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  • Writer's picturePeter Geh

Purchases and Accounts Payable - STOP doing these 6 things!

Updated: Jun 27, 2023

Best practices in business have evolved tremendously over the past 10 years. Has your business kept pace? As part of my CFO Services practice, I'm always amazed at how often I see inefficient or wasteful finance workflows. Purchases and accounts payable is a critical workflow for any business so I wanted to share the 6 things I think you should stop doing immediately. As always, if you have a question or think you might want to work together, please get in touch through my Home Page. Also, never miss a blog by following me on LinkedIn or Facebook.

Purchases and Accounts Payable, things to Stop doing.

1) Writing Cheques as your Primary Payment Method


Hear me out before you skip over this point because I'm sure you've heard it A LOT! About 50% of all businesses still use cheques as their primary source of payments. To me this is a crazy statistic because the number 1 reason why companies haven't switched to electronic payments is because they probably don't really understand how much better they can be. To keep things short, here are the 2 key reasons why electronic payments are so much better:


a) They Cost Way Less


The cost of mailing and printing cheques is about 2X the cost of electronic fund transfers. However, once you add the time and energy into actually preparing the cheque runs, mailing the cheques, and reconciling the cheques with your bank, the cost is WAY higher.


b) They Require Way Less Effort


Once you have established your electronic funds payment process, the total time dealing with payments could be up to 80% less than what it takes you to fully deal with your cheque runs and reconciliations.


Where to Go for Electronic Payments

Big banks are making a big push to help customers move over to electronic fund payments. I urge you to check out what your bank offers. CIBC for example integrates with Xero accounting directly and Royal Bank is working with Quickbooks Online.


However, if you aren't exactly thrilled with your financial institution's offerings or costs, there are other non-bank options that are making electronic payments ridiculously easy and cost effective. One of my favourites is an offering from Plooto. Imagine this electronic payments workflow:


1) All your invoices get entered into your accounting software.

2) Your accounts payable clerk or your bookkeeper logs into Plooto and all of your entered invoices automatically show up and sync.

3) Your accounts payable clerk or bookkeeper simply clicks the invoices to pay and then you as the owner gets a notification that there are payments to approve. You can review the invoices in PDF format before you approve them for payment.

4) Once your payments are approved, your suppliers get a notification that a payment is coming to them, they get another one when the funds have been deposited to their account.

5) Plooto automatically goes into your accounting software and marks the invoices as paid so you don't have to ever worry about double paying someone ever again.


The above is a simple workflow and there's lots of options, but the point is to demonstrate how easy and convenient electronic payments can be. It's so easy and convenient, I really question why 50% of owners still want to use cheques! It's crazy, and oh, by the way, a service like Plooto will even print and mail cheques for the ~5% of vendors that for whatever reason, won't accept electronic fund transfers. Like I said, lots of options!


I recommend a company like Plooto because I really enjoy their product. However, if you do end up checking them out, consider using my referral link HERE. It earns me like $50 if you sign up, so not a huge amount by any means; however, a small token of appreciation to me for helping you out. Free 30 day trial included so you can definitely try before you commit.


2) Never Doing a Key Vendor Review


Big companies are constantly keeping tabs on their costs. One way they do this is through consistent reviews of their vendors / suppliers and related costs. However, amazingly, I find that many small businesses never do a key vendor review. To perform this type of review, pull your businesses spending for the last year by vendor, sorted by the highest spend first. This will act as your list to consider in your key vendor review. The goal of the review is to determine areas where you might be able to negotiate better pricing, services, or terms.


However, caution! Before you go all crazy and only focus on the dollars, remember, you have relationships with these vendors and they probably treat you right. How you are treated and the service you get is important so definitely keep that in mind. My feeling is that most vendors are receptive to customers asking about better pricing, extra services or terms as long as you are professional in your approach. The reality is that it's business, it's not personal! Doing a little bit of homework in advance on competitor offers, coupons, your buying volumes, etc can help with these conversations. HOT TIP: Before you start, you should be aware of highly competitive industries like legal, professional accounting, marketing services, banking & exchange, telecoms & internet, insurance and software. These might be great starting points for vendors to review.


3) Losing Track of your Recurring Expenses


Unless your business is really small, I bet that you have at least 1 recurring cost for something that you don't really need or use. You could also be in the wrong type of plan, or might be able to use a free option, remember, offerings from companies are always changing. In today's subscription centric world, it's important to keep track of these recurring subscription costs. However, it's unfortunate that they are often poorly managed and rarely reviewed. Remember, any wasted money on these costs is less money you have for things that can add value. If keeping your recurring costs organized is a problem for you, there's even apps out there to help you. Try searching around for them!


4) Not Getting Enough Quotes


It is literally the wild, wild west out there in terms of costing right now. Some companies are overwhelmed and are busy! As a result, they may quote high since they don't really have time for you. If they get the work, great for them, but if they don't, no sweat, they didn't need it anyways.


As an example, I personally replaced some flooring in our home and we got 4 quotes from local companies. I was astonished at how different the costs were, even though I was requesting materials of a similar quality. For perspective, on a roughly $20,000 job, some quotes were different by over $10,000. If I had only gotten one quote, I could have been stuck with an unreasonably high cost.


Business is no different, don't be lazy, always insist on getting at least 3 quotes on projects, materials or services. Not only will you get a fair price but you can take the best mix of service, quality and price.


5) Paying Your Bills Late


No joke, yes, this is something I see all the time. For some companies, especially during the pandemic, they literally had to pay late to survive; however, for some companies, late payments arise because their accounts payable processes are terrible. Late payments can cost you more in interest or penalties but they can also damage relationships or get you less than ideal service.


TRUST ME, if you are always late on paying your bills, your vendor / supplier has noticed this and likely won't go above and beyond for you. In contrast, if your account is always up to date, you don't have to worry about your orders being delayed, you likely will get some preferential treatment (even if you don't know it), and if there's a problem, you will have better luck when bringing up your issue. Morale of the story, stretch your payables and don't pay early, but don't unnecessarily pay late!


6) Not Going Paperless


If you are still using physical paper for most of your record keeping, you need to get with the 21st century. There I said it, it's totally true. I would say that more than half of all businesses have moved towards a paperless system. The ones that have, are benefitting tremendously and have a competitive edge. While there's a bit of transition initially, you will ultimately save lots of time, your records will be improved, and your overall workflow will be much more efficient. Your cloud accounting software like Xero or Quickbooks Online should help you, but also check out great offerings from companies like Hubdoc.

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