As a business owner, your primary job is running your business. That includes managing cash flow, but it doesn’t necessarily include tedious bookkeeping.
But how can you improve your cash flow without focusing on accounts payable and receivable? Simple: You can automate your accounting requirements using the best accounting software.
Why is cash flow important?
Cash flow is arguably the most important part of your job. Yes, you also need to focus on sales, operations, and other details, but cash flow can easily make or break your business.
If you don’t have cash, you can’t pay your vendors. Eventually, you may have trouble sourcing supplies or even paying utilities. Often, people assume that cash flow simply means that a company isn’t making enough money to meet its obligations. That’s rarely the case, though. Sometimes inadequate cash flow is really just poor bookkeeping. Customers won’t pay if you don’t remind them. Likewise, your vendors won’t get paid unless you send the money.
Accounting is a never-ending task, and it’s easy to get behind. Cash flow management requires knowing who to pay, who to bill, and budgeting your cash so there’s always enough. Here’s how accounts receivable and accounts payable automation can help.
1. Accounting automation is efficient.
How much time does your team spend on accounting tasks each week? How much of that time do you spend on repetitive, simple tasks that are mostly data entry? If you’re not sure, track your hours for a day or two. The answer may surprise you.
AP and AR automation can drastically reduce the time and effort you spend on tasks like data entry, invoice processing and approval, electronic invoicing, and payment processing. You’ll also spend less time fixing problems like mismatched invoices, duplicate payments, and keying errors.
2. Accounting automation reduces errors.
If you’re wondering, “How will I save time fixing problems?,” the answer is simple: You’ll have fewer problems to fix. AP and AR errors are much less likely with automated software.
Even the most detail-oriented employees sometimes make mistakes, and one small error can cost your company thousands of dollars and hours of time.
For example, a simple keying error may create a vendor payment for $12,000 instead of $1,200. That’s an extra $10,800 in cash! Sure, you’ll eventually fix the mistake, but how long will it take? Meanwhile, your other vendors are waiting for their payments, but you don’t have the cash to pay them.
AP automation streamlines detailed tasks like data entry, so you’ll rarely (if ever) see mistakes.
3. AP automation takes advantage of discounts.
There are many perks when you pay your bills on time. Discounts are a huge benefit that’s often overlooked.
Vendors often offer a small discount if you pay your bill within a certain timeframe. For example, you might save 2% of the invoice total if you pay within ten days. The savings may sound small, but they quickly add up, especially with the vendors you use most often.
Assume you process roughly $10,000 in payables each month, and the average discount is just 2%. That’s $200 a month in savings, which adds up to $2,400 a year. That savings alone is well worth the investment in AP automation software.
4. Automated accounting helps financial forecasting.
The cash flow cycle includes a lot of complex factors, and the accuracy of your data greatly affects the accuracy of your cash flow forecasting.
When you automate your accounting, the software actively collects cash flow data. You can see details about every piece of the cash flow cycle, from receivables to payables to financial risk, your overall performance, and more.
With manual accounting processes, you’ll spend a lot of time collecting this data, and it won’t necessarily be accurate. Automated accounting helps predict your cash flow, which is an invaluable tool for better cash flow management.
5. Automated accounting saves money.
What’s the best way to improve your cash flow? Save money.
AP and AR automation software is designed to save your business money. That’s its primary goal, whether you’re saving money directly or you’re saving time.
Here are just a few ways you’ll save money using automated accounting software:
- Labor: Employees won’t need to enter each invoice manually. Entire AP and AR processes are automated, saving you thousands in labor costs each year.
- Time: You’ll save significant time when you automate your AP and AR. Time equals money. You’ll use electronic systems versus old-fashioned paper ones. You’ll instantly send and receive payments. Automated software speeds everything up.
- Money: You’ll save money when you take advantage of discounts. You’ll save money when you pay vendors using the cheapest payment option with no transaction or processing fees. You’ll save money when you avoid late fees. You’ll save money when you avoid careless errors.
If you want to streamline and improve your business’s cash flow, accounting automation is the way to go. It’s simple, it’s efficient, and it helps you take advantage of every cost-saving feature available while also improving your cash flow forecasting. Why not give it a try and see how much you save?