Solving the Problem of Accounts Payable

I ran across a sad but funny situation last week.  The business owner was mad with the current CPA because she didn’t know there was accounts payable, so none were booked.  The owner felt the CPA should have known that goods were purchased on account and not paid immediately by check or credit card.  It made me realize this is an all too easy situation to happen.

As my business has evolved, the majority of my clients are online clients.  I rarely see most of them, and some I’ve never met face to face.  It’s not really by preference, but that’s the way the world has gone really.  But because I’m not in their offices, I don’t see the bills stacking up on their desk.  For most of my clients, they talk and operate as if they are a cash business, so I have no reason to believe they have outstanding accounts payable.  For these, it’s never crossed my mind to ask if they have any vendors that have extended credit terms to them or if they purchase any items on account and pay later.  If they DO, these bills absolutely need to be booked on their balance sheet!

The Problems

The problem is a two-fold one. First is communication.  There’s a lack of education on my part (or the bookkeeper’s/CPA’s) educating the client on what accounts payable are, and the importance of recording that.  There’s a lack of communication to me (bookkeeper/CPA) regarding what their true bills are.  Maybe they don’t want to look at a bill until it’s time to be paid.  Perhaps they don’t want to face what their true financial situation is with their business.  But likely it goes back to just plain not knowing it has any meaning for their business.

 

The second problem is actually GETTING the paperwork.  For some, solutions like HubDoc work well.  It auto-fetches bills like utilities and puts them into folders for the bookkeeper/CPA to input.  But with other vendors; smaller or niche especially, that doesn’t work.  Most vendors now prefer to be paperless and save the postage, so faxing or emailing is their preferred send method.  Having the client add you as a “cc” on either works well.  As a last resort, a client portal for clients to scan and upload paperwork is still an option (HubDoc works here too), but it relies on the client remembering and making the time to do it, so it’s definitely not as reliable.

I think once the importance of recording all incoming bills is explained (and understood) by the client, the second problem is much easier to tackle.  You have a partner in getting the work done, not someone that’s resisting (even passively) you every step of the way.

I’m always here to answer questions, so if you’re curious how to implement this in your business, let me know!