Step one: one place for bills
Bills arrive by mail, email, text and handed over in person. Pick one inbox or portal where everything lands. Many accounting programs give you a forwarding email address for bills. Anything outside that place is at risk of being lost.
Scan paper bills the day they arrive. Name the file clearly with the vendor and date so you can find it later.
Step two: check before you enter
Compare the bill with what you ordered or agreed. For goods, match the invoice against the packing slip or delivery. For services, confirm the work was done. Look for duplicate invoice numbers and amounts that differ from quotes.
This small check stops many errors, including bills from vendors you do not recognize.
Step three: enter, code and approve
Enter the bill into the software with the vendor, date, due date, amount and expense category. Add a note if the bill covers several periods. Then have the person who authorized the purchase approve it. In a one-person business, that may be a quick check of your own, but write the habit down.
Keep the approver separate from the person who enters and pays, if you have the staff. It is one of the oldest fraud controls.
Step four: schedule payments
Run a bills-due report weekly. Pay on or just before the due date, not weeks early, unless a discount for early payment makes it worthwhile. Terms like a small discount for fast payment can be valuable, but compare it to the cost of tying up cash.
If cash is tight, call the vendor before the due date. Most will work with you if you ask early. Prioritize payroll taxes, rent and critical suppliers.
Step five: record and reconcile
Pay bills through the software so the bill is marked paid and the bank transaction is matched. Paying outside the system and then recording an expense creates duplicates.
Each month, compare the payables total with the unpaid bills list, and reconcile vendor statements for your key suppliers. If your payables balance includes old unexplained items, investigate and clear them.
Month-end payables checks
At month end, run the unpaid bills report as of the last day and compare its total with the payables balance on the balance sheet. They should agree exactly. If they do not, a bill was probably entered with a journal entry rather than the bill screen, or a payment was applied to the wrong vendor.
Also look for bills that arrived after the month closed but relate to work done before. These are accruals, and leaving them out understates your costs. Finally, review credits from vendors that have not been applied to any bill, since unapplied credits are money you are owed.
Common questions
Should I pay bills by check, ACH or card?
Choose the method that gives a clear record and fits your cash plan. Electronic payments are easier to track and match.
How do I avoid paying a bill twice?
Always pay from the bills list, and check the vendor and invoice number before entering. Many programs warn about duplicates.
What if a vendor bills me incorrectly?
Dispute it in writing, note the issue in the bill and hold payment of the disputed part only if the contract allows.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.