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Ecommerce merchants and AP software: The perfect mix

An e-commerce seller using a laptop to manage AP online.

Melio and Shopify recently launched a new partnership. With Shopify Bill Pay powered by Melio, merchants can now pay all of their vendors in the same place that they run their businesses. You can access the app straight from your store’s admin.

Here’s our take on accounts payable (AP), what ecommerce merchants should look for in AP software, and how to find the right solution for you and your business.

AP isn’t just the class you took in high school. It also stands for accounts payable. It represents a company’s short term obligations owed to creditors or suppliers which have not yet been paid. Spoiler alert: cash is the lifeblood of every company and therefore AP has a major effect on cash flow. When you keep track of your AP with the right platform and in one place, you can save big bucks.

Imagine you own an online clothing company and purchase $2,000 worth of fabric. Your vendor sends you an invoice to be completed within 30 days of purchase (also known as net 30). From the date of purchase until the date the money is paid in full to the supplier, your company has an AP of $2,000. As soon as you pay your vendor, the debt is removed from your AP balance. In a nutshell, the payable is a short-term IOU from one business to another.

Managing AP is one of the most important financial responsibilities for any business. It ensures you pay your bills on time and have the necessary cash flow to keep your doors open.

How does AP impact cash flow?

The answer is a bit counterintuitive, but an increase in your AP indicates positive cash flow. It means you haven’t spent any cash yet. However, if your AP decreases, this means you’ve actually paid your vendors and therefore have less cash on hand. This is why a decrease in AP means negative cash flow.

It’s a good idea to always pay your bills on time, but never before they are actually due. It may be tempting to get your bills out of the way sooner rather than later, but this can unnecessarily drain your cash flow. If you have a strong relationship with your vendor, you can even negotiate payment terms and buy yourself more time—so you can hang onto cash even longer.

What to look for in AP software

As an ecommerce merchant, you’re already running your business online. It only makes sense for you to enjoy the same accessibility and visibility throughout your AP process.

So the question becomes, how do you select the right AP software for your business? The choice can be overwhelming. But if you look for the right things and follow the proper steps, you’ll find the perfect AP software in no time.

We recommend your AP software have the following five features:

1. User friendly interface

Lots of platforms have steep learning curves, are difficult to navigate, and therefore end up wasting your valuable time. That’s why easy-to-use interfaces with quicker onboarding and easy navigation end up paying off big time. More efficient processes, anyone?

2. Flexible payment methods

It’s wise to use a platform that gives you the flexibility you need to pay vendors the way that works best for your business. Bonus points go to platforms like Shopify Bill Pay* that have decoupled payment methods. In other words, you get to pay the way that works for you while your vendor still gets paid their way.

3. Automatic 2-way accounting software sync

If you pay your bills through one system–like your bank account–and then update the info in a different system, there is a lot of room for error. The good news is that with the right AP software you don’t need to update two separate systems by hand. They enable you to enjoy less busywork, say goodbye to manual errors, and eliminate dual data entry. That’s precisely why Shopify Bill Pay allows you to sync with QuickBooks®. Life is easier with 2-way syncs.

4. The ability to schedule payments

Scheduling payments might be missing from your workflow. It allows you to easily set up and manage one time and recurring payments. It also enables you to pay at the last possible moment, and not a minute too soon. This means you get to hang onto cash longer–without the risk of facing late payment fees or penalties. The best part? Once you schedule the payment, you can put it out of your mind for good.

5. International payment options

You’ll want a platform where you can send international payments. This allows you to  pay vendors anywhere, meaning the vendors you work with won’t be limited by location. Compromising vendor quality simply isn’t worth it. With platforms like Shopify Bill Pay that include this offering, your vendor (whether domestic or international) doesn’t even need an account to get paid.

How to choose the right AP software

Choosing the right AP software doesn’t have to be complicated or time consuming. It’s wise to start by mapping out the day-to-day steps of your current AP process. This will give you insights into places where it can be more efficient.

Once you acknowledge existing bottlenecks, you can figure out what additional features will best address them. This will allow you to nip these issues in the bud before they pose more serious problems.

The bottom line

You must think about your business’s current needs when finding the right AP platform. At the same time, it’s equally important to look ahead and think about how your needs might change in the coming years as your business continues to grow.

With Shopify Bill Pay, we set you up for long-term success with all the features and flexibility needed for growing businesses. Ready to get started? Sign up today.

*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.