Whenever the goods or services are purchased by the company from the supplier on credit which is to be made payment back in a short duration, then the accounting entry is known as Accounts Payable. It generally comes in the current liabilities section of the balance sheet.

Every company wants to make its accounts payable process very efficient. An inefficient accounts payable system in the company leads to various complications like late payments than the due date, missing the discounts, rewriting the financial transactions, and delay in the decision for management for investment. It helps to clear all the bills of an organization on a timely basis. A successful accounts payable process helps the management to handle the financial aspect properly. The businesses focus much on the reduction of the liabilities, making it difficult to increase the revenue of the business. A well-managed accounts payable process manages the financial cycle of the business effectively.  Accounts Payable is an important aspect of the accounting process of any business.

What is accounts payable process?

The structure of the accounts payable process flow is a little different for different organizations. It depends on the number of vendors and other service providers it is dealing with. However, a generalized process is surely followed by each of these organizations.

Here is the general accounts payable process which most of the organizations follows:

1. Bill receiving

The bills help to trace all the goods or services received by the business from different sources. The validation time of the bill plays an important role here which helps the organizations to take the bill payment decision faster.

2. Checking the bills

Proper verification of the bill is made for important details. Some of the general important details checked are the name of the vendor, authorization, date, and other details of the vendor.

3. Recording of the bills received

The records of the bill payment are made properly in the ledger accounts. All the expenses made here can be made in the proper books of accounts. A proper authority from the management is essential in giving the approval for the concern bill of the organization.

4. Making the payments on time

The payment is made for the mentioned vendor or service provider when the due dates arrive. Here, the proper documents are check and prepared in an organized way. All the details of the payment made like bank account details, original bill, cheque, agreement, and purchase order has to be checked properly. Generally, the signature of the authorized person is essential before taking the bill forward. After making the payments, a relevant entry is made in the books of accounts. Here, after making relevant payment, the amount payable will not be consider as a liability.

These are generalized processes followed in the accounts payable for the organization. There may be some alterations in the process for different organizations, depending upon their nature of work, still there process follows the above steps. Many businesses now outsource the account payable activities to an expert agency. A well-managed account payable contributes immensely in growing the profit of the company. for more information talk with our experts.