Accounting Payable Process

@ ACCOUNTING PAYABLE PROCESS

Payable is the money the company owes to its vendors in case of non-payment for the supplies. Although it is a short term loan that needs to be paid-off in short duration, it demands to be treated properly. In case otherwise, it can badly affect the company’s financial statements.

Accounting payable goes to a well- defined process, from start till its end to makes it mess-free. The process mainly goes like this:

ACCOUNTING PAYABLE PROCESS:

1. The Department that requires any item asks it from the procurement department.
2. When procurement department gets this notice of the requirement, it then asks from the suppliers for that specified item. It is known as RFQ( Request For Quotation).

PROCESSING OF THE PAYABLE DATA:

1. When the order is made to the supplier, then the company receives the item in bulk along with an invoice.
2. The invoice is now recorded in the books of accounts on the liability side. Recording of the invoice differs from company to company. At many places, it is entered manually. While other uses automated softwares that scans or emails it. The less paper work involved, the more beneficial it will be for the processing.
3. Then, It is paid off on or before the due date and hence, that amount of liability is reduced by that amount.

MAJOR KEY PROCESSES INVOLVED IN THE ACCOUNTING PROCESSES:

• Procure To Pay: since the company receives the item till it is paid off on due date and removed from its liability side. This whole accounting process is also known as ‘Procure to Pay’. Since the company receives the item along with its invoice.

• Record to Report: Every single credit purchase is recorded in the books of accounts to show the correct financial statement of the business.

• Order to Cash: The procurement department orders the required item from its vendors. The vendor supplies it along with an invoice and then the cash is paid on the due date. Payable exist since the order is made till its cash payment.

• Ratio Analysis: Account Payable holds great value while calculating the liquidity ratio of the company. It is a part of current liability. So, it should always be accurate and minimal.

BENEFITS AUTOMATED PAYABLES MANAGEMENT PROVIDES:

• Faster Processing Of Payables: Automated payable accounting benefits your with more efficiency. It eliminates the mundane task of manually entering every single entry.

• Keeping The Vendor Happy: Automated payable accounting alerts you for due dates or even integrates with your banking softwares that automatically make payments. Early payments maintains healthy relations with the vendors.

• Early Payment Discounts: Healthy relations with the vendors can, sometimes, also grants you discounts for early payments against the orders in future.

• Reducing Errors On Payables: As automated payable accounting software scans the invoices for making entries, the possibility for the errors is almost nil.

• Dashboard Reports For CFO: Automated softwares help in preparing Dashboards. These are very useful for the CFOs. It helps them keep track of the departments that is lacking in finance or which one has more than sufficient.

• Reducing Duplicate Payments: Automation cross-checks every invoice from the respective departments before making any entry. So, there’s no place for double entry or duplicate payments made.

SOFTWARES HELPFUL FOR MANAGING ACCOUNT PAYABLES:

• Bill.com: Bill.com (www.bill.com) is basically is cash flow management software. It offers you cloud based payment. It offers you many handy features, all at a same time like - l Giving any vendor hard copy of the invoices, if they asks for it. l Allowing access to many people, along with the accountant. So that, if there’s need for someone’s approval, it can be done without any delay. And partiality can be maintained at the same time. l It makes syncing with the accounting and banking softwares easy.

• Receipt Banks using Xero: Receipt Banks,(www.receipt-bank.com) with the help of OCR technology scans your invoices and bills and takes out the information about the payables. It then, integrates and transfers the data to the accounting softwares like Xero. Xero (www.xero.com) offers you cloud-based accounting that almost ends the paper work. It is also very cost and time efficient.

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Meru Accounting is a CPA firm providing complete outsource bookkeeping and accounting solutions to CPAs and small & medium-sized businesses across the United States, United Kingdom, Australia, New Zealand, Hongkong, Canada, and European countries.