9 inventory management tips to save your business

9 Inventory Management Tips that Might Just Save Your Business

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Since there are no two companies with exactly the same inventory and stock or the same supply chain, inventory management is therefore different from company to company. That said, you should strive to customize your inventory management system in such a way that it minimizes human error and maximizes productivity. Here are 9 inventory management tips that might just save your business and increase cash flow.

1. Plan for the Worst

Things rarely work out exactly as you plan them in your head. The same goes for inventory management, needless to say. Don’t think if something will happen, but when it will happen. This way, when the problem does occur, it won’t take you by surprise and you will be ready to tackle it.

Be sure to know the risks that are in front of you and the problems that might arise. For example, the manufacturer might run out of the product just when you need it to fill the orders. Or, you run out of warehouse space. Here, it pays out to ask a question, “what is the worst that could happen” before starting a new enterprise, just like stoics do.

2. Know Who is Responsible

Inventory management should be done ad-hoc. You need to have a person responsible for it. Whether that person is you, if you’re the owner or you hire a professional inventory manager is up to you and will depend on the size of your business, how big your inventory and stock are, the size of your purchase orders, how many clients and vendors you have and so on.

The important thing here is to have someone you can wake up in the middle of the night (please don’t do that literally) with a question about the state of your inventory and get an accurate answer.


FIFO or First In First Out is one of the key principles of inventory management where the oldest stock (first in) gets sold first (first out). This is an important principle you should hold on to if you have product that are susceptible to spoilage such as food.

That said, FIFO can be used for non-perishables as well. For example, new mobile phone models are released every few months. If you have a stock of them in your warehouse, you need to move them quickly as they will lose value the longer you keep them (customers are looking for new and better models).

Interestingly enough, FIFO is also used in computing, where it represents a method for organizing and manipulating data buffers. Namely, the oldest (first in) needs to get processed first (first out).

FIFO won’t work if your warehouse is not adequately organized. If you’re running your own warehouse, be sure to add a new product from the back and move old ones to the front.

4. Valuable Product Prioritization

Not all your products are equal. Some will simply get you more money than others. That’s basically the Pareto principle in action, which in this case, means that 80% of demand will be generated by just 20% of your products.

It is with these 20% that you need to put your focus the most. Then the next 30%, which will generate 10% less and finally, the remaining 50%, which typically generate only 10%. Of course, don’t take these percentages too literally, maybe it won’t be 20%, but 15% of 25%, but the principle is the same.

5. Set Par Levels

A “par level” represents the lowest amount of the product that you must have on hand and it’s a good thing to set them for all of your products. This gives you enough time to order more when you see that you are soon going to run out of stock.

Par-leveling does requires some upfront research, but it will make your inventory management considerably easier and allow you to make decisions about the product quicker. Of course, keep in mind that you don’t always need to order the same amount. Keep in mind the seasonality and other factors before you set par levels.

6. Audit on  Regular Basis

Be sure to audit your inventory regularly. This is important if you want to know whether all your reports (warehouse and others) match. Here are a few methods that will help you with this:

  • Spot checking

Spot checking involves choosing a single product, counting it and comparing to what you should have. This is a very good method if you do a full physical inventory and have a lot of products or often run into problems (such as low stock).

  • Physical inventory

Many businesses count all their inventory at once at the end of the year since this ties in with filing income tax. The problem with this method is that, if you have a lot of products, doing physical inventory can be very time consuming. Also, if you do find an error, it will be very hard to deduce where it came from just from an end-year inventory.

  • Cycle counting

The first two methods mean doing a full physical inventory, but that might not always be the best choice for an inventory audit. Instead, what you can do is use cycle counting and check  a different product at the end of the week or month. Typically, you want to count the higher value items more often than lower value ones.

7. Think About Dropshipping

You’ve probably heard someone say they are opening a dropshipping business or that they are running one (and often making a lot of money) and wondered, what is dropshipping? Basically, dropshipping differs from other retail fulfillment methods in that you don’t keep the products you sell in the stock, but buy them off from a third-party (usually a wholesaler), who then ships the product directly to the customer. That way, you don’t have to handle any inventory and can concentrate on acquiring customers.

You might be wondering, why doesn’t the wholesaler sell the product himself? One reason for this is that the wholesaler may not have the customer-acquiring, product promotion or selling tools that you do, so this is usually a win-win situation for both.

