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How to Pay an Invoice | Accounts Payable Guide for Small Businesses

Small businesses need to pay their invoices on time by establishing a consistent and streamlined approach to accounts payable. A proper system for accounts payable will help you pay your incoming invoices on time and only pay invoices that are fully accurate. It’s crucial that small business pay their invoices on time to avoid being charged additional late fees and harming their relationships with vendors.

Here’s what you’ll need to know to learn how to pay an invoice on behalf of your business:

How to Pay an Invoice

What Is Accounts Payable?

How to Organize Accounts Payable

How to Pay an Invoice

Small businesses can ensure they pay their invoices on time by following these invoice payment steps:

1. Review Goods and Services

It’s important that you review all the invoices your company receives to ensure they are accurate and that the goods and services you’re being billed for accurately reflect the goods and services you received from the vendor. To ensure the accuracy of the invoice, you’ll need to:

  • Review what your company ordered
  • Review what you received, to see that it aligns with your order
  • Review that the cost included on the invoice aligns with your initial agreement with the vendor

2. Note the Payment Due Date

All invoices you receive from vendors should clearly list the date on which your payment is due. They will also outline any late charges you may incur if you don’t pay your bill on time. Make note of the payment due date in your digital calendar or any other software you use to track your expenses.

3. Choose Your Payment Method

The invoices you receive will outline the various payment methods each company accepts, such as cash, check and credit card. Make note of the payment method that works best for your business so you know how to pay the invoice when the time comes.

4. Add the Invoice to Your Payment Schedule

You’ll need to track the due dates of all the invoices you receive to ensure you’re properly managing your expenses. You can create a payment schedule in a spreadsheet or you can use cloud-based accounting software to help you track and schedule all your upcoming payments. You may choose to schedule payments weekly or monthly, depending on the volume of invoices you receive and the timelines given for your payments.

5. File Payment Confirmation Details

When you do pay an invoice on behalf of your business, make sure you file away any payment confirmation details you receive, such as a confirmation number for an online payment. You’ll want to store this information in case you ever have a dispute with a seller over whether you paid an invoice.

Depending on the operations of your business, you may receive a variety of different types of invoices. This article will familiarize you with the different types of invoices your business may encounter.

What Is Accounts Payable?

The accounts payable process for a small business is an accounting function that involves all the payments a company must make, outside of payroll. The accounts payable process ensures that a company pays all its bills on time and that it only pays those invoices that are accurate and legitimate.

How to Organize Accounts Payable

Small businesses can improve their accounts payable process by better organizing their approach to payments. Follow these steps to simplify and improve your accounts payable methods:

1. Establish a Consistent System

Consistency is the key to a well organized accounts payable system. Create a standardized approach to paying invoices, from the time you receive the invoice to the time you make the payment. You’ll want to have a standard system for filing invoices as well, so they’re always easy to find. This can either be a physical filing system or a digital system. Organize invoices by due date, so that you can see in a glance what’s due soon and what can wait a bit longer for payment.

2. Set Reminders

To ensure you never overlook an invoice and miss a payment, you should set reminders for every invoice your business must pay. Use a digital calendar to set alerts for when an invoice is coming due, so you don’t overlook an approaching deadline. If you make sure you always pay on time, you’ll never be hit by unnecessary late fees that can add up and hurt your business over time.

3. Keep Vendor Information Current

To ensure you can always easily reach your vendors for new orders or questions about past invoices, log vendor contact information and store it in a centralized place. Double check the vendor’s contact details each time you receive an invoice and if the information ever changes, make updates to your vendor records.

4. Seek out Discounts

Plan ahead for your purchases and payments to take advantage of discounts. Some suppliers offer discounts to customers for early payment. If one of your suppliers does so, make sure to schedule your payments ahead of the cut-off date, to always take advantage of the discount. If one of your vendors tends to have seasonal sales, make note of that information and plan ahead to stock up when supplies are cheaper.

5. Budget Expenses

Part of your accounts payable planning should include a detailed budget for your business. With a business budget, you’ll know what you need to pay each month and how much cash is available to make payments. Use historical data from past invoices to forecast how much you’ll need to cover your business’s various expenses each month.

6. Build a Cash Reserve

Cash flow shortages are a major problem facing small businesses. To ensure your company has a steady flow of cash to use toward its expenses, save up a cash reserve that you only access in case of an emergency. The easiest way to build up a cash reserve is to open a business savings account and contribute cash to it regularly. If you do take money from the cash reserve for emergency expenses, be sure to replenish your cash reserve as soon as possible.

7. Go Paperless

It’s easy to lose or miss paper invoices, so it’s a good idea to go paperless for your business’s accounts payable process. Whenever possible, request digital invoices from your suppliers that they send to you by email. Purchasing accounting software can further streamline your accounting by allowing you to import and file all your invoices to the cloud.


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