Mastering Payables to Drive Positive Cash Flow

For any business, managing the cash going out of the business is just as important as managing the cash coming in. Improving your payables process is the ultimate key in enhancing your cash flow position. Here's what you need to know:

The cash coming into a business, usually in the form of revenue, is something business owners gravitate to as a readily apparent lever for increasing cash flow. While more sales tends to equal more cash coming in it’s equally as important to take control of the cash moving out of the business in the form of payables. Adding efficient processes and technology to the way payables are handled is an easy way for a business to rein in costs, simplify invoice management, improve control over the timing of payments, and reconcile accounts. All of these improvements allow a business to stretch how long cash remains on hand.

In fact, it’s these payables processes that can determine the current cash position as well as the ongoing cash flow of a business. For businesses looking to keep their books balanced and in the black, payables management offers the following:

  • A more efficient and reliable way of dealing with payables
  • Automation to reduce errors and save time
  • Payment methods that put control over timing in your hands
  • Improved relationships with key vendors and creditors due to stronger processes
  • Enhanced fraud protection that helps reduce the risk in your payables process
  • Less payroll hours spent on managing payables, resulting in cash savings
  • Better cash flow and reliable access to important working capital
  • Visibility into spending that can prevent waste
  • More cash on hand available to earn interest every day

Any one of these is a worthwhile benefit; but, when considered as a whole, they can truly reshape the cash position of a business. Today, it’s possible to access the power of smart payables management solutions that utilize the latest technology to put the control over cash flow back in the hands of business owners.

These solutions are designed to bring cash flow under control by making payables simple to manage and affordable to deal with. The following five proven methods for managing payables are a great starting point for a business that’s ready to begin improving cash flow today.

Robust Cost Control from Expense Management

It’s no surprise that a great starting point for improving cash flow on the payables side of the equation is by controlling expenses. Temporary discounts and improvements in terms are of course helpful, but a strong expense management solution can deliver longer term savings as well. By enhancing visibility into the costs incurred by a business it’s possible to strategically identify the areas where better terms will make the most difference for the cash flow of your business. 

Adding Discipline to Employee Spending

Even the best employees can lose track of their spending on behalf of their business, particularly if there is no automated method for reviewing and authorizing individual purchases. Fortunately, there are business credit cards available that can limit employee spending and provide ongoing and real-time visibility into individual employee spending activity.

The ability to monitor individual purchases and set personalized limits allows for business owners to tailor employee spending to what is appropriate at every level and function of the organization, and group limits can prevent overall employee spending from unexpectedly impacting business cash flow. Adding merchant codes for individual card users is another way to track and manage spending at a granular level and put enhance cash flow.

Time Payments to Take Advantage of Available Terms

When a vendor offers 30, 60 or 90 day terms it can quite literally pay to make payment when due rather than according to an arbitrary invoice processing date. Keeping your money on hand and earning interest for you is a great advantage of vendor terms; and it’s always a good idea in terms of managing cash flow to negotiate the best possible terms for making payment. The use of automation can provide control over payables to such an extent that it’s possible to stretch payment until the last possible days by using ACH (Automated Clearing House) or EFT (Electronic Funds Transfer) payment methods.

Adopt Electronic Payments to Maximize Efficiency

The process of writing checks and sending them off to vendors in the mail takes valuable time and money, and the burden of monitoring accounts to see if or when they clear your account so that you can reconcile the books is painstaking and unreliable. Adopting modern payment solutions like ACH (Automated Clearing House) and EFT (Electronic Funds Transfer) as part of a digital solution that includes online banking can improve the efficiency and cost of making payments to 3rd parties.

Payroll Automation to Keep Your Business Focused

The proliferation of reliable and streamlined payroll solutions means that business owners have better access than ever to proven systems for small business payroll. Adding the right mix of technology and process that an outsourcing offering provides can save valuable time, allowing employees to avoid the distractions of payroll and stay focused on what the business does best.

The Right Business Banking Partner Can Make all the Difference

Small business owners today have the ability to access the same payables management solutions and cash flow enhancing tools that were previously reserved for the largest companies by connecting with the right business banking partner. The technology available for managing payables enables businesses of all sizes to optimize cash flow by tying together the process of controlling expenses, employee spending, payment timing and payroll automation. The use of electronic payments and online banking solutions make it easier than ever for those businesses working with the right banking partner to tap into the power of technology to take advantage of the most powerful payables management solutions.