8. Have an Action Plan for Excess Stock

Poor sales forecasting inevitably leads to excess stock. To prevent this, you need to have two “task forces”. One will be responsible for selling off that excess inventory, while the other looks for the cause of this inefficiency. Of course, these two task forces need to communicate well, otherwise the whole plan will be liable to failing.

9. Accurate Forecasting

Accurately predicting demand is an important part of inventory management. A couple of thing that you need to consider when forecasting your future sales are:

  1. Market trends
  2. Growth year this year
  3. Guaranteed sales (subscriptions and contracts)
  4. What were the sales like last year on the same week or month
  5. Upcoming promotions
  6. Product seasonality
  7. Overall economy (consider both local and global economy if you sell internationally).

There are many other ways to improve your inventory management, but these 9 inventory management tips should help you operate a more effective supply chain, improve your cash flow and run a successful business. So don’t waste time and implement these tips today.

Do you have any questions or have any other inventory management tips to share? Let’s hear from you in the comments below and don’t forget to sign up for a free trial for Purchase Order Plus.

Why it's a good idea to use a cloud ERP

6 Reasons to Use a Cloud ERP Solution

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If you have a growing business, you’ll soon find that the way you’ve managed it to that point no longer works. For SMEs, cloud ERP solutions can be a blessing and significantly improve their operations. There are at least six reasons why this is so.

Take a look at the six biggest benefits a cloud ERP solution can bring to your business.

1. Lowers Operational Costs

If you are using an in-house ERP system, that’s a step in the right direction, but it’s not always the cheapest. Usually,  you have to deal with installing new hardware and need people that know how to work on it and maintain it. If we add licences, you can see how much this can impact your budget.

Cloud ERP solutions are often available on a monthly subscription. This means you can use them when you need them and not think of the ERP 24/7. In addition, cloud-based enterprise resource planning solutions can be customized per your specific needs, so if there is something you don’t need, you can leave it out and not pay for it.

Finally, when it comes to costs, a cloud-based ERP is already made and ready for your use, while building a new solution takes a good deal of time and money and those are not things in great supply.

2. Greater Scalability

Cloud technology has a number of benefits, but one in particular stands out and that’s the ability to scale it to your own needs. Of course, the same applies to cloud ERP. Let’s say, for instance, that you bought a licence but in the meantime your business has grown in a way that the current ERP cannot keep up. No problem, you just scale your licence per your needs and get a bigger one.

3. Better Accessibility

If there’s an Internet connection around you, you can access the cloud. For your business, using a cloud ERP software can offer several benefits, including:

  • Allowing your employees to access and use the ERP when travelling
  • The ability to go global. If you use an in-house ERP, you need several system if you want to go global. A cloud ERP will work across the globe.
  • Offers more flexibility for your employees. Today, more and more companies give their employees an option to work from home. If you have staff that takes a long commute just to get to work, they will be more than happy to use a cloud ERP that allows them to work from home.

4. Enhanced Security

One of the biggest reasons why some businesses didn’t adopt the cloud from the start is the perceived lack of security when compared to storing their data as they used to, or on-premises. This really had less to do with security and more with not wanting to abandon already established practices.

Today, reputable ERP cloud vendors  use the tools and have the resources that you don’t have access to and that can significantly improve your security. Simply put, if you want to ensure that your sensitive data is safe, partnering with a cloud vendor is a much safer option than using an in-house system.

5. Stronger Support

With on-premise hosting, you often get only the basics and need to buy additional packages, including support. This can be a hassle when you need to upgrade your software. What’s different with cloud ERP is that vendors include support as part of the deal and will provide it 24/7 in most cases.

6. Improved Performance

All that you really need in order to use a cloud ERP is a good Internet connection. This means you don’t need to worry about infrastructure or that the ERP system will hog all your resources, which is not the case with an in-house ERP. Naturally, this frees up those resources for you to use them on other business processes.


Enterprise resource planning in itself provides many benefits to a small business, but a cloud ERP is the next step. These six points were just some of the many benefits to using such a solution.

Are you using a cloud-based ERP? Do you know of any other advantages  besides these? Let us know in the comments below. Also, if you like software that makes your life easier, you  should give our Purchase Order Plus a free try. POP lets you easily create, approve and send purchase orders on any device, including your mobile phone or tablet.

be careful of these small business accounting mistakes

8 Biggest Small Business Accounting Mistakes You Need to be Aware of

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When running a small business, finances matter a lot and that makes the job of an accountant all the more important. Failing to recognize accounting as an integral part of your business can lead to cash flow problems and put your entire business to a stop.

Accounting deserves much more attention than it sometimes gets. So, to make it work for you, you need to be aware of the common small business accounting mistakes you can make.

Here are the 8 biggest small business accounting mistakes you need to avoid:

1. Not Taking it (Accounting) Seriously Enough

We get it. Your business is small, you don’t need a team of bookkeepers and accountants. But that doesn’t mean you don’t need a professional to make sure your books are in proper order. You, sitting with a calculator in 8PM in your apartment, checking your new company’s general ledger, does not count as “professional accounting”.

In accounting, you need to record every expense and profit, no matter how small or seemingly insignificant it may seem to you. Everything needs to be properly documented and classified in accounting.

Without taking accounting seriously, there is little hope that it will give you an accurate picture of your business finances.

2. Not Separating Home and Office Expenses

According to Small Business Trends, 69% of entrepreneurs in the United States start their new business from home. What many of them fail to do is separate their business from their house when it comes to books.

Don’t put your new refrigerator as a business expense (even though it contains soda you’ll be drinking while working) or the new laptop you’ll be using for work as a home expense (even if, from time to time, you use it to check your Facebook or Instagram).

The same goes for your credit card and bank accounts. Keep them separate for business and home and have one for each. Yes, it is a bit more effort, but you’ll be happy you did it in no time.

3. Not Reconciling Your Books and Bank Accounts

Reconciling your books means making sure that your account balance is without errors and matching the balance in your bank account. This is something you need to do on a regular basis.

This is important if you want to get an actual image of your current financial situation, so be sure to reconcile your books with the bank account at the end of each month and quarter. This way, you can spot and mistakes and make sure your books are in sync with the account.

4. Poor (or No) Communication with the Bookkeeper

We already established that accounting and bookkeeping are not the same. However an accountant needs to have a good communication with the bookkeeper. The two are not rivals, competing against each other, but need to work together.

This means keeping your bookkeeper in the loop about every expense you incur as part of your business so they can properly log it in the general ledger. It saves time for both you and the bookkeeper.

5. Forgetting to Pay Your Taxes

A lot of people have this notion that they only need to document their taxes once per year. That is not true and can cause some serious legal problems for you and your business. You need to pay your taxes every month and your employee tax every two weeks.

There is a “saying” that “nothing is certain, only death and taxes”, and unfortunately, too many small businesses never heard of it. If you are going to run one such business, be sure to familiarize yourself with how taxes work and the entire tax process. Sooner or later, they’ll catch up to you.

6. Not Appointing a Budget for Every Project

When starting a project, you need to be aware of how much it will cost you in the end. Failing to do this usually leads to paying much more than you originally planned. To make sure that doesn’t happen, you need to appoint a budget for every project you have.

Let’s say, for example, that you own a web design and development company and you have several clients. If a new client comes in and ask you to make him a new website, you need to assign a budget to it to see whether it will generate profit or cause you a financial loss.

7. Thinking that Profit Equals Cash Flow

Profits and cash flow are not the same. Let’s say you  just closed a $100,000 deal that should take you four months to complete and it is going to cost you $70,000. That’s a $30,000 profit. Not bad for four months, right?

Wrong. What if, for instance, it takes you six months or a whole year to finish the project. You need to take into considerations the delays that will inevitably pile up on this project. Even something as mundane as a programmer not showing up for work today can slow down the project and increase its cost, not to mention something much bigger happening.

The bottom line here is that you shouldn’t write down each deal as it occurs. Because, if you do this, it will be easy to get the wrong picture of your finances and that eventually lead to further wrong business decisions along the line.

8. Not Following Technology Advancements

Look, you don’t have to use every new technology that comes, but in general, you need to keep up with it. If you are still doing your books in paper and your competitors are using software like Xero, guess who has the advantage?

Technology can be your friend, or at least make your life a whole lot easier. So don’t be stubborn, leave that “I just need a pen and paper” attitude and start using it.

