Accounts Payable Procedures

E2E Accounts Payable steps :- Processing an Accounts Payable (AP) invoice involves several key steps to ensure accuracy, compliance, quality and timely payments. Here’s a standard workflow we can follow: 1. Invoice Receipt: • Receive the invoice via email, mail, EDI, or supplier portal. • Stamp the invoice with the receipt date (if manual). 2. Invoice Verification - Check the following: • Vendor name and address • Invoice number (unique) • Date of invoice • Purchase Order (PO) number (if applicable) • Description, quantity, and price of goods/services • Payment terms • Tax details (GST, VAT, etc.) • Ensure the invoice is not duplicated. 3. Match the Invoice: • 2-way match: (Service-based PO invoices, recurring purchases & subscriptions etc) Invoice vs. Purchase Order • 3-way match: (Material PO Invoice) Invoice vs. Purchase Order vs. Goods Receipt Note (GRN) Confirm:Quantity received = Quantity billed & Price as per PO= Price on invoice 4. Code the Invoice: • Assign appropriate GL (General Ledger) codes, cost centers, and project codes. • Ensure correct accounting treatment (capital vs. expense). 5. Approval Workflow: Route the invoice for internal approval if required (non-PO or exceptions). • Approval levels may depend on the invoice amount or department policy. 6. Enter into Accounting System: • Record the invoice in the AP module of ERP/accounting software. • Capture: • Vendor details • Invoice details • Due date (based on payment terms) 7. Schedule for Payment: • Review payment terms to determine due date. • Set for payment in the payment run. • Verify discounts for early payment, if any. 8. Make Payment: • Pay via approved mode: bank transfer, cheque, ACH, etc. • Record payment in the system. • Send remittance advice to the vendor. 9. Record & update: Record the payment in the accounting system to reflect the transaction and update the accounts payable ledger. 10. Reconcile and Archive: • Reconcile vendor statements with AP ledger. • Resolve discrepancies. • Archive invoice documents as per compliance requirements. #accountspayable #AP #APprocess #E2EAPworkflow #bestpractice #P2P #procuretopay #apsteps #workflow

Accounts Payable (AP) Process in a Company 1. Invoice Receipt Description: The company receives invoices from vendors for goods or services provided. Sources: Invoices may come via email, post, or an Accounts Payable automation system. Key Activities: Ensure the invoice is addressed to the company. Confirm that all necessary information is present (vendor details, invoice number, amount, etc.). 2. Invoice Verification Description: Ensure the invoice details match supporting documents to confirm its validity. Steps to Follow: Perform a 3-way match: Compare the invoice, purchase order (PO), and goods receipt. Check: Vendor name and details. Invoice amount and quantity. Tax amounts (GST, VAT, etc.). Payment terms. Tools: Use accounting or ERP software for automated matching. 3. Approval Workflow Description: Send invoices to the relevant departments for review and approval. Steps to Follow: Route invoices to authorized personnel for approval. Ensure all approvals are documented (digitally or physically). Objective: Prevent fraudulent payments and ensure compliance with company policies. 4. Recording the Invoice Description: Once approved, invoices are recorded in the company’s accounting or ERP system. Steps to Follow: Enter vendor details, invoice number, date, and amount. Code the invoice to the correct general ledger (GL) accounts (e.g., expenses, cost of goods sold). Mark the invoice as "pending payment." Goal: Accurately record liabilities to maintain proper financial statements. 5. Payment Scheduling Description: Plan and prioritize invoice payments. Steps to Follow: Review the invoice due dates and payment terms (e.g., Net 30, Net 45). Take advantage of early payment discounts, if available. Ensure sufficient funds are available in the company’s bank accounts. 6. Payment Processing Description: Issue payments to vendors. Steps to Follow: Process payments through checks, wire transfers, ACH (Automated Clearing House), or other methods. Communicate the payment details to the vendor (e.g., remittance advice). Goal: Make payments on time to maintain vendor relationships and avoid late fees. 7. Reconciliation Description: Compare company records with vendor statements to ensure accuracy. Steps to Follow: Reconcile vendor accounts by matching payments with invoices. Identify and resolve discrepancies, such as overpayments or outstanding invoices. Tools: Use bank reconciliation software or manual reconciliation. 8. Reporting and Record-Keeping Description: Maintain accurate and up-to-date records for compliance and auditing purposes. Steps to Follow: Generate reports (e.g., aging reports, vendor payment summaries). File invoices and payment records digitally or physically. Comply with tax regulations and audits by keeping records for a specified duration. #AccountsPayable#MNC#Accountsjob#

