Big or small, your business likely accumulates a lot of bills. Between your vendors, utility providers, contractors, and other essential partners, you may find yourself paying dozens of bills every month.
With so many bills piling up in your “to pay” stack, it’s easy to lose track and let one fall through the cracks. Failing to pay your bills in full and on time can result in late fees or, in some cases, cancellation of an essential service. It can also sour relationships with your essential vendors, which can result in a variety of problems for your business.
In response, many business owners automate their bill payments using online bill pay tools. These tools are especially useful for recurring, predictable payments, like utility bills and debt payments.
Of course, when conducting any sort of business automation—such as automating your accounts payable—your business will want to make sure the system it uses is reliable and has the features you need. In this article, we’ll discuss some of the most important things to consider when implementing payment automation.
What is bill payment automation and how does it work?
The phrase “bill payment automation” describes any process used to make planned bill payments automatically, rather than manually. Automating your bill payments can help your small business coordinate accounts and schedule upcoming payments, as well as free up your accountant’s time, reduce the risk of errors, and ensure you don’t miss making any payments.
An automated process involves receiving invoices from vendors electronically. You should also be able to upload bills easily to your bill payment platform and avoid manually inputting information. The best bill pay tools allow you to sync payees, categories, and more with your accounting software to save you even more time.
If your bill pay platform lets you set up approval workflows, that means you can empower your team to submit payments for your review—so you still get to approve payments before they’re sent out, without having to schedule them yourself.
How automated bill payments can help your business
Using an automated process can help your business stay up to date with its bills, which will keep your accounts in good standing with vendors and help you avoid unnecessary fees. Accurate and on-time payments can also help your business credit score and make it easier to forecast cash flow every month.
Here are several other benefits that business bill automation can provide:
- Track all your bills from one place. By keeping everything together, you can get a big-picture view of your financial obligations and make sure you never miss a payment.
- Pay online instead of writing physical checks. Some bill pay platforms offer check payment services where you pay from your account and they send out a paper check on your behalf, usually for a minimal fee.
- Keep your vendors happy. If you’re paying all your bills in full and on time, you may even be able to negotiate better payment terms with some suppliers.
- Save time and focus on growth. With all the time you can save by automating payment-related tasks, you can shift your focus to growth opportunities.
Best practices for bill payment automation
When using an automated bill payment system, be sure to keep these best practices in mind.
1. Create a calendar to track due dates, amounts, and payment methods
If you’re using an automated bill pay system, it can be easy to forget about the bills you are regularly paying. Creating a calendar that makes it easy to see when your bills are due—and, preferably, how much you will need to pay—can help you stay up to date with your finances and avoid surprise charges.
2. Set up alerts to avoid overdrafts
If you make a payment and don’t have enough money in your corresponding account, your payment will either bounce (meaning it’s rejected) or you’ll overdraft, and your balance will dip into the negative. Set alerts before each bill is paid so you can ensure there is enough money in your account.
3. Keep your checking, debit, and credit card account numbers up to date
One of the most common reasons bill payments are rejected is that the payment method being used is no longer active. For example, if your business gets a new debit card, the old one will likely be canceled. Be sure that if any recent account changes have occurred, all of your automated payments are fully up-to-date.
4. Monitor your checking account and credit balances regularly
While automated bill payment is certainly convenient, it is still your responsibility to confirm that all your bills are being paid. By checking your accounts and balances on a regular basis, you will not only be able to assure all payments are going through as planned, but you’ll also be able to catch any mistakes before it’s too late.
5. Use approval workflows to let your team submit bill payments for your review
With approval workflows, you can empower specific members of your team to submit bills that need to be paid, while also allowing a central authority (such as the CFO or controller) to maintain financial oversight. This helps the team save significant amounts of time while also ensuring all payments are authorized.
6. Budget for different expenses with sub-accounts
Even if you keep all your funds in the same business checking account, you can still use sub-accounts that will help keep your business’ budgets organized. For example, if your business has predictable utility expenses (water, electricity, internet, etc.), you might want to create a sub-account dedicated specifically to paying these bills. Creating sub-accounts for other common expenses like payroll and travel can also be beneficial.
Automated bill payments can help your business
There’s no way around it: your bills need to be paid. However, paying your bills doesn’t need to be stressful or tedious. By automating parts of your bill pay process using the right online platform, your business can maintain control of its financial situation and ensure vendors get paid on time.