The Accounts Payable Process
- 2. 2 Introduction The Accounts Payable or Account Payable (AP is the amount of money that a business entity owes to vendors/suppliers for availing their goods/services. The Accounts Payable Process is the management and execution of the company’s short-term payment obligations to the vendor/supplier.
- 3. 3 The Basic AP Workflow Process The scale of Accounts Payable Processing of any organization depends on: ● the number of vendors/service providers that cater to its needs ● the quantum of payment expected to be made over a short period of time ● the types documentation required to validate the purchase process
- 4. 4 The Basic AP Workflow Process ● Receive the bill/invoice from vendor ● Verify the data on the bill/invoice ● Update the records of bills/invoice ● Make payment within the due date ● Close ledge account for the transaction
- 5. 5 Documents associated with the AP Process Depending on the scale of operations, the accounts payable procedures of a company may include many or all of the following documents: ● Purchase Order – the PO ● Receiving report ● Vendor Invoice ● Vouchers
- 6. 6 The Importance of AP Management and Accounts Payable Workflow ● It helps prompt payment of bills, which is important for the creditworthiness of the company and helps establish healthy relationships between the vendor and the company. ● Prompt payments also prevent overdue charges, penalties, or late fees. ● Accounts Payable Processing keeps overspending in check, and prevents multiple/duplicate payments for the same product/service. ● It keeps track of the company’s needs and purchases, which helps avoid delays and interruption in the day-to-day functioning of the company.
- 7. 7 The Importance of AP Management and Accounts Payable Workflow Cont ● It consolidates all purchase actions for easy retrieval. ● AP processing eliminates fraud through stringent follow-up and checks at every stage of the process. ● It helps better management of cash flow by enabling payments only when due, using the credit facility offered by vendors etc.
- 8. 8 The Breadth of the AP Process The AP maintains records of all financial aspects of purchases made by the company, which is crucial for auditing and tax purposes. The main goals of the AP are: ● To ensure that payments are legitimate and accurate ● To leverage early payments or dynamic discounts.
- 9. 9 Challenges to the AP Process ● Time delays ● Matching errors ● Exception management ● Unnecessary purchases ● Fraud and theft ● Missing documents ● Double payment ● Blind spots ● Outsourcing accounts payable activities vs Automating AP responsibilities
- 10. 10 Streamlining the Account Payable Cycle Streamlining can be enabled by automation. Automating serves the following purposes: ● Eliminates paper clutter, thereby reducing processing time and error rates ● Links POs and invoices with electronics payments, which presents the full picture of the accounts payable cycle ● Helps better vendor management & prevent vendor fraud ● Enables hassle-free three-way matching ● Allows integration of the Accounts Payable process with other core business systems such as ERP and CRM
- 11. 11 Streamlining the Account Payable Cycle Cont ● Allows setting up of multiple checkpoints in the accounting payable cycle to avoid overspending or unnecessary purchases ● Warnings and alarms can be set when discrepancies are detected at any stage of the accounts payable workflow ● Allows for setting up payment deadlines ● Enables generation of periodic reports to understand the spending patterns of the company and prepare for audits and taxation
- 12. 12 Automating the AP Management Process Today, the digital Accounts Payable Process includes invoice data capture, coding invoices with the correct account and cost center, approving invoices, matching invoices to purchase orders, and posting them for payments. A variety of accounts payable workflow software use features such as Optical character recognition (OCR and intelligent data capture (IDC to automatically capture key bits of data such as the PO number, amount and date. More recently, all accounting tasks, including the Accounts Payable, are being automated using AI-based technologies.
- 13. 13 Learn more about The Accounts Payable Process: https://nanonets.com/blog/accounts-payab le-process/