Streamlining Accounts Payable
Discover Why You May Not Want to Follow Conventional Wisdom for Payables
By Peter Lyle DeHaan, PhD
The standard business advice when it comes to accounts payable is to delay payment as long as possible, even beyond the stated due date—assuming you can get away with it. This benefits cash flow, making more money available for day-to-day operations. This may be shrewd business, but it’s not good business.
Although lengthening payables may make sense from a money standpoint, it may not be the best overall strategy. Here’s why:
Build A Buffer: A business that mails payables at the 30-day mark or pushes payments beyond that, say perhaps to 45 days, has no cushion when cash flow gets tight and there’s not enough money in their account to pay all the invoices that are one month old.
A business that pays invoices quickly, perhaps in one week, benefits by establishing a buffer for those times when they can’t pay as quickly. After all, what vendor would care—or even notice—if they received your payment in ten days as opposed to the usual seven? Having a policy of paying invoices quickly whenever possible, builds a buffer for those times when remitting payment suffers a bit of a delay.
Act Ethically: Some businesses readily agree to their vendors’ terms of service, such as net 30, knowing they have no intention of ever following through. Yes, they will pay, but it will happen when they want to and not according to the agreement they committed to with their vendors. This is not an ethical policy. Stop doing it.
Reduce Needless Interruptions: When a business pays invoices late, even by a couple days, they receive collection calls. Each call about a late or missed payment is an interruption to the person receiving the call. Now multiply this by every vendor you work with. That’s a lot of employee time spent dealing with an avoidable problem, and it diverts them from work that’s more important and more profitable.
Become A Preferred Customer: Whenever I have a special promotion who do I contact first? It’s those who pay their bills quickly, followed by those who pay within 30 days. I never consider customers who pay late and cause me extra time chasing down the payments that they committed to make. In short, becoming a preferred customer has rewards, while those who pay late end up on a different list.
Summary: Of all my optimize articles, this may be the least acceptable. I get that. But consider your accounts payable policy and how that affects your vendors and your staff. Granted, you can’t immediately go from paying in 45 days to paying the day the invoice arrives. But you can move in that direction. First, take steps to make sure all vendors are paid within the timeframe they expect and that you agreed to.
Next, consider incrementally shortening your payables cycle one day at a time. Keep working on it until you can pay every invoice quickly. The ultimate accounts payable streamlining will occur when you can pay every invoice on the day it arrives. Your vendors will appreciate it, and your staff will respect you for it.
Peter Lyle DeHaan, PhD, is the publisher and editor-in-chief of TAS Trader. Check out his latest book, Sticky Customer Service.
7 Tips for Better Telework and Remote-Employee Engagement
By Kate Zabriskie
Are you and your team members participating in the new normal of remote work? Telework isn’t going anywhere, and it’s not going as well as it needs to. The good news is there are concrete actions managers can take to steadily improve to make telework more productive and enjoyable.
1. Think in Stages: When talking with your team, stay positive about stage one (going remote), and take the opportunity to congratulate people for making it this far. Then, once you’ve recognized the positives, you can discuss steps to improve. Think long term about what remote work should look like between now and the end of the year.
2. Revisit Expectations: In a perfect world, organizations that move to telework have policies, procedures, guidelines, and training to prepare people for the transition. During the pandemic, however, the cart may have come before the horse. But nothing says you can’t get the horse back on its feet and start planning after the fact.
3. Fix What Isn’t Working: When something is wrong on a team, it rarely fixes itself. This is especially true when work goes remote. As the person in charge, you have the responsibility to find the issues and fix them. If you don’t your team will never function at its full potential.
4. Address Questions: Here are a few questions a manager should address:
- Can people switch to part-time status if they’re having difficulty balancing work and home?
- What are the rules for returning calls, emails, and other communication?
- What communication channels make sense for various interactions?
- Do people need to be on camera when they meet as a team?
- How often does the team need to meet?
- What technology is standard?
- How can we infuse a little fun into our interactions?
- How much communication is too much or too little?
5. Seek Continuous Improvement: Few teams get the telework equation right on their first try, and yours probably won’t either. Adopt an evaluate/plan/act mindset to allow your team to systematically reflect on what’s working and adjust what isn’t. Start practicing this cycle at regular intervals as you transition your team’s norms. Once you’ve established a rhythm, people will become used to the process and frequency of change.
6. Connect People to Their Work: When a team is not together, employees can feel disconnected from each other and from the purpose of their work. As a manager, you have an opportunity to reestablish those connections. Do this publicly when possible. Thank them and affirm their contributions.
7. Repeat Important Messages: Even with advances in technology, remote communications often compete with a multitude of distractions. Know that you may need to repeat messages and send them using more than one channel.
Conclusion: With some focus, tenacity, and these seven tips, any manager can successfully navigate the new normal that includes telework. What will you do to chart your course?
Kate Zabriskie is the president of Business Training Works, Inc., a Maryland-based talent development firm. She and her team help businesses establish customer service strategies and train their people to live up to what’s promised.
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Quotes for the Month
“Work saves us from three great evils: boredom, vice, and need.” –Voltaire
“People often say that motivation doesn’t last. Well, neither does bathing—that’s why we recommend it daily.” –Zig Ziglar