Accounts payable

Accounts payable
Accountancy
Key concepts
Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow management · Chart of accounts · Journal  · Special journals · Constant Item Purchasing Power Accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO & LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax
Financial statements
Statement of financial position · Statement of cash flows · Statement of changes in equity · Statement of comprehensive income · Notes · MD&A · XBRL
Auditing
Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act
Accounting qualifications
CA · CPA · CCA · CGA · CMA · CAT · CFA  · CIIA  · ACCA  · CIA  · CTP · ICAEW · CIMA  · IPA  · ICAN
This box: view · talk · edit

Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet (a form of debt), sometimes referred as trade payables. When an invoice is received, it is added to the file, and then removed when it is paid. Thus, the A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received.

In households, accounts payable are ordinarily bills from the electric company, telephone company, cable television or satellite dish service, newspaper subscription, and other such regular services. Householders usually track and pay on a monthly basis by hand using cheques or credit cards. In a business, there is usually a much broader range of services in the A/P file, and accountants or bookkeepers usually use accounting software to track the flow of money into this liability account when they receive invoices and out of it when they make payments. Increasingly, large firms are using specialized Accounts Payable automation solutions (commonly called ePayables) to automate the paper and manual elements of processing an organization's invoices.

Commonly, a supplier will ship a product, issue an invoice, and collect payment later, which describes a cash conversion cycle, a period of time during which the supplier has already paid for raw materials but hasn't been paid in return by the final customer.

When the invoice is received by the purchaser it is matched to the packing slip and purchase order, and if all is in order, the invoice is paid. This is referred to as the three-way match.[1] The three-way match can slow down the payment process, so the method may be modified. For example, three-way matching may be limited solely to large-value invoices, or the matching is automatically approved if the received quantity is within a certain percentage of the amount authorized in the purchase order.[2]

Contents

Expense administration

Expense administration is usually closely related to accounts payable, and sometimes those functions are performed by the same employee. The expense administrator verifies employees' expense reports, confirming that receipts exist to support airline, ground transportation, meals and entertainment, telephone, hotel, and other expenses. This documentation is necessary for tax purposes and to prevent reimbursement of inappropriate or erroneous expenses. Airline expenses are, perhaps, the most prone to fraud because of the high cost of air travel and the confusing nature of airline-related documentation, which can consist of an array of reservations, receipts, and actual tickets.

Internal controls

A variety of checks against abuse are usually present to prevent embezzlement by accounts payable personnel. Segregation of duties is a common control. Nearly all companies have a junior employee process and print a cheque and a senior employee review and sign the cheque. Often, the accounting software will limit each employee to performing only the functions assigned to them, so that there is no way any one employee – even the controller – can singlehandedly make a payment.

Some companies also separate the functions of adding new vendors and entering vouchers. This makes it impossible for an employee to add himself as a vendor and then cut a cheque to himself without colluding with another employee. This file is referred to as the master vendor file. It is the repository of all significant information about the company's suppliers. It is the reference point for accounts payable when it comes to paying invoices.[3]

In addition, most companies require a second signature on cheques whose amount exceeds a specified threshold.

Accounts payable personnel must watch for fraudulent invoices. In the absence of a purchase order system, the first line of defense is the approving manager. However, A/P staff should become familiar with a few common problems, such as "Yellow Pages" ripoffs in which fraudulent operators offer to place an advertisement. The walking-fingers logo has never been trademarked, and there are many different Yellow Pages-style directories, most of which have a small distribution. According to an article in the Winter 2000 American Payroll Association's Employer Practices, "Vendors may send documents that look like invoices but in small print they state "this is not a bill." These may be charges for directory listings or advertisements. Recently, some companies have begun sending what appears to be a rebate or refund check; in reality, it is a registration for services that is activated when the document is returned with a signature."

In accounts payable, a simple mistake can cause a large overpayment. A common example involves duplicate invoices. An invoice may be temporarily misplaced or still in the approval status when the vendors calls to inquire into its payment status. After the A/P staff member looks it up and finds it has not been paid, the vendor sends a duplicate invoice; meanwhile the original invoice shows up and gets paid. Then the duplicate invoice arrives and inadvertently gets paid as well, perhaps under a slightly different invoice number.

Audits of accounts payable

Auditors often focus on the existence of approved invoices, expense reports, and other supporting documentation to support cheques that were cut. The presence of a confirmation or statement from the supplier is reasonable proof of the existence of the account. It is not uncommon for some of this documentation to be lost or misfiled by the time the audit rolls around. An auditor may decide to expand the sample size in such situations.

