Many businesses would have made it to the peak and would have blossomed like the rose planted by the rivers of water if the issue of accounting principles were taken care of by experts who are committed to reading the books.
The problem of why many businesses come to an end prematurely can be traced to issues that have to do with recklessness with the accounts of the company. We shall be looking at the concept of account Payables with the sole aim of showing our readers the mistakes that they ought to avoid if they want to remain afloat in business.
What Is Account Payable?
It will be appropriate to start with this definition if we are to get in terms with this subject matter of Account Payables.
Let us take a look at what this accounting term involved in the lay man’s language:
- Money expended on the materials that you needed for running the business.
- The cost of inventory of the materials that you have stocked for business purpose
- The amount of rent that you owe
- The utility bills that you have accumulated on account of the business.
The four listed above and other related expenses on account of the business are what is referred to as Accounts Payable. The fact that most of these expenses are normal experiences in the line of business is the main reason why some business CEOs fall into the error of treating it as business as usual.
Every business day of operation comes with their challenges and it is only wise to treat each business day as a different ball game if you want to avoid the sharks that are alive in the waters and ready to devour.
Here are the accounting mistakes that you must avoid for peace in business to be sustained:
1. The Entering Of Invoices Batch of Accounts Payable
This is one of the temptations that business owners easily run into. When the invoices are many, they decide to enter them in a block into a single file. Yes, it will save you time that you would have spent entering them one after the other; but this might turn out to hurt the business very badly in the future. When you enter them one after the other you will create a paper trail that will make fraud difficult. What are the benefits of this?
- It prevents fraud
- Makes your account easy to trace by auditors
- Can be used to measure performance
2. Making It A One Man Show
If you think all the processes involved in Account Payable can be handled by a single employee, then you are making the mistake of a lifetime. Your desire to cut down on costs might make the cookies to eventually crumble on your head. There are glaring disadvantages to this:
- The staff will become too powerful
- You will expose him to the financial secrets of your company
- Fraud is possible
- He can miss out on some essential details because of the workload on him alone.
3. The Purchase Order
Another problem easily coming up with Account Payable is forgetting to close the purchase order. The purchase order is used for everything that you have ordered and after receiving the goods and an invoice, the cut for the payment is made by your company. This order must be closed. If this is not done, the following scenarios may likely come up:
- Having to pay for an invoice several times
- The embarrassment of the supplier informing you that you are making double payments.
4. Making Late Payments
Every company that you are working for will send you a paper invoice through electronic Email. The neglect of this will come to hurt your company when you suddenly realized a late hour of the day that you cannot meet up with the payment. It is best to study the invoice and note the expected date of payments. If there are going to be issues of any kind; then you can simply notify the Account Payable and they will send the relevant signal across asking for a change in the date of payment.
The above are some of the common errors that occur in Account Payable which should be avoided to avert the big issues involved in the line of business operations. According to the employee’s skills and ability, they are assigned in each department like sales, marketing, IT, HR, operations and many more. It helps in achieving the tasks given to each department. It also helps in making the decision-making process easier along with the communication required.
This model helps in organizing each department according to the brands and products operated by the organization. It helps in clarifying each and every query as a specific team or individual has been appointed for the brand or product.