![]() Splitting your invoice payments not only makes it harder to get a handle on how much your company is paying each month, but also opens you to the risk of fraud. One thing you really want to avoid is paying invoices on an ad hoc basis, or with multiple accounts or credit cards. If all company payments come from a single account, it’s a lot easier to get a clear overview of the money heading out the door. When processing supplier invoices, it’s crucial to centralise payments. (Be sure to read our post on the four biggest fraud risks finance teams face, and what you can do to guard against them.)Īnother important step in your AP process flow? Using a centralized payment system. Having multiple people sign off on invoices makes it a lot harder to game the system. ![]() Even if everyone involved means well, small errors can creep in and be costly down the line.īecause of this, it’s crucial to break up responsibility for the separate steps. The sheer amount of money exiting a business through accounts payable makes it an attractive process for fraudsters to target.Īnd then there's always the risk of simple mistakes along the way. Unfortunately, accounts payable is one of the areas most prone to business fraud. As above, this involves checking through each of the details to ensure it matches the goods or services actually received. Receiving and processing the supplier invoice : Once an invoice is received, the business then processes it for payment. Receiving reports list a lot of crucial details, so it’s important to take the time to comb through them. Processing a receiving report: Here, the supplier records the goods or services provided and lists the payment owed to the supplier. A purchase order also lists any terms and conditions for the transaction, and the timelines for delivery. Key steps in the AP process flowįor most businesses, the accounts payable process boils down to three key steps:Ĭompleting a purchase order: This involves setting out the items or services to be purchased, as well as the price. Let’s break this down into a few key steps. Getting these details right will help ensure the accuracy and integrity of your accounts payable process. Has the company actually received the goods or services billed?Īre the unit costs and calculations correct? What about tax? Before you process a vendor's invoice for payment, remember to check the following:ĭoes the invoice reflect exactly what the company ordered? This might sound obvious, but it’s crucial. When it comes to accounts payable, the most important thing is to pay only company invoices that are legitimate and accurate. ![]() If you don’t have a system in place to help you manage these payments, you’re asking for trouble. The number of people relying on the prompt and accurate payment of invoices makes accounts payable a high-stakes task. This includes software providers, professional services such as accountants or HR advisors, and any freelancers you might have on the books. In the modern world, businesses have to pay a lot of creditors on a constant basis. Now we’ve got the definition stuff out of the way, let’s crack into some of the crucial considerations when managing accounts payable. people who haven’t yet paid for your goods or services. It’s helpful to think of accounts payable and accounts receivable as two sides of the same coin.Īccounts payable refers to the processing of payments owed to debtors by your business.Īccounts receivable, however, refers to the exact opposite - money owed to your business by debtors, i.e. Let’s take a second to cover a key distinction: accounts payable vs. Plus, it’s a respectful thing to do for your creditors. This makes it very important to manage effectively and responsibly, as doing so helps maintain confidence in your ability to pay your debts. Long-term debts - such as mortgages and other loans taking more than twelve months to pay off - are typically itemized as separate liabilities, and aren’t included in accounts payable.Īccounts payable is a liability for businesses. things you plan to pay off within the year - ideally well within the year. Usually, accounts payable refers to short-term debts, i.e. This can run the full spectrum of debts, from freelancers billing by the month through to car leasing agencies invoicing for your work fleet. Put simply, accounts payable consists of everything your business owes to creditors.
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