To continue the discussion about accounts payable, we wanted to discuss your process and whether it makes the most sense for your business to use accounts payable within QuickBooks or with a third-party integration.
If you missed our blog on the introduction to accounts payable, which explained what it is and how it benefits you, here’s a link INTRO TO ACCOUNTS PAYABLE to get started. This blog is more of a continuation of your decision to utilize accounts payable, moving into how you want to manage that with your accounting software.
Because of that, we will be comparing the pros and cons of a built-in system in QuickBooks to multiple third-party APs such as Melio and Bill.com.
QuickBooks Built-In AP
We’ll make it easy, starting with QuickBooks’s built-in AP system. It works with QuickBooks online or QuickBooks desktop version. You can do all those standard things, such as entering and paying your bills, and there are two ways to achieve this. You can use manual data entry to add the bill manually, pay the bill, track your AP, and then pull a bill payment report.
The other option is to forward your bills to QuickBooks, and it will read the bill. We don’t use this system because auditing the bills that come through with the AI trying to read and code takes as much time as manually adding those bills in the 1st place.
However, this is more because our clients using the bill pay are doing more advanced things, such as class tracking, so the Purchase Order needs to be read to connect to a class. Forwarding is likely more successful if you add bills to the same material account every time. There are certain limitations with the forwarding option, such as the e-mail being used for the forwarding must be an e-mail that already has access to QuickBooks.
This AP solution is wholly included with your QuickBooks subscription, and they allow you to pay bills through QuickBooks so you can do ACH and connect with that specific vendor through the business portal. Those bill pay plans have multiple options, and you can be at basic with five free monthly ACH payments. The extra ACH payments above the plan limits are $0.50, and all plan check payments are $1.50 for each transaction. QBO AP is a relatively high-cost plan.
Overall, we recommend QuickBooks AP for regularly seeing the effect of your accounts payable on your financial statements, especially for companies that are not paying off their AP vendors often. The payments would go to your material cost in the month you pay, which could be four months’ worth. Having AP will allow you to look at the price you purchased that month versus when you paid it.
Melio
Melio was the original program built into QuickBooks until they created their own AP software. It was a partnership with some excellent benefits where ACH payments were free. Even though they are no longer partners, there is still a strong integration between Melio and QuickBooks. When you add the bills to QuickBooks, it ports right into Melio.
Melio gives you a lot of different features, such as the ability to have multiple approval workflows. You want to have that separation of duties when setting up accounts payable. You don’t like the same person entering the bills, approving paying the bills, and then writing the check.
Separating duties will help to illuminate any embezzlement that could happen because they are handling the entire AP process. This week, you have a lot of double-checking. Whereas you might have an in-house person making purchases, the accountant is the one that is double checking all bills are input and saying here’s the payment that needs to be made, and then the owner is the one that’s signing off on paying the bill and writing that check.
As far as cost, they do charge a monthly fee, with the lowest payment plan also offering five free ACH at no cost. There are multiple plan options, but there is also an additional cost per user.
Much like QuickBooks, there is a $0.50 fee for any ACH above the plan amount; however, they let you pay by ACH wire or check. You can also use a credit card for additional cost. You must use their $22.00 monthly plan to integrate the QuickBooks online.
Bill.com
If Waterford is looking for the gold standard, consider Bill.com to be that accounts payable option. One of our main benefits of Melio was the approval process, which Bill.com has even more options for separation of duties.
Another feature beyond what the other offers is instant payout options. So, their ACH is as close to instant as possible. Instant payouts would be highly beneficial if you needed to pay someone that day to avoid a late fee. They actually use a third-party service that will front the money instead of pulling it from your bank account, so the deposit is immediate.
Bill.com has more features than our clients are looking for; however, if you’re one of the larger companies, this might be the perfect solution. It never hurts to compare capability versus price, but the price will be steep compared to our other options. For example, their lowest monthly plan begins at $45 per user.
Bill.com gives you a unique e-mail to provide to your supply houses so you can directly receive bills uploaded and processed through their AI. Currently, it is much more accurate than QuickBooks in reading bill amounts and invoice numbers.
Another feature is their integration. They don’t only integrate with QuickBooks but also with multiple other accounting software, such as Sage and Xero. It even integrates with Hubdoc, so a lot of our clients use Hubdoc to upload receipts and bills. However, bill.com will actually read that source document and can create the bill from there.
They are the most advanced option, and so it’s hard to compete with them because they have been doing this for so long and have really specialized in multiple different facets of accounts payable. The only difference is that a lot of businesses are not going to be at the point where it makes financial sense for them to have all of these features because they’re only using a select few.
AP Softwares & You
At the end of the day, picking the software that fits your business and does what you are looking for is going to be the most important part. There’s no reason to start out with bill.com as a one-man truck for HVAC. However, you might prefer the platform of Melio over QuickBooks just as a user for their interface. If you are struggling with AP or even just picking out an AP system, we’re here to help you.
Waterford can also set up AP, manage your AP, and even prepare Melio pipelines for us to be part of your paying-the-bill process. We consider this an add-on service, so you must already be doing bookkeeping with us. This should not be your first step when learning to do accounting for your business.
Check out our YouTube video When to Use Accounts Payable in QBO and Other 3rd Party Systems with James for a first-hand recap. If you are still determining which plan works best for you, need additional help, or have any questions, Waterford Business Solutions is happy to help. Feel free to call us at 864-351-0852 or email us at Info@WaterfordBusiness.com.
