Introduction:
Accounts payables are the balances a company owe to its vendors when services or other supplies are supplied to the company by its vendors. They are of credit nature and are placed under current liabilities of the balance sheet.
Accounts payable process is the process in which the company follows the same cycle of how the company orders supplies, get the supplies, got billed by the vendors and the payment process followed by the company.
Each company may have a unique payable process but we will discuss the most usual and normal process below
Accounts Payable Process:
Managing accounts payable is a very important area for the company because it involves all the company’s payables amounts to all the vendors for all the supplies.
Accounts payables process is managed by large departments in a large corporation, by several staff in a medium-sized entity, or by a bookkeeper or representative in a small company.
No matter what the size of the company is, 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 a precise and accurate condition.
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 make sure that precise document with 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 note:
Once the purchase order is generated and delivered to the vendor, the vendor will deliver the goods to the company.
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 as well as the 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 note or receiving report role completes here.
3) Invoice from the vendor:
The invoice is delivered to the accounts payable department after it is received by the company. 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 purchase order, the company receiving report, and vendor invoice confirms 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 follows the segregation of duties for all the different responsibilities of the process.
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 as well as provide other necessary information.
