Do you control your company’s accounts payable and receivable? Understand the importance of this activity and discover 4 essential tips for it!
Managing a company’s finances is not easy. After all, it involves several activities that require organization, knowledge and rigorous monitoring. Among these tasks is controlling accounts payable and receivable.
Do you practice this in judiciously your business’s daily activities? Be aware that cost and profit monitoring is vital for the proper growth of the company. This, after all, helps the company’s financial health.
In this post, you will learn what accounts payable and receivable control is and 4 tips to apply in your business. Let’s get started!
What is accounts payable and receivable control in companies?
Accounts payable is a time period meaning the fixed and variable charges which the enterprise have to incur to run its business. These prices also are called liabilities and cover lease, water, strength, payroll, taxes, providers, and other charges.
Accounts receivable are assets, amounts that the business has to collect from the customers who purchased. Therefore, controlling accounts payable and receivable involves managing the company’s liabilities and assets .
How important is good control of accounts payable and receivable?
Understanding what accounts payable and receivable control is, the importance of this management needs to be applied to the day-to-day business. In practice, controlling the liabilities and assets of the company identifies financial commitments and amounts of debts receivable in advance.
This will make you aware of the current financial situation of your business and give you a preview of the upcoming months. Thus, it helps in arranging your company’s finances, paying the expenses, and saving your company from debt.
If liabilities and assets are not under control, then a series of factors bring a company down that might eventually cause loss of finance in the following manner:
- forgetting to pay one or more bills (generating interest due to interruption of service);
- forgetting to collect amounts receivable;
- not taking steps to avoid debt;
- spend more than you earn, getting into debt;
- not having money to pay the bills;
- not investing the company’s money because you don’t know that this possibility exists.
Therefore, controlling both groups of accounts becomes essential to maintaining the company’s good financial health. Consequently, this habit increases the chances of healthy business growth, as it allows you to organize your accounts and use your company’s money more strategically.
4 Tips for controlling your company’s accounts payable and receivable
You already know the importance of controlling your company’s accounts payable and receivable. So it’s time to discover the 4 tips for managing your business’s liabilities and assets and be successful on this journey.
Check it out!
1. Record all cash movements
The first step to controlling accounts payable and receivable is to record all cash movements in the company, without exception. Any amount that comes in or goes out of the business, even if small, must be recorded.
This practice helps identify potential bottlenecks or even drains through which money may be flowing, if applicable. In addition, records allow you to discover good sources of income and other relevant financial information.
Another important function of recording these transactions is to provide data for carrying out other financial management activities. This is the case, for example, with cash flow, the company’s financial cycle, etc.
2. Control your cash flow
As you have seen, recording transactions is essential for controlling cash flow . This tool consists of understanding how much money came in and went out of the company’s cash register. This way, it is possible to find out whether the organization’s balance is positive or negative.
To ensure proper monitoring, it is important to monitor your cash flow daily. This way, you can identify any problems immediately and take action in advance, preventing the situation from getting worse.
Otherwise, depending on the flow of inputs and outputs, control becomes more complex, increasing the chance of errors. To make this task easier, it is possible to rely on an activity automation tool, such as good financial management software.
3. Divide the cost centers
Cost centers are categories into which you can divide your accounts payable and receivable. There is no general classification for them, so you can distribute income and expenses as you see fit.
For example, you can separate cost centers by branch or by sector (marketing, logistics, sales, etc.). This way, you can better control the company’s liabilities and assets. After all, it will be easier to focus on the data from these centers to later have a macro view of the business.
4. Use financial management software
Keeping all these records you’ve seen so far manually isn’t easy. That’s why financial management software can help automate cash flow. But that’s not the only way they can help control your company’s accounts payable and receivable.
Management software allows:
- record expenses and earnings;
- plan the company’s budget;
- issue invoices;
- issue payment and receipt receipts;
- charge with bank slip, Pix or credit card;
- set goals for spending or earning;
- classify assets and liabilities by category and cost center;
- attach receipts via mobile device camera;
- obtain management reports .
All of these functions are performed automatically. Therefore, without human interference in obtaining data, it is possible to minimize errors and achieve better results in the financial control of the business.
In this post, you understood the importance of controlling your company’s accounts payable and receivable. Now you can put into practice the 4 tips you just learned and closely monitor, without difficulty, the control of your company’s liabilities and assets.