Founders often receive incoming invoices right at the beginning of their self-employment – be it from the notary, the registry court, or other authorities in the course of the company registration. Invoices from suppliers and service providers will soon follow. The orderly management and timely payment of these liabilities is a Part of accounting and is called accounts payable.
In large companies, there are separate departments for this, as a founder you should know at least some basic rules. You also need these rules to prepare your annual financial statements.
Who are my vendors?
The word vendor comes from credit. Some vendors offer these credits in form of NET 30 accounts. The customer has debts or liabilities to the vendor until he has paid his invoices. In accounts payable, however, accounts payable do not mean banks as lenders, but primarily all suppliers, service providers, and other business partners who work against invoice. A founder has outstanding liabilities to them until he or she has paid the corresponding invoice in full.
The counterpart of accounts payable is accounts receivable. Here, the entrepreneur manages the invoices that he has written to customers. It is just as important as accounts payable, which is why we provide you with the essential aspects of accounts receivable here have put together.
Why set up accounts payable?
Even with small businesses, a large number of vendors quickly come together. Orderly accounts payable helps the founder not to lose track of his payment obligations. Because missed payment terms not only mean additional costs (e.g. for reminder fees), but also trouble if, for example, dissatisfied suppliers no longer want to deliver or only against advance payment. At the same time, as a founder, you sometimes cannot and do not want to pay every bill immediately, e.g. in order not to temporarily slip into the red area on the account and high-interest rates for the current account credit to have to pay.
Accounts payable, as boring as it may sound, is therefore of enormous importance for the success of a young company, especially in the early phase. Because if liquidity is scarce after starting a business, it is easy for a start-up to get into often unnecessary insolvency or insolvency. the following insolvency. Good accounts payable help to avoid unnecessary liquidity bottlenecks.
How do I organize my accounts payable?
To avoid the problems described, accounts payable must be well organized even in a small business and start-up. The foundations for efficient accounts payable are not rocket science. Rather, as is so often the case, a clean and stringent process is also crucial for accounts payable.
Basis of accounts payable: the master data
At the beginning of every account payable is the maintenance of the master files records. Behind this is nothing more and nothing less than a well-maintained database with the most important information on suppliers and business partners, from whom invoices can be expected on a regular basis. From these, data such as
- Company name
- Company form
- Contact details and
- Bank account.
This master data from accounts payable helps with future invoice settlement and also with the identification of the most important business partners as well as with evaluations of one’s own expenses or price comparisons between different suppliers and service providers.
If these records are a basic condition for orderly accounts payable, the following steps should be processed sequentially as a standard process. Then not much can go wrong in accounts payable. Assist in setting up and executing accounts payable external accounting services.
An important point in accounts receivable accounting is also a well-organized payment transaction.
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Step 1 of Accounts Payable: Invoice Verification
Before an invoice is paid, you should check it as part of accounts payable. Especially as a founder and self-employed person, you have neither the excess liquidity that you could afford incorrectly paid bills nor the time to run after your wrongly transferred money. For example, invoice verification in accounts payable includes the reconciliation of quantities:
- Were there really 15 printer cartridges in the delivery, as stated on the invoice?
- Does the specified number of hours at a service provider correspond to the work performance?
Likewise, you should compare the calculated price with the agreed price in the offer. It does not always have to be bad will on the part of the biller in the event of deviations. It can also happen that the contact person promised special conditions when concluding the contract, but these were overlooked during invoicing in accounting.
This makes it all the more important for accounts payable to check invoices carefully before they are transferred or paid into their own system.
Step 2 of Accounts Payable: Account assignment and posting
After incoming invoices have been checked, they must be accounted for or posted in Accounts Payable. Account assignment refers to the assignment or posting of individual invoice items to corresponding accounts such as “operating equipment” or “office equipment”. An important orientation aid here is the Standard chart of accounts SKR03 or SKR04 dar.
Step 3 of Accounts Payable: Payout
The settlement of an invoice and the payment of the amount owed to the vendor are therefore only the third step in accounts payable. If you have checked the factual and arithmetical correctness of the invoice and correctly accounted for the amounts in your own accounting, you can instruct the money. You should pay attention to the payment deadlines of the creditors and your own liquidity situation. Finally, you can already provide the transfer with a certain date or you can use a discount if this is noted on the invoice.
Step 4 of Accounts Payable: Archiving
Checked, accounted for and paid invoices must then be archived as part of stringent accounts payable. The legislator also writes for founders and the self-employed Strict retention periods that you should definitely pay attention to. Storage is just as much a part of accounting as account assignment and payment of invoices.
In the case of accounts payable, in addition to the legal regulations, the vendor may not find the paid invoice in his accounting or see payment terms violated. Then a well-stocked accounts payable, with which you can quickly prove the timely payment of invoices, saves a lot of trouble. In many cases, professional accounting software this work. Too external accounting offices can help.
Individual cases in Accounts Payable
As a founder and self-employed person, it can also happen from time to time that you receive invoices from creditors with whom you are not in a regular, but only in a one-time business relationship. For these special cases in accounts payable, a CpD account, one Conto per Diverse, is typically used. This is used to post individual cases that do not have their own master files recorded in Accounts Payable. The same account is also used for individual cases in accounts receivable, i.e. when payments are received.
Avoid insolvency through accounts payable
Good accounts payable can also help to improve unnecessary insolvency to avoid. For example, if you know the payment terms of your creditors exactly, you can align the payment of your invoices within these deadlines with your own liquidity situation.
Should money nevertheless become scarce, a well-set up accounts payable system helps to quickly identify the most important suppliers and service providers and to talk to them at an early stage as to whether they do not grant an extension of the deadline or waive parts of their invoice (at least temporarily). If you can convincingly demonstrate that these are only short-term payment difficulties, you have a good chance that creditors will have an open ear for appropriate considerations.