Tips to Manage Accounts Payable & Accounts Receivable

Management of accounts payable and receivable is one of the most crucial steps in a business setup. Only with efficient management of outstanding can you stay on top of your business avoiding any room for doubts.

What is Accounts Payable and Accounts Receivable?

Well, to simply put the definition of these two accounting terminologies, Accounts payable are amounts a profitable business owes mainly because it purchased goods or services on credit from the supplier or vendor. Accounts receivable are amounts a company has a right to collect because it sold goods or services on credit to a customer.

While managing Accounts Payable and Accounts Receivable is a bit of a juggle, it helps you get a thorough view of the cash inflow and outflow at a single shot. However, using accounts receivable and payable management software is like hiring the perfect employee who always follows your direction, never lets anything fall through the cracks, and works 24/7.

How to manage Accounts Payable and Accounts Receivable Efficiently

When you fail to diligently manage your accounts receivable, you put your business in jeopardy. Management of accounts receivable and payable are responsible for your cash flow, which you use to pay your debts, grow your business, invest in new technology, and accomplish dozens of other goals. Here’s how you can effectively manage these accounts and increase the transparency of your books of accounts:

1. Establish Credit Policies

Business owners detest long transactions which aren’t closed on time. The receivables department helps establish credit terms, which often vary according to the clients and their history. While newbies might not earn trust soon and so their credit ratings could differ, but regular customers who have always made their payments on time enjoy the liberty of getting a good credit rating. The payables department must always ensure that the payments are made within the time period given by the company, in order to avoid a hit on their credibility. Keeping a track of the accounts receivable and payable allows you to enjoy shorter transaction cycles, which means you can bid goodbye to longer cycles that might be symptomatic of workflow bottlenecks or low cashflow.

2. Management of Outstanding Bills

When a sale is made, the seller incurs some hard cost which includes labour and inventory. The only way you can match your inflow and outflow efficiently is by receiving payments within the credit time provided by you to the buyer. Every company that extends credit is taking a calculated risk of getting paid on perishable time or inventory. With effective accounting software, companies can easily manage delayed payments and which further affects the overall growth of the organisation.

3. Foster More Communication

One of the most effective ways to strike a balance between accounts receivables and payables, respective departments must consult the other on purchases and sales affecting the company. If it is noticed that there’s huge consumer demand, receivables can signal payables to order more items. If times are tight, payables may want to curb procurement until there’s greater stability. Clean Track of Bills Payables and Receivables (Bill-by-bill) -helps in healthier customer relationship and settling the disputes easily.

4. Use Automation to Track the Accounts

Documents used to track accounts receivable and payable are invoices, receipts, shipping orders, purchase orders, financial statements and others. When so many reports and data is involved, it is tricky to stay on top of everything without any errors. A cutting-edge accounting software like Tally will help you generate the necessary reports seamlessly and accurately and can help track anomalies such as delinquent accounts or interruptions in workflow.

5. Optimizing Accounts payable

Taking full advantages of credit period and delaying the payment as far as possible within the credit terms will help you to balance the cash outflow and inflow. But it’s also crucial to pay off the amount sticking to the credit period you have been provided by the seller. Considering vendors who offer flexible payment terms and discounts on earlier payment will help here as it will act as a boost your credit score.

Tally.ERP 9’s simple yet quick navigation helps to track and managing accounts receivable and payable. It is important not only for assessing overall performance but for helping managers and owners make smarter decisions that can influence an organization’s future. You can view details of the accounts receivables, accounts payables, ledger outstanding report, group outstanding report, ageing analysis report and bill party-wise outstanding report in Tally.ERP 9 at a flick. 

Latest Blogs

Salary of a Qualified CMA

Salary of a Qualified CMA

Best Career Option After Class 12th

Best Career Option After Class 12th

Why to choose career in "CMA" ?

The Reasons to Choose a Career in "CMA"

Top Reviews

Introduction to Statistics for CA Foundation

Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics

Chapter X of Companies Act 2013

Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448

What is Corporate Image

What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage

What is Energy Audit

What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit