As your company grows, the number of invoices it receives grows. Once you acknowledge receipt of a vendor’s invoice, it becomes an accounts payable. Logging the invoice into your software system, confirming the purchase of the items or services shown on the invoice and paying the invoice involve time and effort. Fortunately there are a number of actions your company can take to reduce the number of small invoices or their impact on your accounting system.
Accounts payable are the payments due to your suppliers for goods and services you purchased. Accounts payable are created by the extension of terms or trade credit to your company. Instead of paying immediately, a vendor allows your company to pay at a later date, for example, 30 days.
If your company receives a number of small invoices from the same vendor every month, you have a couple of options. If your vendor sends a monthly summary, you can disregard the actual invoices. Wait until you receive the summary and use it to input the bills into the system and schedule one payment. If there is no monthly summary, you can set up a folder for that vendor with monthly tabs. At the end of the month, input all the invoices for that month and issue one check.
Use a Credit Card
Large corporations often use corporate procurement cards to pay for small items and reduce the number of small invoices from multiple vendors. You can replicate this with your company through the use of a company credit card. Some suppliers will allow you to pay with a credit card. If you can move a number of these accounts to payment by credit card, you can significantly reduce your accounts payable processing time and effort. Instead of viewing and approving multiple invoices, you review the credit card statement each month and log the payments into your accounting system as expenses.
For suppliers that you have a long history with and trust, you can set up EFTs or autodrafts. This can work well if your company generally purchases a similar amount each month. For example, your company is a promotional products company. Each month you purchase coffee cups, pens, t-shirts and other items from a variety of vendors. You can establish autodrafts for these purchases and place limits on the autodrafts. If your typical purchase ranges from $300 to $450, for example, you could place a $500 limit on the draft. Limits protect your business checking account from being overdrawn and reduces the risk of fraud.
- Google Books: Accounts Payable: A Guide to Running an Efficient Department [http://books.google.com/books?id=XbXuRpAJdKYC&pg=PA19&lpg=PA19&dq=Reducing+the+Number+of+Small+Dollar+Invoices+Coming+Into+Accounts+Payable&source=bl&ots=UUOzWHMIvE&sig=ulwajoWqBgy_ZSu94TliP_0ARqQ&hl=en&sa=X&ei=MmvwUd2rPJSC9gTZrIC4Dg&ved=0CHYQ6AEwCA#v=onepage&q=Reducing the Number of Small Dollar Invoices Coming Into Accounts Payable&f=false]
- Business Dictionary: Accounts Payable [http://www.businessdictionary.com/definition/accounts-payable-A-P.html]