Paying Supplier Invoices

A new client was paying their supplier invoices as soon as they had received them, even though most of their suppliers were granting 30 day credit terms. I always advise clients to pay supplier invoices either on or just before the date they’re due. Why?

  • It’s better for cashflow
  • If you’re VAT-registered there’s less time between paying the invoice and reclaiming the VAT from HMRC
  • And, even though interest rates are very low, the money is still better in your bank account for a few weeks, rather than in someone else’s

 

The client knew all this but they were worried they would forget to pay, so I recommended the following paper-free system for dealing with invoices received:

  • Post supplier invoices into Xero on receipt
  • Process a future-dated online banking payment to the supplier, so that the payment is made on or just before the due date
  • Mark the invoice as paid in Xero, using the future payment date, and then when the actual payment is made this can be reconciled from the bank feed

 

Alternatively, for larger companies with lots of supplier invoices who might prefer to do one payment run each week or month:

  • Post supplier invoices into Xero on receipt, and set a planned payment date for each one
  • Review your Bills To Pay tab and pay any invoices that have planned payment dates falling due that week/month
  • Mark as paid in Xero and reconcile from the bank feed once the payment has left your account

 

And don’t forget that you can also remittance advices to your suppliers directly from Xero at the same time you mark invoices as paid.

Either of these simple processes will ensure that invoices are not forgotten or accidentally paid twice, and that the money remains in your account for as long as possible.

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Paying Supplier Invoices

A new client was paying their supplier invoices as soon as they had received them – but I always advise clients to pay supplier invoices either on or just before the date they’re due. Why?

Read More »