Auditors typically prepare an ageing structure of accounts payable for a better understanding of outstanding debts over certain periods (30, 60, 90 days, etc.). Such structures are helpful in the correct presentation of the balance sheet as of year end.[4]

Accounts Payable Automation

ePayables are defined as the technology or process automation solutions that automate any part of the accounts payable ("AP") process. The key to Accounts Payable Automation is to develop or invest in technology that will enalbe the company to free up labor from task the techology can perform. Examples are opening mail, scanning, entry in to the Accounting System or ERP System and filing(4).

There are three main components AP Automation.

  1. 100% Electronic Invoices
  2. Event Driven Workflow
  3. Reporting Layer to Track all Actions

Accounts Payable Requirements [5]

  1. Have years of Accounts Payable experience
  2. High school diploma required, college courses in accounting preferred
  3. Must have strong work ethics
  4. Must be well organized and a self-starter
  5. Must be able to follow standard filing procedures
  6. Detail oriented, professional attitude, reliable
  7. Proficient in Excel and Word, 10-key by touch, Oracle experience a plus
  8. Ability to type 60-65 wpm
  9. Possess strong organizational and time management skills
  10. Strong problem solving skills, basic accounting principles knowledge, documentation skills, research and resolution skills, data analysis and multi-tasking skills
  11. Thorough knowledge of applicable accounts payable/general ledger systems and procedures, financial chart of accounts and corporate procedures
  12. Ability to communicate effectively verbally and in writing
  13. Ability to interact with employees and vendors in a professional manner
  14. Ability to speak and write English and Spanish fluently (a must)
  15. Ability to work independently and with a team in a fast-paced and high volume environment with emphasis on accuracy and timeliness
  16. Ability to perform mathematical computations such as percentages, fractions, addition, subtraction, multiplication and division quickly and accurately

See also

References

  1. ^ Schaeffer, Mary S. (2007). Controller and CFOs Guide to Accounts Payable. John Wiley & Sons. ISBN 0-471-78589-X. 
  2. ^ http://www.accountingtools.com/article-ap-invoice-approval-pr
  3. ^ Schaeffer, Mary S. (2006). Accounts Payable & Sarbanes Oxley: Strengthening Your Internal Controls. John Wiley & Sons. ISBN 0-471-78588-1. 
  4. ^ Elmore, Christopher (2011). The 8 Pitfalls of Accounts Payable Automation. NC: CreateSpace. pp. 198. ISBN 10:1461039967. http://www.costperinvoice.com. 
  5. ^ Accounts Payable Job Description

Wikimedia Foundation. 2010.

Игры ⚽ Нужен реферат?

Look at other dictionaries:

  • accounts payable — index bill (invoice) Burton s Legal Thesaurus. William C. Burton. 2006 accounts payable …   Law dictionary

  • accounts payable — An obligation to pay for goods sold or services rendered (SA Bankruptcy.com) United Glossary of Bankruptcy Terms 2012 …   Glossary of Bankruptcy

  • accounts payable — is money you owe to suppliers and other business creditors as a result of purchases of stock and other expenses such as overheads and taxes. Glossary of Business Terms A category of liabilities that represents funds due to creditors. Usually,… …   Financial and business terms

  • Accounts payable — Money owed to suppliers. The New York Times Financial Glossary * * * accounts payable accounts payable ➔ payable * * * accounts payable UK US noun ► [plural] also UK creditors, also US payables) ACCOUNTING the amounts in a company s accounts that …   Financial and business terms

  • Accounts Payable - AP — An accounting entry that represents an entity s obligation to pay off a short term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities. Accounts payable are often referred to as… …   Investment dictionary

  • accounts payable — noun a debtor s accounts of money he owes; normally arise from the purchase of products or services • Hypernyms: ↑liabilities * * * acˌcounts ˈpayable 7 [accounts payable] noun plural …   Useful english dictionary

  • accounts payable — trade creditors The amounts owed by a business to suppliers (e.g. for raw materials). Accounts payable are classed as current liabilities on the balance sheet but distinguished from accruals and other non trade creditors (such as the Inland… …   Accounting dictionary

  • accounts payable — trade creditors The amounts owed by a business to suppliers (e. g. for raw materials). Accounts payable are classed as current liabilities on the balance sheet, but distinguished from accruals and other non trade creditors (such as HM Revenue and …   Big dictionary of business and management

  • accounts payable — *Short term, invoiced liabilities owed for the supply of goods or services. Accounts payable balances are classified as a *current liability in the *balance sheet. Further reading: Banks (2001) …   Auditor's dictionary

  • accounts payable — mokėtinos sumos statusas T sritis Gynyba apibrėžtis Sumos, kurios turi būti sumokėtos kreditoriams. atitikmenys: angl. accounts payable šaltinis NATO mokymų ir pratybų finansavimo terminų žodynas AAP 43(1), 2009 …   Lithuanian dictionary (lietuvių žodynas)

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”