseeing several functions in the company such as operations, finance, sales, and marketing, tasks like paying suppliers are often set aside for more critical ones.
However, there are effective methods to rectify these overdue payment-related complications. Let this article serve as your guide on actionable insights to avoid and reduce the number of payments that are settled late.
How to Avoid Overdue Payments
Overdue payments could be a daunting endeavour for business owners due to factors that often need utmost attention. The following are effective strategies to pay down overdue payables.
1. Create an aged payables report
This strategy can improve your invoice management. Reports of ageing accounts payables give your company the ability to forecast payments. You can utilise your invoice payments history to predict when and how much you'll need to pay for specific accounts instead of waiting for invoices.
You'll have more time to prepare and coordinate all the necessary resources by anticipating upcoming and ensuring timely payments by a wide margin. Manually creating an accounts payable ageing report may be difficult for most companies, but a good bill payment software can accomplish this process faster and more effectively.
2. Track every payment due date
It's crucial for you to monitor all activities related to expense management, including all cash outflows and due payments. Tracking every payment due allows you to avoid late or double payments.
3. Re-negotiate payment terms
Communicate openly with your suppliers about your capacity to pay past due bills when things get too tight. Re-negotiating terms to loosen up the payable crunch is a great way to relieve pressure from your finances.
A good supplier is someone who not only looks out for its best interest but also for its clients. Your company's financial viability is in their interests.
4. Set up reminders
While you may feel you can stay on top of payments and invoices without assistance, that's not always the case. Running a business involves multiple functions and employees, which is challenging for one person. You can easily handle payables and act towards improving your accounts payable process by setting up reminders.
5. Improve your AP procedures
Late payments may indicate inefficient processes in your AP management. You should take the time to analyse your processes, identify the cause of delay and optimise your AP workflow to reduce invoice processing time.
How to Prevent Overdue Payments from Spiraling Out of Control
1. Settle invoices immediately if cashflow permits
Don't wait for invoices to be overdue before processing them. Settling invoices upon receiving them lets you organise and manage expenses efficiently, allocate funds to specific receivers, and get the process started immediately. However, you should only do so if you have enough cash to circulate.
If settling your invoices immediately becomes challenging, consider scheduling your payments instead. For this to be effective, consider the number of days it takes for the payment to be posted to the receiver’s account to ensure timely receipt of the payment.
2. Automate your AP process
Automating your accounts payable process can improve speed, accuracy, and quality. Eliminating manual processing will help you prevent losing invoices, making double or late payments, and a negative cash flow.
Investing in an AP software that is heavily integrated with your accounting system eliminates manual data entry and decreases the chances of errors, similar to what Spenmo offers.
Renewed Strategies for Overdue Payables
Resolving overdue payment-related matters can be challenging for business owners, especially when left unattended for an extended period. The process involves collecting and organising documents important to resolving the issue. However, executing the practical and actionable tips stated above will undoubtedly expedite the process of withering down your overdue payables.
If you're looking to speed up and streamline your AP management processes, consider using Spenmo. It is a cloud-based accounts payable solution that brings internal spend management, corporate cards, bill payments, and reconciliation in an integrated view. Book a demo today to find out more!