There are a lot of small business accounting mistakes besides these 8, of course. I hope this article will help you better understand them and avoid making them.

Do you have any thoughts or questions about small business accounting mistakes? Let me know in the comments below and don’t forget to sign up for our Purchase Order Plus software and make creating, approving and sending purchase orders much easier for you and your team.

10 small business accounting tips

10 Small Business Accounting Tips Every Business Owner Needs to Follow

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As a small business owner you often need to wear multiple hats. One of those hats might be that of the bookkeeper or accountant, or even both (because, the two are separate, remember when we talked about that?). Or you might be free from having to wear that hat by hiring a professional accountant to come over every months to look over your books.

Well, no matter how you are keeping your books and finances in order (and, trust me, you will want to do that, even be a little “obsessed” with it), these 10 small business accounting tips will make your life as a business owner a lot easier.

1. Always Follow up on Invoices

Because if you don’t, who will? Certainly not the customer you’ve sent that invoice to. If you leave it to them, they’ll probably “forget” all about it. Sending an invoice, doesn’t mean that you’ll actually receive payment for it. That’s why you need to follow up on your invoices.

If you are working with paper invoices that could pose a problem when following up. Fortunately, the solution is very easy. Start using an online or cloud-based accounting software which will help you automate this process.

2. Get Everyone to Use the Same Account Numbers

It’s all about consistency here. If you allow every department to use their own account numbers and code invoices as they please, you’ll sooner run out of stress medication than they will of account numbers.

By getting everyone to use the same account numbers you will rapidly increase the entire accounting process and reduce paperwork significantly.

3. Don’t Forget to Track EVERY Expense

Just because it might be “just a few bucks”, it doesn’t mean you can ignore an expense. Whether it’s $2 or $200 or $2000, you need to track, label and categorize every, and I mean EVERY expense you have. Because those things add up faster than you can say Jack Robinson.

But wait a second. Wouldn’t all those receipts be too much paperwork? Not if you use your business credit card, which will also let you earn cash back and rewards (when applicable) on your spend. Neat.

4. Make Use of Lockbox Processing

Lockbox processing can be a lifesaver if you are receiving large customer payments. What it essentially means is that, instead of getting payments to your business address, they instead go to a PO box from where your bank will process those payments for you and then deposit them into your business account.

Not having to manually process every payment will save you a lot of time.

5. Use Separate Coding for Ongoing Projects

If you have ongoing projects, you should think about setting up separate line items. Why? Because if you enter the project cost into your general ledger at a later date it will only lead to processing one invoice twice. You don’t want to do that.

Instead, by setting up separate coding for your ongoing projects, you get clean and easy-to-read reports.

6. Hire a Professional

Look, I understand. You’ve just started your SMB and you think you might be able to save some money by doing your own bookkeeping and accounting. Perhaps you even have a knack for it.

But here’s the thing. You are not a professional accountant or a bookkeeper and very soon your hubris is going to make you pay badly. To avoid this, hire a professional to keep an eye on your books and you in return, you can deal with other stuff. Which are probably going to be more interesting.

7. Use an Accounting Software

There are plenty of reasons why you should consider using an accounting software app like Xero for instance. This will allow you to automate your entire accounting process, plus you can use the full suite of their professional tools and features and that’s not something you can get with your in-house system.

8 Look Better Into Credit Screening

You’ll often be in a situation where you will have to accept credit from a customer. The question is, who should you accept credit from? Certainly not from a customer with bad credit.

You need to perform a credit check before accepting it from a customer. Otherwise, you are running into a risk of not getting paid. The least you can do is screen those customers with a software like Credit Karma and ask for a deposit.

9. Consider Labor Costs and How You Reimburse Employees

One of the biggest (if not the biggest) expenses you’ll have will be paying your employees. Of course, you want this to be fair, which is why you need to keep tabs on any perks, overtime work and benefits you want to offer them in order to avoid either underpaying them and overpaying them.

One big problem here is that, when asking for reimbursement for travel and other expenses they accrue, employees will often send you messy receipts, which may even contain a bunch of errors. Instead, get them to use an automated electronic entry system when scanning their receipts.