Simple way to understand the AP process. What is Accounts Payable? Accounts Payable (AP) refers to the money a company owes to its vendors or suppliers for goods or services received but not yet paid for. 🔄 Accounts Payable Process (Step-by-Step) Purchase Order (PO): official order is placed for goods or services. Receive Goods/Services (GRN): ordered items or services are received and documented. Invoice from Vendor: vendor sends a bill for the goods or services provided. Match Documents (3-way match): Match PO + Goods Receipt + Invoice to check everything is correct. Approval: Someone in charge checks and approves payment. Payment : vendor is paid according to the agreed terms. Example: Net 30 : Payment is due 30 days after the invoice date. Net 60 : Payment is due 60 days after the invoice date. Record Entry: Make an entry in accounting books. Dr: Expense or Inventory Account (e.g., Raw Materials, Services, etc.) Cr: Vendor Account (Accounts Payable) Invoice Entry: Dr: Raw Material Inventory A/C 10,000 Cr: Vendor A A/C (AP) 10,000 Payment Entry: Dr: Vendor A A/C 10,000 Cr: Bank A/C 10,000 ⚠️ Risks in AP Process • Duplicate payments (paying the same invoice twice) • Fake or fraudulent invoices • Late payments (can lead to penalties or damage relationships) • Incorrect amounts or accounts used in entries 🛡️ Controls to Avoid Mistakes • Perform 3-way matching (PO, Goods Receipt, Invoice) • Require invoice approval before payment • Use accounting software like Tally or SAP • Maintain a clean vendor list (avoid duplicates) • Regularly reconcile vendor accounts

MASTERING ACCOUNTS PAYABLE: A KEY TO FINANCIAL EFFICIENCY💡 Accounts payable (AP) is more than just paying bills it's about managing cash flow, maintaining vendor relationships, and ensuring financial accuracy. But what does this look like in real life? Let’s break it down with examples! 1. Invoice Accuracy Matters! Imagine your company orders office supplies worth $5,000. The invoice arrives, but the amount is $5,500. Without proper verification, this could lead to overpayment. A strong AP process ensures invoices are checked against purchase orders and delivery receipts before approval. 2. Vendor Relationships Build Trust A manufacturing company relies on a key supplier for raw materials. By keeping vendor details updated and ensuring timely payments, the company maintains a good relationship, leading to priority deliveries and potential discounts. 3. Payment Terms Can Save Cash A retail business negotiates a 2/10, net 30 payment term with its supplier meaning if they pay within 10 days, they get a 2% discount. By managing AP efficiently, they save thousands annually in early payment discounts! 4. Approval Workflows Prevent Fraud A company receives a suspicious invoice from an unknown vendor. Instead of processing it immediately, their AP workflow requires manager approval for new vendors. Upon review, they realize it’s a fraudulent invoice saving the company from a financial scam. 5. Efficient Payment Processing Keeps Operations Smooth A tech startup ensures its software subscriptions and office rent are paid on time through automated AP processes. This prevents service disruptions and allows the finance team to focus on strategic growth rather than chasing due payments. Final Thought A well structured accounts payable system is not just about processing payments it’s about financial control, risk management, and strategic planning. How does your organization manage AP? Any challenges or success stories to share? Let’s discuss in the comments! #AccountsPayable #Finance #BusinessGrowth #CashFlowManagement #VendorRelations #InnocentTax #InnocentAccountant #InnocentMotivated #InnocentLinkedin

Accounts Payable: A Comprehensive Guide Definition Accounts Payable (AP) refers to the money a company owes to suppliers for goods and services received but not yet paid for. Accounts Payable vs. Accounts Receivable Key AP Ratios and Formulas Accounts Payable Turnover = Net Credit Purchases / Average Accounts Payable Shows how quickly a company pays suppliers. Days Payable Outstanding = (Accounts Payable x Number of Days) / Cost of Goods Sold (COGS) Indicates how many days a company takes to pay suppliers. Current Ratio = Current Assets / Current Liabilities Measures liquidity and the ability to pay short-term obligations. Accounts Payable Process 1. Receive Invoice - Supplier sends an invoice for goods/services. 2. Verify Invoice - Match with purchase order and received items. 3. Get Approval - Approved by the relevant department. 4. Record Invoice - Enter into the accounting system. 5. Schedule Payment - Plan based on due date and cash flow. 6. Make Payment - Process via bank transfer, check, etc. 7. Update Records - Mark as paid and update books. 8. Review Reports - Track outstanding invoices and cash flow. Examples of Accounts Payable Utility bills Rent expenses Software subscription fees Payments to suppliers for raw materials Professional service invoices (legal, consulting, etc.) This guide provides essential insights into managing Accounts Payable efficiently for better cash flow and financial stability.