Accounts Payable Best Practices: How Can Your Bookkeeper Help?

By Patrick Bonnaure, ProLedge founder.

In a previous posting, we discussed the various options for streamlining your accounts payable process. The idea is to try to avoid having to use the full accounts payable feature in QuickBooks or other apps in order to save time. However, this works only if you have very few bills and if you have the time to do it yourself. If you business is such that you need help from a bookkeeper with accounts payable, cutting corners doesn’t work and you need a more rigorous process. QuickBooks is a fantastic tool for that, but there are other options for Accounts Payable such as Bill.com. In this post, we’ll focus on QuickBooks. We’ll address other options in future posts.

Before we jump into the details, note that we use the term “bill” for the document you receive from a vendor. Many people call it “invoice”, but we’re trying to stick to the QuickBooks nomenclature that assumes that an invoice is the document that you send to your clients and a bill is the document you receive from a vendor. From the vendor’s perspective, the document he sent to you is an invoice, so his invoice is your bill. It’s semantic, but QuickBooks does a good a job at being consistent and we try to stick to this terminology as well.
So, let’s assume that you’ve hired a bookkeeper or a firm like ProLedge to help you with bookkeeping, and among other tasks, you need this bookkeeper to help you with Accounts Payable. How would make this work?

You first need to break down the process into multiple steps and decide who will responsible for each of the steps. Here’s a typical process:

  • The bill arrives in the mail or email.
  • The bill gets aggregated with other bills in some form of a holding tank: a inbox tray, a folder, a shoebox (!), a computer folder, an email folder, etc… This function can be performed by you, by an admin or by the bookkeeper.
  • The stack of bills gets passed onto the person who will enter the bills into QuickBooks, typically, the bookkeeper. If the bookkepeer operates remotely, you will either need to scan and email the data to the bookkeeper or simply put it in an envelope and snail mail it to the bookkeeper.
  • The bookkeeper enters the bills into QuickBooks. They will now show as an “accounts payable” in your books.
  • On a regular basis (typically weekly, but no less than monthly), the process of selecting the bills to be paid kicks in. In some businesses, this can be a fairly mechanical process and it can be done by the bookkeeper, mainly if the bookkeeper is given clear instructions such as “pay all the bills a week before their due date”. However, this is quite rare. Most of the time, selecting which bills to pay is a process that requires judgment and a deep understanding the business: e.g. “let’s postpone this payment. The vendor trusts us and we are likely to hit a cash crunch next week because we expect revneu from Client X to be delayed”. If this is the case, the business owner or someone with high level authority needs to take care of the process of selecting the bills to be paid. A hybrid solution that we often employ with our clients, is the following: the bookkeeper selects all the bills that “should be paid”, and puts them in the “To Print” queue. The business owner can then review the queue and remove the payments that should be delayed from the queue.
  • Cutting and signing the checks. This one step in which we STRONGLY recommend not to use your bookkeeper for. This is were most of the fraud happens. We, at ProLedge, trust our bookkeepers enormously, but why open the door for fraud? As a rule, business owner should not give access to the stock of blank checks to anybody except for senior management. The process of printing checks takes a couple of minutes. Even if it is menial and mechanical, we encourage to leave this task to a senior person in the company. As they say” better to be safe than sorry”.
  • If you are using online bill payment instead of printing paper checks, the same logic apply. Don’t give the trigger to payments to anybody other than senior people in the company. In larger companies, they call this “control”. In larger companies, “control” takes different forms (such as double signatures on checks). With small business, “control” means that you don’t let junior employees or contractors (such as you bookkeeper) have access to your money.
  • Reconciling statements: some vendors may send you statements of all the invoices you incurred and the payments to be made. It’s a good idea to give this statement to your bookkeeper as well and let her make sure that what’s in QuickBooks matches the vendor’s statement. If it’s a vendor with whom your work a lot, it’s easy for you or the vendor to get out of synch of which payments to apply to which bills.

If you implement the process correctly, the bookkeeper will save 90% of your time spent on accounts payable. 100% is unfortunately not possible, because, for security reasons, the business owner or decision maker has to stay involved with a couple of the steps.

Comments

  • JG says:
    16-04-10

    It is extremely important that business owners and managers have a firm grip on the bookkeeping/accounting practices of their businesses. These “Best Practices” covered in this article provide good advice to that end. A business lacking good bookkeeping practices is out of control. Once the bad bookkeeping practices have done their damage, it is very expensive, time consuming, and often impossible to unravel. The best advice is to take the time to establish and implement, the well established, correct practices from the beginning. This article is a big help to that end.

  • 16-04-10

    Great information on bookkeeping practices. A good flow chart dictating the bookkeeping procedures should help employees with the process and tasks of each employee. Thanks for the information.

  • Kari says:
    16-04-10

    Totally agree. Too often people abatcdie this responsibility when they should just delegate. The best entrepreneurs I have worked with didn’t get too involved, but did understand the numbers and demanded weekly updates (especially re: cash levels).

  • 16-04-10

    I agree with the rest. Bookkeeping is something that should be done by the company concerned. It should not totally abdicate the responsibilities to an outside firm and should closely monitor their performance and activities.

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