10. Don’t Forget to Separate Your Business and Personal Expenses

You know what they say, “separate your love life from your business life”. The same logic applies to your expenses. I hope I don’t have to tell you this, but your grocery expenses do not belong in your business general ledger. Keep these two separate with a high fence.

There you have it. 10 small business accounting tips you should follow as a business owner. If you find only one of these useful, I’ll consider my mission a success.

We’d like to hear from you in the comments below and don’t forget to sign up your email to try Purchase Order Plus for free and make creating, approving and sending purchase orders on any device easier and faster.

Differences between bookkeeping and accounting

What are the Main Differences Between Bookkeeping and Accounting

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Every business needs a bookkeeper and an accountant to support them in various stages of their financial cycle. The problem is that many consider these two to be one and the same, which is clearly a mistake. Yes, a bookkeeper and an accountant do share similar goals, but they both serve two distinct functions.

If you are convinced that a bookkeeper and an accountant are interchangeable, it’s time to dive into this article and learn the differences between bookkeeping and accounting.

What do Bookkeeping and Accounting Seek to Accomplish?

Both bookkeeping and accounting observe and record financial data and transactions and generate reports based on them. That’s basically where the similarities end and the  differences between bookkeeping and accounting begin.

Bookkeeping is primarily concerned with recording day-to-day financial transactions. This is done through a general ledger, where the bookkeeper records amounts from sale and expense receipts.

On the other hand, you could argue that accounting is a more advanced process that takes the information gathered by the bookkeeper and uses that to create a financial model necessary for the business owner to understand their profitability, cash flow, tax planning and filing and predict finances.

5 Big Differences Between Bookkeeping and Accounting

There are several differences between bookkeeping and accounting, but for this post, we’ll concentrate on the 5 biggest.

  1. They have a different objective

Bookkeeping seeks to create and maintain a record of all financial transactions within a company, while accounting aims to evaluate the current financial situation and help the business owner or relevant higher-ups in the company better understand it and the next steps they need to take.

  1. Their impact on management making decisions

Bookkeeping merely provides a record of financial transactions. On its own, the management can’t use this to make a decision. Accounting, however, provides data that are aimed at helping the management make business decisions.

  1. One analyses the other

An accountant uses the information the bookkeeper has provided to analyze and make sense of the data, which he can then use to create a financial report.

  1. Preparing financial statements (or not)

One of the key parts of an accounting process is preparing a financial statement. This is missing in the bookkeeping process.

  1. What skillsets they require

To be a bookkeeper, one does not require any special skills or training. In general, if you are good at:

  • Organizing
  • Have a high attention to detail
  • Good data entry skills
  • And have a solid understanding of bookkeeping principles

You should have no problem being a bookkeeper.

An accountant, however, requires somewhat more advanced and specialized skills. These include:

  • IT and accounting software know-how
  • Strategic decision making
  • Problem solving skills
  • Analytical skills
  • Good business knowledge and understanding
  • Communication skills
  • And more


So there you have it! Hopefully this post has helped you understand the differences between bookkeeping and accounting and why it is important to have them both.

If you have any comments or questions, feel free to join the conversation below the article and if you’re interested in an easy-to-use purchase order software, try Purchase Order Plus for free.

How vendor management solutions can help you better communicate with vendors and suppliers

Introducing Vendor Management Solutions – Your Hotline for Communicating with Vendors

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How you communicated with vendors and suppliers plays a huge role on the overall success of your business. As such, this process needs to be smooth, uninterrupted and able to lead to a good relationship between the two of you.

Unfortunately, miscommunication happens every day and it’s no different when it comes to your vendors. However, you can make this process better for both you and the vendor by using vendor management solutions.

What are Vendor Management Solutions and How to Choose the Best for Your Business?

Vendor management solutions (VMS) is a service or software that allows companies to better manage projects and communicate with their contractors. It serves three functions:

  1. Project management – helps with work coordination, tracking and assigning tasks.
  2. Payroll management – you’ll need to pay your vendors and contractors, naturally.
  3. Vendor communication – think of VMS as a hotline for communicating with vendors.

What VMS you are going to use depends on your needs, size and type of your business, type of vendors, contractors and a number of other things.

So how do you choose the right VMS? A simple Google search won’t be of much help here, unless you want to end up even more confused. Here are a few things you need to consider when choosing vendor management solutions:

  • Is it easy to deploy and use? 

