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How accounts payable and receivable software helps small businesses

Two carpenters using AP software in their shop.
Jenny Chang Guest Author
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Small businesses always have a lot on their plates—and dealing with accounts payable and receivable (AP and AR) is a big part of it. If a small business isn’t careful, this can significantly drain its time and resources. Some of the potential challenges include slow processes, matching errors, not having enough workforce to handle documents, and so much more. 

Small businesses should remember that accounts payable and receivable are two sides of the same transaction. The former is what your company pays, while the latter is what your business collects. A solid grasp of these is crucial to managing your business’s cash flow. 

The good news is that using accounts payable and receivable software gives small businesses an edge. This article will go over exactly how. 

6 ways accounts payable and receivable software helps small businesses flourish

1. Saving time and money

The old way of managing accounts payable and receivable relied on bringing stacks of papers (such as invoices) to the proper desks. You would then have to wait days or even weeks for the right people to sign off on these papers. It was tedious and highly inefficient. 

AP and AR software offers intuitive dashboards telling you where invoices are in the approval process. The software makes it possible to streamline the entire approval process. Keeping the approval process seamless helps speed up payment processing and forge better business relationships. 

Managing AP and AR through software saves your employees from having to spend hours poring over numbers and invoicing the right people.

Reducing finance-related responsibilities held by your employees frees them up to focus on other tasks. As a small business, this means more people helping out in marketing, sales, and other business-critical areas. More hands on deck will make growing your business easier than ever.

Finally, digitally managing AP and AR  benefits your employees on another level. Utilizing tech is one of the best ways to avoid burnout while growing your business—simply because it makes work more efficient. It can hardly be overstated how much a small business needs healthy, rested employees. 

2. Organizing data

The traditional way of organizing accounts payable and receivable has always been prone to human error. Inevitably, physical invoices sometimes go missing, so you might charge the wrong people and compute the wrong amount. 

Managing cash flow becomes much more organized when technology is introduced into the equation. Accounts payable and receivable software can keep track of a customer’s details and take notes of the order, previous deals, and any agreed-upon terms. Having your data organized this way will come in handy if your business needs to pursue any payments. 

Organized data goes a long way in crafting a solid internal process. It’s what allows you to improve your bookkeeping and payment processes.  Some AP and AR software, including Melio, will even allow you to schedule payments in advance, sync with your accounting software, and get a complete overview of all your payments, without losing track of your data or having to input it again into various systems. These things are essential to your business because they allow you to know exactly how much money is flowing in and out of your business at any given time. 

Using accounts payable and receivable software takes the guesswork out of organizing critical financial data. For small businesses, this could mean the difference between a record profit and a record loss. 

3. Protecting sensitive account information

Dealing with accounts payable and receivable means you can’t help but deal with sensitive info. You’ll be exposed, for example, to payment details as well as bank account and credit card numbers, addresses, transaction histories, and contact information. It will reflect poorly on your small business if it’s unable to safeguard this data properly. 

Becoming a victim of a business data breach is easier than many think. A 2022 survey found that 71% of organizations were victims of payment fraud hacks or attempts.

The good news is that accounts payable and receivable software always comes with measures to protect data. For instance, you can use the software’s dashboard to grant specific employees access to invoice and payment approval. So, if any leaks occur, it will be easier to trace them back to the source. This type of system also helps ensure no single employee is responsible for payment approval alone. This security measure has two benefits: it reduces the potential for fraud while making it easier to double-check data. 

Yet accounts payable and receivable software offers more protection than just restricting access. Financial software providers are legally bound to employ basic security protocols like password protection, data encryption, and security protocols such as SSL. These features are your business’s first line of defense in case of a data breach. 

4. Getting better insights

Accounts payable and receivable software comes with dashboards telling you how productive your payment process is. These dashboards also carry other data, such as when payments were made and their current status.

These nuggets of data can be insightful. By looking at them, you get a bird’s-eye view of how things are going with your small business at just a glance. Accounts payable and receivable software is also capable of forming analyses and reports. Your business can use these insights to recalibrate your strategy as necessary. In other words, it gathers data to let you know what works and what doesn’t. 

It’s also possible to increase the productivity of accounts payable and receivable software by integrating it with other software. For example, QuickBooks Online reviews will show that it can track invoices and fix cash flow statements. The intelligent accounting system in its software is designed specifically to be easy to use and support smart, data-based decisions. It’s also worth noting that the system was specifically geared toward small businesses. 

5. Improving communication with customers

AR has a lot to do with charging clients and customers, so communication is key. An example of good communication with your clients is staying on top of your invoices. Using accounts receivable software means you get automatically notified of the status of an invoice. 

You’ll know immediately if the recipient received it or if there were any errors in the charges. Your business can preemptively address any problems before they become a major client concern. Your clients will view your small business favorably if you can communicate you’re on top of things.

6. Creating customized solutions

Every small business has different needs. Accounts payable and receivable software providers understand this and include customization in their platforms. 

These platforms carry options allowing you to design workflow to best suit your needs. You can set payment approval workflows, assign different roles and permissions to teammates, and get instant notifications to keep you (or your bookkeeper) informed.

Customization is important because nobody knows how your small business works better than you. By taking advantage of customizable features, you make accounts payable and receivable software as efficient as possible. 

Your next step from here

If your small business wants to stay on top of its cash flow, accounts payable and receivable software is a must. The market for AP and AR software is expected to be around $17.6 billion by 2028. This signifies that businesses everywhere understand the importance of streamlining their financial and accounting processes with tech.

The evolving nature of business means even small businesses must evolve to keep up. Using AP and AR software is key to ensuring you know where your business’s money is going. This alone should make it clear it’s a worthwhile investment.

Jenny Chang is a writer specializing in SaaS and B2B software solutions.

*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.