Most chief executives delegate accounts-payable responsibilities to accounting clerks, since they consider payables far less important than receivables, cash management, and other internal financial matters. Not Nancy Dunis, CEO of Dunis & Associates, a marketing firm in Portland, Oreg. "Our payables must be functioning just right to keep our cash flow running smoothly," she says.
Dunis's five-point payables system:
* * *
1. Set scheduling goals. Dunis aims to pay all bills 45 days after she receives them and to collect all her receivables within 30 days. "Obviously, it doesn't always work that way," she says. "But the closer I can keep the company inching toward this goal, the more of a cash cushion we'll be able to build up."
2. Keep paperwork organized. Dunis believes the only way to actually stick to her payables schedule is to keep close track of details, especially the aging of all bills. Her system: She dates each invoice the day she receives it, then files it in her office according to its scheduled payment date, 45 days later. "This helps us remember when to cut the check," she says. "But it also helps us stagger our payments, over days or weeks."
3. Prioritize. Every business has some financial obligations it can't stretch out for 45 days. "You've got to evaluate how big a portion those costs are of your total expenses. If, as in our case, they're significant, then you'll have to calculate how you can balance those frequent payments by collecting your receivables faster or stretching other payables out further."
4. Don't negotiate -- just act consistently. "Companies want consistent customers," Dunis emphasizes. "With a few exceptions, like utilities, most businesses will be happy to accept 45-day payments, so long as they know you'll always pay your full obligations at that point."
5. Look for warning signs. Dunis considers her accounts payable to be an early-warning system about cash-flow problems. "The first indication I get that cash flow is in trouble is when I see I'm getting low on cash and could have trouble paying my bills according to my staggered filing system." When that happens, "I analyze my outstanding obligations, look for a couple of bills that I can stretch out slightly longer, and get on the phone with my customers to get money back into the business as fast as possible."