Managing your creditors is a vital part of maintaining smooth financial operations for your business. Paying your creditors on time and keeping accurate records is essential for sustaining strong relationships and ensuring an uninterrupted supply chain. In this blog, we will explore the key elements of efficient creditor management, from invoice tracking to avoiding payment errors.
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Who Are Your Creditors?
Simply put, creditors are your suppliers. The term creditors comes from the fact that they extend credit terms to your business, allowing you to pay at a later date under agreed conditions (most likely outlined in the contract you would have signed when you bought their goods or services). Managing your creditors effectively means reviewing them regularly and ensuring that all payments are accurate and timely.
Streamlining Your Creditor Management Process
Here are 6 ways you can streamline your management process for creditors:
1. Conduct regular reviews of your creditor list
Dedicate time each month to review your list of creditors in your accounting system. Look at each entry carefully to identify any inaccuracies, duplications or omissions. Ensure that all your supplier invoices have been received, and recorded correctly and even more crucially, that payments have been made to the relevant accounts.
2. Centralise invoice management
We all want to avoid missing a payment because of a misplaced invoice! So take action to reduce the risk. Centralising the collection of invoices can be as simple as a dedicated email address where you ask all your creditors to send invoices. At Long White Cloud Accounting, we use software that can funnel all invoices into a single, manageable location.
3. Verify invoice due dates
When you enter invoices into your system, double-check that the due dates are accurate. This step ensures that creditors are paid on time and in turn, fosters a strong relationship with them, as well as preventing disruptions in your supply chain.
4. Reconcile statements of account
At the end of each month, reconcile supplier statements of account with your own records. This allows for any discrepancies to be identified and resolved promptly so that you and your supplier both have up-to-date information.
5. Avoid payment errors and duplications
Preventing payment errors, such as duplicate entries, is critical. For example, if a payment is not matched up to the unpaid invoice and instead is coded directly to your accounts, the invoice will still remain unpaid and this can lead to inaccuracies. By implementing strict bookkeeping practices, you can avoid these issues and ensure all payments are accurately recorded and reconciled.
6. Automate payment processes
Use technology to your advantage! Automating payments can do wonders to simplify your creditor management. Look at implementing automated tools that integrate with your accounting software, pull in due invoices and arrange for payments to be made. By automating this process, you can reduce errors and make sure payments are made on time.
Building and Maintaining Supplier Relationships
Paying your creditors on time is not just a financial obligation - it’s the key to maintaining a reliable supply chain and securing more favourable credit terms. It should be your priority to pay bills promptly to improve your business’ reputation and operational efficiency.
Regular and transparent communication with your creditors is also essential - especially if a payment is going to be delayed. Where possible, assign a team member to manage these relationships on your behalf. This ensures that any concerns are addressed and your creditors are informed about payment statuses.
Creditor Management Goes Beyond Paying on Time
Efficient and effective creditor management goes beyond just paying your bills on time - it involves having accurate financial records, taking advantage of technology and building strong supplier relationships.
By taking the time to standardise your processes and utilise the tools at your disposal, your business can ensure a robust creditor management system that supports healthy cash flow and successful operations.
Are you a company director navigating the complexities of month-end financial management?
Don't worry, we've got you covered! Download our FREE guide: '5 Things Every Company Director Needs to Know at Month End' and gain the insights you need to streamline your month-end processes and drive business success.
You can also check out our YouTube series where our Founder, Kath Vincent, breaks down each topic in-depth.
Long White Cloud Accounting is based in Sutton, South London and serves established limited company service-based clients in the Greater London area. Led by Kath Vincent, we provide high-quality bookkeeping to keep you on top of what’s happening in your business each month. Looking for bookkeeping support? Click below to book a chat with Kath.
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