In today’s world, where companies are evaluating every aspect of business to try to cut costs, few are looking at their accounting departments for ways to save money. The billing process is a basic and necessary function of accounting, and as a result, its potential impact on a company’s bottom line is often overlooked or undervalued. Before reducing staff or cutting the marketing budget further, consider a few strategic steps accounting can take to improve the bottom line.
Automate the process
Implementing AP Automation or e-invoicing provides a number of operational and financial benefits. It can reduce costs associated with billing and is more efficient than paper-based invoicing. It also allows accounting to capture discounts on payables and speed up receivables, while reducing errors and maintaining a fully auditable trail. E-invoicing saves money on the cost of paper and postage, reduces the need for physical storage and cuts operating costs associated with filing and searching for misfiled invoices.
Update for accuracy
Whenever there is a price or rate adjustment, it is important to ensure the new rates are immediately updated in the accounting system. Keeping rates and prices current in the system allows the company to have a more accurate picture of payables and receivables. It also eliminates the need for accounting to go back and make corrections to the system, issue corrected bills to customers or redo checks for employees.
Paying bills on time improves your reputation as a vendor and your credit rating, which offers a variety of benefits, including access to lower interest rates. Paying bills on time can also provide the opportunity for cash discounts and reduce costs resulting from late payment penalties. Payable departments taking advantage of a discount term of 1/10 net 30 will return an annualized 18 percent.
Charge late fees
Late fees are applied to encourage customers to pay promptly. While the accounting department should strive to make payables on a timely basis to avoid incurring late fees, it may be wise to institute a late fee policy for your own customers. Late fees can quickly accumulate in your favor. If customers aren’t going to pay on time, you may as well be compensated for financing their business.
Many business-to-business companies traditionally take check or cash payments on invoices, but more and more are now turning to credit card or virtual payments. While there are fees associated with these options, they offer ease to your customers and encourage prompt payment, so you receive your money more quickly. For clients or customers with recurring payments, like monthly subscriptions, it is extremely efficient. Credit card or virtual payment systems can also result in increased sales, because customers are better able to make impulse purchases, paying instantly. Accepting credit cards also eliminates the time and costs resulting from bounced checks.
Managers have a tendency to first look how and where the company can cut back, in order to improve its bottom line. By first taking a look at how the accounting department is functioning, and what its policies and procedures are in regards to billing, cash flow and profitability, companies can improve the bottom line without making any cuts at all.