Many small business use the Just-In-Time approach to payment processing and invoice issuing. This means writing cheques, using a credit card or paying online when vendors start demanding payment or when a bill reminder comes in. This can work when your cashflow is tight. A method that may appeal to some small businesses or investors (but not all) is a Payment Centric method. In a nutshell you choose a frequency that you plan to make payments (or issue invoices), you then write your cheques or process your Bpays, and book the transactions in your accounting system, all on one day. Let’s call this the ‘accounts day’. Then you don’t touch the accounts until the next assigned ‘accounts day’.

With any business system or procedure it’s a case of what works best for your specific needs. Who are the experts at processing and doing accounts efficiently? Accountants must be on this list. They are not just there for tax advice.

We have a listed a few pro’s and con’s that you might like to consider.

Why does this work?

• Get all your cheques prepared and then signed in one session by the cheque writer or cheque signatory.
• Allows you to use Internet banking templates to process multiple payments on that day.
• It may help to manage you cashflow in a more predictable way. e.g. If you know that the 5th of each month is payment processing day and you have $X dollars to make your payments then cashflow becomes more predictable.
• Doing a task 20 times in one sitting is nearly always more efficient than doing 1 task over 20 sittings.
• When you do everything on one day, filing is a lot easier.
• Your vendors and customers will find your organisation more predictable and professional.
• Your work colleagues and employees will know that its the ‘accounts’ day. You can deal with it on that day rather than interrupting work.
• If you have a bookkeeper or a bookkeeping company to do this work, it will nearly always be cheaper to have them in for one full day, rather than have them in spasmodically over time.
• Your Profit and Loss and Cash Flow reports (and others), may end up cleaner and clearer.

When doesn’t it work?

• When the gaps between ‘accounting days’ are set too far apart your management information may get out of date, your vendors may get impatient and you might hate the idea of spending a whole day just doing ‘accounts’. Select a frequency that suits your business model from a holistic perspective.
• When your customer insists on invoices immediately or very regularly. Note that there are legislated requirements for invoices to be issued within a certain time after services have been provided.
• When vendors insist on getting cash on delivery
• When you forget to pay a vendor then they have to wait until your next ‘accounts day’. This can really upset vendors. Then they might charge you more. Ouch!