Running farm operations means obtaining supplies from outside vendors and paying them on time. Accounts payable (AP) refers to the money that is owed to these suppliers after you’ve made purchases with credit. As you need more goods from more manufacturers, this information can quickly become disorganized. Missed deadlines or duplicate payments will cost you money in the long run, but an automated system will help reduce these unnecessary costs and stay ahead of your payment due dates.
Quick Links
- WHY ACCOUNTS PAYABLE IS SO IMPORTANT FOR FARM OPERATIONS
- ACCOUNTS PAYABLE CHALLENGES AND HOW THEY IMPACT FARM OPERATIONS
- TOP BENEFITS TO AUTOMATING ACCOUNTS PAYABLE TO IMPROVE FARM OPERATIONS
- Find The Right AP Automation Solutions with FBS Systems
Why Accounts Payable is So Important For Farm Operations
There’s a lot to keep track of when it comes to running a farm. From machinery costs to buying seeds for crops, someone is going to have to keep track of when and how to pay these vendors for their contributions to your farm. That’s when accounts payable becomes an important part of farm management.
Farms are a complex enterprise that are obtaining resources from other businesses all the time. Accounts payable helps to track how much money is owed and where that money is meant to go. Additionally, accounts payable informs farm financials about whether the business is overspending or relying heavily on credit. An organized AP system will help keep farm operations on track and ensure all aspects of the business are being managed properly.
However, most farms aren’t currently using any kind of accounts payable system or integrating it into their farm accounting software as they’re relying on cash accounting for tax purposes. As a result, AP systems may seem like an extra step, but as we’ll discuss, there are considerable advantages to integrating it into your overall farm accounting system, especially when it comes to the application of management accounting principles.
What is Accounts Payable Automation?
Software solutions can help farmers manage their finances so all operations are streamlined for maximum efficiency. Using accounts payable automation software allows farmers to minimize the amount of tasks that were previously performed manually. With just one platform, farm information regarding upcoming and pending invoices can be tracked for all vendor management needs.
Accounts Payable Challenges and How They Impact Farm Operations
Proper management of accounts payable ensures positive relationships with vendors while making sure you have the supplies you need to run your business. While financial reporting is essential, it’s not always easy to keep organized.
Early Payments
Good management means staying on top of all approaching deadlines. You might try to pay your vendors early, but this can have some complications. Paying invoices before the product is received might inhibit your ability to request credit if there are any damages. Once you’re stuck with damaged tools, farm operations won’t be very efficient.
Duplicate Payments
Manual payments that aren’t tracked properly can lead to confusion among your team. Vendors often provide multiple invoices as reminders for payment due dates, but these can be mistaken as additional charges. If your AP system isn’t properly organized, you might not be able to track down duplicate invoices for refunds, which will negatively impact your cash flow.
Missed Invoices
Farms that have multiple production centers need an array of resources to function properly, but without proper filing systems, documents can easily get lost. One challenge of manual accounts payable systems is proper management of information, especially if the filing system is reliant on physical documentation. If a missed invoice or due date halts your ability to receive supplies, your level of production will decrease until the matter is resolved and you might even be charged with an additional late fee.
Human Error
Everyone makes mistakes, that’s just human nature. Whether a number is entered incorrectly or the documents are misplaced, tracking payments can quickly become complicated. Running a farm requires detailed back office management of farm information, and accounts payable plays a key role in organization. Even the smallest mistakes in data entries can have lasting effects.
Top Benefits to Automating Accounts Payable to Improve Farm Operations
Making the switch to automated AP solutions is a simple decision that yields a variety of benefits. Streamlined record keeping efforts will quickly turn your farm operation into a well-oiled machine. Here’s a list of some benefits that you can expect once you transfer your old manual systems into top-of-the-line automations.
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Efficiency
With an innovative automation system, you won’t have to file away documents manually. All invoices that are uploaded to your system will be automatically transferred to the right location. This makes finding information easy for all users so your employees don’t have to waste time digging through piles of paperwork.
When working on a farm, there is a lot of information to keep track of. Being able to find what you need when you need it will allow you to move on to your next project faster than before. Additionally, you can automatically schedule payments so you don’t have to worry about finding the right invoice and matching it with vendor information — that’s all done for you!
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Accuracy
As mentioned before, human error is a large side effect of traditional accounting systems. Any input information that is inaccurate can cause delays and lead to financial trouble if the problem isn’t caught and resolved. An automated AP system will ensure that all received information is input correctly so no mistakes are made.
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Standardized Processes
To be highly efficient, your team needs a system that everyone can use. Automated accounts payable software is user friendly and allows for all individuals to access up to date financial information right when they need it. Additionally, detailed management makes finding information quicker and easier for you and your team.
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Reduced Spending
Old methods for invoicing and record keeping required lots of day-to-day office supplies. Those supplies can be quite costly, especially if you’re running through them pretty quickly. Switching to automated systems removes the need for disposable resources, saving thousands of dollars on hard costs.
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Vendor Relationships
Have you ever considered your business relationships with vendors? Late payments or poor organization can make them pull out of business dealings if they are not satisfied. With automated accounts payable systems, you can get payments to suppliers on time and develop long-lasting relationships that will keep both parties happy. If you can show vendors that you’re a reliable customer, they’ll likely want to keep doing business with you, and maybe even give you a discount in the future.
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Production Insights
Not only will you be able to keep data organized, automated accounts payable software will provide you with detailed insights into your financials. Reports regarding how much money you are spending in different areas will help you make informed business decisions that enhance cash flow.
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Customization
Automated software allows users to pick and choose the right features for their unique business needs. When it comes to farming, being able to track workflows across several years is a key feature, which is where flexible technology comes into play. Looking at invoices at several points in the production timeline can help to track spending and turn your business into a highly adaptable organization as production cycles progress.
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Integrated Business Model
If you already have financial systems in place for other areas of your business, you can integrate those existing elements into your new automated AP system. With shared data across platforms, you can easily analyze performance without having to re-enter data into a new account.
Find The Right AP Automation Solutions with FBS Systems
Advanced agricultural accounting software is a needed technology to improve efficiency on your farm. Not only will you refine your vendor management practices, you will also be able to integrate business processes across your farm. Previous invoice management tactics lead to human error and missed deadlines. With the implementation of automated AP software, you’ll be able to increase overall productivity and find new ways to save money.
Ag tech is quickly becoming a game changer in farm management. More specifically, a robust Farm ERP system, like the one offered by FBS Systems will help you import AP invoices enabling you to allocate expenses to the appropriate accounts, vendors, cost centers, and products right when those costs are incurred rather than trying to allocate them when the transactions hit the bank.
One of the primary goals of an ERP system is to help you get a holistic view of your operations to help predict costs and profits, adapt to changing markets, and adjust for underperformance. Incorporating an automated accounts payable system into can provide even more insight to aid in the decision making process.
To learn more about effective accounts payable automation and how it would help operations on your farm, reach out to an FBS Systems team member today!