Why have something that no one knows or can’t use? Having a VMS and not using it is pretty much the same as not having one. It just sits there.If you are going to use a VMS, be sure that your team leaders are not ignoring it and are really working with it.

Of course, it could be that the VMS in question simply requires too much training and additional equipment and is not really worth the effort as such. There’s a fine line to walk between making a few adjustments and completely having to overhaul your entire system for the sake of one vendor management solution.

  • Are your vendors equipped to use it?

Communication is a two-way street, so ask yourself, can my vendors use this? If they can’t, that VMS will be useless and you will need to look elsewhere.

  • Are your other systems compatible with it?

Vendor management solutions don’t work isolated from the rest of your business systems. There are plenty of things that you’ll need to integrate your VMS with, so be sure that you will be able to before you implement the VMS.

  • Vendor qualification and onboarding

You probably already have an established vendor qualification and onboarding process. Consider how the new VMS will work with it. Will you have to make any significant changes to this or can you basically “plug-and-play” it?

  • Does it comply with local regulations?

You also need to consider if the VMS adheres to the local regulations and industry standards. Specific industries will have their own requirements when it comes to vendor management solutions, so be sure you can step up.

  • How secure is it?

Hackers can get access, steal or destroy your vendor data just because you were careless and were using an unsecure VMS. Don’t be the fool that thinks this won’t happen to him. Play it safe and look for the VMS with the best possible security for the sake of your business, vendors and your mental health.


Communication with vendors is what leads to a good and long business partnership and you can ensure this with the help of a good VMS.

Let me know if you have any questions about vendor management solutions in the comments below and don’t forget to sign up for a free Purchase Order Plus trial.

What does an accounts payable process look like

Understanding an Accounts Payable Process and What it Involves

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An accounts payable process is not a new or an unknown thing for businesses. A lot of organizations use it, in fact, but that doesn’t mean they all approach it the same way. This process can be very different, depending on the company in question. Because of this, I think it’s important to delve a little into the nitty-gritty of what a typical AP process may involve in this article.

The 3 Usual Steps in an Accounts Payable Process

The simplest accounts payable process includes 3 steps.

  1. It starts when the AP department receives an invoice. The important thing here is for this process to be centralized. You can’t receive one invoice via email, the next through a courier and then the next one via fax an expect it to run smoothly
  2. Next, the someone from the accounts payable department needs to roll up their sleeves and get to work on the invoice. This can be the AP manager or a member of the department
  3. The invoice then gets introduced into the company’s accounting system and perhaps scanned in order to create a digital record of it.

This, however, is the most simplified accounts payable process possible and it often requires that an organization has an enterprise resource planning (ERP) system in place. In most cases, the AP process will be more or less complicated.

The more steps an accounts payable process has, the more chance you’ll have to slip somewhere. However, some of these steps may be necessary and unavoidable.

For instance, how are invoices validated to know they’re genuine and not fake, or that they’re not duplicates? Who is responsible for approving an invoice? Also, does the company approve and pay invoices automatically or does it have a specific process of doing so?

Why Use an Automated AP Process?

This is where you need to learn to balance automatic and manual AP process. For instance, an automatic accounts payable process will work well if the invoice came from a known and already approved source. After all, why bother checking it all over again?

On the other hand, for a new vendor, you may need to appoint an employee to decide whether to approve the invoice or not. But, this creates another problem. Who made the order? In a large company, tracking down the order to its source can be a difficult task and it involves a lot of back-and-forth.

An automated accounts payable process, that includes an ERP can start once the purchase order is given and an invoice matched to it. That way, a PO can be introduced automatically into the system.

This type of automated AP process has the following benefits:

  1. It saves money as it requires less people to work on accounts payables. Many companies don’t even have a separate accounts payable department, which means taking people away from other tasks. That’s not the case with automating AP.
  2. Improves and speeds up the payment cycles. As a result, the company can better optimize its cash flow strategy, avoid late payment fees and utilize early payment bonuses and rewards.
  3. Handles invoices better. While going through every invoice can be difficult with a manual AP, not to mention the chance for error such as paying twice for the same invoice is a lot greater, an automated accounts payable process makes this a lot smoother.

