Accounts Payable

Accounts Payable is one of the cash-flow drivers of any business, whether General Motors or Corner Drugstore LLC. Managing accounts payable is key to keeping your business afloat.

Accounts payable are those funds you owe other people. You have to pay your bills or you can't live. And if your supplier charges you interest on late payments, too many late payments can at best amount to a drain on your cash or at best can drive you under, particularly when the bills are owed to the government.

Late fees on credit cards and NSF charges on checks will also kill you.

To be successful you have to manage your accounts payable consistently and appropriately. I use my credit card to manage my finances. I make sure I pay off my balance every month by the due date. Without fail. I pay on line to that I can wait until the last minute to pay. That lets me know that the payment has been made when it's made. If I mail it in I have to wait 2 weeks to make sure it gets posted. Sure, they'll probably wave off the penalties, but that's needless headache. Plus you have to write out a check and and pay for a stamp.

I have to make sure I know when that payment is due because they can slip in an early due date me. And if the payment comes on a Sunday, they may not pull the money out until Monday and then charge me. This month the 24th is a Thursday so I'm cool.

It's normally the 24th but one month it was the 22nd. If I'd missed that one I'd have to pay $40 for a late payment plus interest on the money. I don't keep a very high balance so the interest wouldn't have been much but since my balance payable is normally below $300, that $40 amounts to more than 10% of the payment.

The secret is, if your supplier is charging you interest from the date you incur the charge, pay the balance as soon as possible. If your supplier is not charging you interest, delay payment as long as possible, but make sure you pay on time so you keep good credit.

My dad's father, who owned and operated a hardware store in Cleveland, always told him he'd have lost his store if he hadn't kept good credit so that when times were tough his suppliers cut him some slack. Good advice.

You can look up accounts payable on Wikipedia or go to any accounting book or website and it will tell you all about accounts payable.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.