What Does Accounts Payable Do?

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Accounts payable is an area of responsibility that is usually found in every business organization and it has the following functions:

Accounts payable also known as AP plays an important role in the financial management of any business. This department is all about handling all the payments, which a company needs to make to its suppliers, vendors, contractors, and other parties that the business owes money to. Now, let us discuss the main duties of an accounts payable division in detail.

Processing Invoices

Accounts payable function primarily to manage and pay all the invoices from suppliers and vendors. These are usually in electronic format or hard copy and the details are entered into the accounting system and compared with the purchase order for the goods/services, quantities, prices, and other details on the invoice to ensure that the correct details are captured. The invoices are also scrutinized to make sure that any credits, returns, or other charges that are in dispute are recorded. Once these payments have been validated, they are authorized and can be processed at the set date.

Managing Payments

One critical accounts payable process is payment management or consolidation, where payments are made to suppliers and vendors. The AP specialists call the terms agreed with the vendors, then verify any discounts that are available in the early-pay and then they are supposed to pay on or before the set due dates by using checks, electronic transfers, company credit cards, etc. It is paramount to calculate the correct amounts of the invoice and make payments promptly and in the right manner as this determines the nature of the vendor relations. This also improves the consumption of cash as well.

Maintaining Records

The accounts payable are records that indicate the amount of credit that a business has extended to its suppliers and at what date. Every supplier invoice, payment voucher, credit note, accounting statement, and other relevant documents that are used in preparing the accounts must be filed and stored properly in a way that they can be easily retrieved in the future. These records also assist in reconciling the accounts on a more frequent basis.

Weekend Reconciliations

Most accounting departments of businesses do their reconciliation during the weekends, based on whether they have paid for goods and services, and what the trade creditors say they are owed according to their accounting information system. The control also helps to identify any gaps that may have arisen from missing invoices or a duplicate payment among others for correction at the right time.

Expediting Payments

Buyers usually deal with accounts payable whenever they need to request faster payment to acquire goods or materials from trusted or exclusive sources, for projects with strict time requirements, or to avail of discounts for early payment. The AP team then ensures that the related invoices are paid first to give the AP team a signal to process them first.

Vendor Management

Vendor relations are one of the main duties of the accounts payable since they involve dealing with many vendors. This involves identifying appropriate providers, establishing affordable transaction terms and conditions, managing objections and payment backlog, and assessing performance to consider cost-saving measures among others. The majority of the vendors will have to be given regular or more frequent orders to counter the effects of the implementation of the improved efficiency hence cutting down on the operation costs.

Financial Reporting

This is crucial since accounts payable has the relevant details required in preparing different financial statements as well as compliance reports. Together with the finance and accounting departments, they provide information on payables – the amounts due, payments made, accounts payable, credit received and offered, rebates missed/redeemed, and supporting documents.

Typically, accounts payable involve important back-end tasks that might otherwise not be considered to be value-added, such as paying a bill. However, the degree to which an AP department provides these supply chain finance and risk management services determines how effectively a firm can generate revenues, manage costs, and stay out of legal trouble. That is why accounts payable maintains all the payment processes with the usage of best practices, containing reasonable checks and balances.

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