Introduction:
Accounts payables are the balances a company owes to its vendors when its vendors supply services or other supplies. They are of a credit nature and are placed under the current liabilities of the balance sheet.
The accounts payable process is how the company follows the same cycle of ordering supplies, getting the supplies, getting billed by the vendors, and following the payment process.
Each company may have a unique payable process, but we will discuss the most normal process below
Accounts Payable Process:
Managing accounts payable is a critical area for the company because it involves all the company’s payables amounts to all the vendors for all the supplies.
Large departments manage the accounts payables process in a large corporation, several staff in a medium-sized entity, or a bookkeeper or representative in a small company.
No matter the company’s size, the aim is to follow the process of paying the company’s bills, inspecting them, and then paying them. A company has to follow the following process for accounts payable in precise and accurate conditions.
1) Purchase order:
The initial step in the accounts payable process is to generate and process a purchase order. The accounts payable department has to ensure that a precise document with an accurate description is prepared to order supplies from its vendors.
The purchase order will include its unique number representing the purchase order, the date on which the document is prepared, items ordered from the vendor, quantity, prices, method of shipping, and other necessary information.
2) Goods received a note:
Once the purchase order is generated and delivered to the vendor, the vendor will deliver the goods to the company.
The goods received note is the document that has the information of goods delivered to the company. The company’s representatives have to compare the physical and description of the goods on goods received a note to the purchase order.
Once this information is compared and reconciled, they are matched with the invoices from the vendor. Goods received a note or receiving report role completes here.
3) Invoice from the vendor:
The invoice is delivered to the accounts payable department after the company receives it. The accounts payable department will verify and approve the invoice. The amount on the invoice will be credited to the company’s accounts payable account.
4) Matching the information on three documents:
Matching the information of three documents such as the purchase order, the company receiving the report, and the vendor invoice, confirm what goods the company has ordered and at what cost, what the company has received from the vendor and the price charged by the vendor on the invoice for the goods they have delivered to the company.
This accounts payable process is best followed when the company segregates duties for all responsibilities.
5) Voucher:
The last document prepared during the process is a voucher which includes all the documents related to the order and the goods received.
They include the complete information of the approval process and provide other necessary information.
