4 Ways That Cloud-Based Accounting Keeps Your Bills Paid
There are so many problems associated with manual payment of paper bills that it’s hard to know where to start. Here’s a good place: They can get lost. If you stack them or hang them on the wall by date, sometimes they get assembled in the wrong order, so due dates are missed.
Then you have to write “Paid” on the bill and file it – minus the stub – somewhere. If you pay with a credit card over the phone, will you remember what that payment was for when your bill comes due? Same goes if you write a check – will you remember when your bank statement arrives?
Cloud-based accounting applications – the best of them, anyway – solve those problems, as well as some you didn’t even know you had. Here are four ways that they do that.
They provide information about your bills in multiple places.
When you first sign on to an accounting website, you’ll see what’s called a “dashboard.” They all contain similar information that’s designed to tell you – at a glance – what actions need to be taken, like bills that need paying or are overdue. They also display charts and graphs and tables that show you what’s happening with your income and expenses, your account balances, your outstanding invoices, etc.
Web-based accounting solutions also contain templates for data records, so you can fill out forms with details about your customers, suppliers, inventory items, and employees. Contact records often include real-time information about each individual or company’s status with you, like whether there are outstanding bills.
This contact record belongs to a company that is both a supplier and a customer. You can see instantly whether you owe – or are owed – money.
They let you:
- Create a transaction once and make it repeat, and
- Put specific bills on autopilot.
Your company probably has a combination of one-time bills and financial obligations that recur monthly, quarterly, etc. Accounting websites usually offer a two-step process for paying them. First, you enter the information about the bill, like the supplier name, address, account number, etc. Once you’ve created the master form for a bill, you never have to re-enter those details.
When it comes time to pay a bill – and your cloud-based solution will remind you of this – you select that master record and enter the amount due and anything else needed for that specific transaction (memo, etc.) and send it along for payment. But if you pay the same bill every two weeks or month or two months for the same amount, you can often choose to have the transaction processed and dispatched automatically.
If you click on the button in front of Approve at the bottom of this form, your bill will be paid automatically by its due date.
They help you match bills to payments during the reconciliation process.
Manual bank reconciliation can be brutal, so much so that some businesses either don’t do it or always create an adjusting entry. Both approaches will eventually get you into trouble.
Cloud-based accounting applications allow you to download cleared transactions from your online financial accounts. You only have to enter your login credentials for your business checking account with Wells Fargo, for example, and the site will make a connection between itself and your bank at regular intervals, pulling in everything that the bank has processed since the previous refresh of your data.
Accounting websites know how to look for transactions that could be related. So when you go to reconcile an account online, they display two columns, one containing the transactions that have been entered in the application itself, and another showing you transactions that have been imported from your financial institution.
It appears that your check #1236 for $1,181.25 has been cashed. When you click OK, that transaction will be reconciled.
So if you enter and pay a bill, the application’s reconciliation tool will recognize that payment when it clears the bank, based on details like the amount and supplier. It will suggest a match here, which you can accept or not. Not everything will match, of course, so some accounting websites let you both look for matches yourself or create a new transaction (limited types) on the spot.
Bill-paying tools like these are meant to be used only when you fully understand them. You could find yourself in trouble in a hurry. Automation, recurring transactions, and account reconciliation can keep your relationship with suppliers in good standing, but you may want to schedule a session or two with your financial advisor before you attempt them.