What does an accounts payable process looks like in your company? Let us know if you have any comments or questions below the article. Also, don’t forget that you can sign up to receive a free trial of our Purchase Order Plus software.

What is an accounts payable

An Introduction to Accounts Payable: What It is and What It Does?

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When buying goods for your company, you won’t always pay for those goods in advance, but will often receive an invoice from the vendor. You need to keep these invoices in check if you want to avoid double payment, being late on paying your suppliers and so on.  That is what the accounts payable is for.

An accounts payable, or trade payable, is only present in businesses that use an accrual accounting system. This type of accounting system means recording income and expenses as they happen and not when the cash changes hands. For example, an accrual would be an invoice received for the goods this month, but is due for payment next month. This will present a clear picture of the company in review, but has the downside of not always giving an accurate portrayal of the cash flow.

An opposite of the accrual accounting is cash-based accounting, which is used by businesses that have regular and instant cash dealings.

What is an Accounts Payable?

Simply put, an accounts payable is nothing more but a ledger that shows the invoices you still owe money for. These are short-term liabilities, meaning you need to pay them within a shorter period of time, up to a year, compared to long-term liabilities such as employee payrolls. These do not belong in the accounts payable.

You can record purchase orders, contracts, invoices from suppliers and agreements with vendors under accounts payable. When recording accounts payable, you should use double-entry bookkeeping, which means having two entries for every transaction in order to balance your books. One entry will increase the account and is credited and the other will decrease it and is debited.

The AP is usually recorded in the general ledger, under “current liabilities” and is credited when the invoice is received and debited when the bill is paid to the vendor.

Here is what the accounts payable typically contains:

  • The name of the creditor
  • Invoice number
  • Date of invoice receipt
  • Account number
  • Type of expense
  • Invoice payment deadline
  • Invoice status (paid, pending or past deadline)

Why is an Accounts Payable Useful?

Bookkeeping without an accounts payable can be overwhelming, so the AP allows the company to better track its finances. Moreover, the AP will:

  1. Help the company maintain its business relationship with creditors, vendors and suppliers by paying its invoices on time
  2. Prevent possible financial fraud due to bad bookkeeping
  3. Avoid overpayment as you can see the exact amount due for every invoice you have pending at the moment
  4. Help improve the company’s credit score. A business paying its debts on time will always be in more favorable light than one that is constantly late with payments.


Most importantly, however,  an accounts payable will show you if your company is profitable or not. If you keep having low cash at hand, but your AP is high, that means you owe more than you earn.

Are you using an accounts payable or have another system or keeping track of what you owe to creditors? Let us know what you think about this system in the comments below the article and don’t forget to sign up and try Purchase Order Plus for free to better manage your purchase orders.

best ERP systems for 2018

Top 7 ERP Systems to Use in 2018 and Beyond

By | Purchase Order Plus | No Comments

Your company may have many resources at its disposal. While this is usually  a good thing , sometimes it can be hard to keep track and manage them all. This is why you need to use a good enterprise resource planning or ERP system.  The problem, however, is often finding one that fits your company best. To make this decision a bit easier, here are the best 7 ERP systems you can use in 2018.

1. NetSuite ERP

Oracle’s NetSuite ERP is used by more than 40,000 companies, ranging from SMEs to large corporations. It can be found in a variety of industries. This cloud-based ERP solution allows you to automate and streamline both front office AND back office processes, including purchase order management, invoicing, billing, inventory management and financial management, among others.

NetSuite is not only an ERP system, but also a business management suite with applications for customer relationship management (CRM), e-commerce and finance, in addition to ERP.

2. SAP Business One

Managing the information flow between different businesses, especially if they are different in scale and size, are often daunting, especially for small business. SAP Business One, however, handles this task quite well. With it, businesses can much easier manage their resources.

SAP Business One allows you to manage sales, purchases, procurement, CRM, finance, as well as business intelligence reporting and has tools that will let you handle wholesale distribution, retail, machinery or consumer product with more ease.

3. Microsoft Dynamics AX

Microsoft Dynamics AX  is an ERP system that works both on premise and on the cloud and features multi-language, multi-currency capabilities. Of course, the ERP is with Microsoft’s other business applications, which is a big plus, not to mention that it’s relatively easy to customize and has good support.

