By: Shirley Boatright, Senior Assistant Account 

Our Q&A blog series with our accountants rolls on. Shirley Boatright answers the questions in this installment that pertain to bill pay. This should be something of top focus for all business owners. Keep reading for helpful information from Shirley:

•  What are the benefits to a business owner for paying bills as they come in as opposed to waiting until they are “due”? One of the least exciting and most important responsibilities for business owners is paying bills. Waiting till a bill is due to pay can run the risk of missing a payment, possible late fees, and even missing out on discount opportunities. It’s crucial for the financial health of the business to optimize cash flow which is dependent on strategic payment of expenses. Entering bills are they are received is the best practice to have an accurate cash flow forecast and plan payments to minimize cash crunches. Simply, paying by the due date doesn’t consider the business cash flow. Planning payments for bills are they are received will allow business owners to make better-informed business decisions.

• What type of documentation should the business owner be keeping of the bills that they pay? Business owners should keep a copy of the invoice and proof of payment with each bill payment. Keeping these documents can help with tax preparations, tracking expenses, and general business planning. Additionally, these documents will serve as support of your P&L statement and deductions with the IRS in case the business is audited.

• Is it best to pay bills electronically online or send physical payments?  There are several advantages and disadvantages to both online payments and physical payments and what’s best depends on a given situation. Online payments are quick and easy. Simply log onto the vendor’s payment center, enter your payment information, and submit. Electronic payments options like a credit card, e-check, ACH have a significantly shorter processing time than mailing a check. To ensure a check arrives on time, it must be mailed far enough in advance to allow the check to arrive and for the payee to cash the check. Additionally, payees may not cash the check promptly which gives a business an inflated account balance. A pro for physical payments is usually no processing fee while electronic payments often do. Additionally, many businesses and individuals may only accept checks as a form of payment. The best payment option depends on the payee which is why most businesses will have to do a combination of electronic and physical payments. Businesses may find it beneficial to use an online bill pay service. These services can pay bills by EFTs and mail paper checks on your behalf, in addition to keeping your bills organized and paid on time.

•  How should a business owner backtrack if they miss paying a bill? Even with good accounting practices, a bill can still be missed unknowingly. The first thing a business owner should do is verify the bill was not paid by checking the accounting system and bank accounts. Then reach out to the payee. Communicating with the payee is so important to keep a good business relationship and possibly help avoid or decrease late fees. After payment is sent follow up with the payee to confirm payment details and thank them for understanding. Lastly, business owners should determine the cause of the missed bill and ensure the issue is resolved to prevent it from happening again.