AP and AR are two main indicators of cash flow, and properly tracking and managing them is important for assessing the overall performance and helping managers and owners make smarter decisions.
FREMONT, CA: Managing Accounts Payable (AP)and Accounts Receivable (AR) can be a bit of a juggling act. Staying on top of these means the difference between properly tracking purchases and potentially overpaying or not being paid for goods and services. This makes proper AR and AP management more important than ever. Here is how many successful firms achieve that goal.
• Establish Credit Policies
One thing managers don’t like when transactions take place when they take too much time to close. Receivables departments often frame credit terms, which can differ in accordance with the customers they serve. Regular customers with higher credit ratings receive increased flexibility period for payment. When it comes to payment terms, businesses establish terms. Accordingly, payable departments should pay suppliers as soon as the shipped items arrive in good condition. If establishing credit policies is done right, firms will be able to take good thing about discounts for early payments.
• Utilizing Latest Technologies
Making payments with checks and delaying it will complicate the accounts payable and receivable process. Such practices should be eliminated to simplify the AR and AP process. Making the payments too early or late, repeating the payment or missing a payment can hinder the accounts payable process. Using the latest technologies can help keep a proper record of the accounts payable by maintaining data related to paid or to be paid invoices.
• Foster Communication
Companies might battle to stay on top of AR and AP departments, especially when dealing with large a volume of transactions. To make this seamless, each department should consult the other on purchases and sales impacting the company. If there is increased consumer demand, receivables can signal payables to order more items. If times are tight, payables may want to limit procurement until there’s greater stability. Proper communication is the cornerstone to the smooth functioning of all these processes.
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