4. BatchMaster ERP

BachMaster ERP is primarily made for businesses in the manufacturing industry. In particular those in the pharma, chemical and beverage industries. It’s main promise is that it enables organizations to handle their sales, distribution, purchasing and other tasks much faster, while at the same time giving them a clear view of their data.

5. FinancialForce ERP

Sometimes an organization will want to move from CRM to and ERP solution. Unfortunately, this is often not an easy task and there can be a number of problems along the way. FinancialForce ERP enables mid-market companies do that by aligning sales, finance, human resources and other apps and organizes them to be more visible, perform faster and flexible.

6. Odoo

Odoo is a cloud-based ERP solution that offers sales & project management in one place for organizations of all sizes. The software not only has a myriad of e-commerce, point-of-sale (POS) and MRP applications and functions, but is also capable of integrating the organization’s sales channels with inventory management.

7. Brightpearl

Few ERP systems can boast the sheer range of business processes that Brightpearl can handle in just one platform. This includes inventory, customer data, purchase orders, reports, accounting and more. Brightpearl also includes tools for cash flow, inventory, customer purchase behaviour and more, in real time. Thanks to Brightpearl, multi-channel retailers can have a reliable ERP system that allows them to better manage their retail and increase their profits.


Finding a good ERP can help your business grow, handle a variety of tasks and maximize profits. These 7 ERP systems here are our choice for the best ones to keep an eye on in 2018. Which other ERP systems would you recommend? Let us know in the comments below and don’t forget to sign up and try Purchase Order Plus for free.

How to write a PO cancelation letter

How to Properly Write a PO Cancelation Letter and Politely Let the Customer Know You’re Unable to Complete Their Order

By | Purchase Order Plus | No Comments

Canceling a customer’s purchase order isn’t really the best-case scenario, but sometimes you just have to do it. You may have to cancel a PO due to your organization’s inability to complete it on time, not having the required goods, or a suspicion you have about the customer and their PO. Whatever the reason, you need to let the customer know by sending them a PO cancelation letter.

What Should a PO Cancelation Letter Look Like?

Whatever the reason for the cancelation, a PO cancelation letter is not something you should use to “give the customer what for”. Be polite. Apologize for the inconvenience. Even if you don’t consider the cancelation to be your fault. Clearly state the reason (or reasons) why you can’t fulfill the purchase order.

Don’t forget to list the items on the order you are canceling. Make sure to also remind the customer about any action they need to do and provide a contact to reach you on with questions.

A PO cancelation letter should contain:

  • Customer’s company information (name, address…)
  • Name of the person taking purchase orders
  • Your company’s information
  • Name of the person in your company canceling the order (if you are canceling the PO, it’s your name)
  • Order number for the items you are canceling
  • Order placement date
  • What items are you canceling
  • What items you are not canceling (if for instance, you are able to only partially complete the order)
  • Description of the items you are canceling (quantity, size, inventory number, etc)
  • When the cancelation will take effect
  • Why you are canceling the order
  • A request for confirmation of the cancelation by the customer (usually in writing, but email is often acceptable)
  • Contact information that the customer can reach you on with any questions (email, phone number)
  • Copies of purchase orders, invoices and receipts used for the order.

That’s a lot to consider, so to make it clearer, here is an example of how a PO cancelation letter should look like.

PO Cancelation Letter Example


Name of your company

Company address

City, State, Zip Code

Company representative canceling the order



Name of customer’s company

Customer’s company address

City, State, Zip Code

Person responsible for taking orders


“Dear (insert name of the person responsible for taking purchase orders within the customer’s company):

I am writing to inform you that my company will have to cancel the purchase order NUMBER you placed on DATE for AMOUNT.

Unfortunately, due to time constraints, we are unable to complete your purchase order by the required date.

I apologize for any inconvenience. We are offering a REFUND within 7 working days, as per our agreement.

If you have any questions, please reach me at Name@email.com or phone number 000-123-4567.

Thank you for your understanding.

Kind regards,”


Your full name and signature

List of included documents (receipts, invoices, POs…)


Canceling a PO is not the end of the world. Sometimes, you just have to do it. If that’s the case, we hope this article can help you let your customer know.

Need help with  creating, approving or sending purchase orders? Try Purchase Order Plus for free.

Do you have any questions about PO cancelation letters and how to write them? Let us know in the comments below.