Understand the Accounts Payable process. Understand the AP cycle and the various tasks that need to be completed during AP transaction processing. Learn the key activities and setups that are done in any typical system during the AP processing.
Given below is the complete Accounts Payable Process:
1. Issue Purchase Order:
The AP Process starts with the issue of Purchase order to the Supplier. The purchase order specifies what you intend to buy, the make and the quality of the goods. In some cases it also specifies the agreed quantity and the price.
2. Receive Goods:
Based on the purchase order the supplier will ship a product. Till goods have been received by the customer, the ownership generally lies with the supplier. Once the goods are received at your go down, you become the owner of the goods.
3. Inspect Goods:
Most organizations have the internal control processes to inspect the goods to ensure the quantity and quality of the supplied material.
4. Enter Invoice:
Supplier issues an credit invoice, and collects payment later. This 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. Received invoice is accounted for in the books of the customer.
5. PO Match and Receipt Match:
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. The three-way match can slow down the payment process, so 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.
6. Release and Make Payment:
Once the matching is done and accounts payable department is satisfied to the accuracy and validity of purchase, the refer to the payments terms. Companies may have negotiated different payment terms with different suppliers. Payment is released based on the agreed payment terms and amount is issued to the supplier.
7. Bank Reconciliation:
Generally the payment is made through the bank. There is a slight delay between the date when the payment is released and when it reaches to the account of the supplier. The bank entry is reconciled to the original payment entry in the Payments Register to reconcile the both accounts and this completes the account payable process.
In the next video tutorial we will take you through the accounting entries in the payable process.
Given below are some other activities that happen during the AP processing cycle:
What is the difference between Warehouse Management & Inventory Management?
The terms “inventory management” and “warehouse management” are sometimes mistakenly used interchangeably as they both deal with operations and products of industries. Despite their few similarities, there are many notable differences between warehouse and inventory management systems.
When products arrive at a facility, there need to be a defined process to let them in. The process for accepting inventory when it arrives is called "Receiving". Any warehousing operation must be able to receive inventory or freight from trucks at loading docks and then stow them away in a storage location. Receiving often involves scheduling appointments for deliveries to occur, along with unloading the goods and performing a quality inspection.
Overview of Warehouse Processes
The basic function of a warehouse is to store goods. This means that they receive deliveries from suppliers, do any necessary checking and sorting, store the materials until it is dispatched to customers. Traditionally warehouses were seen as places for the long-term storage of goods. Now organizations want to optimize their customer experience and try to move materials quickly through the supply chain, so the role of warehousing has changed.
Types of Order Picking Methods in the Warehouse
There are many different types of picking in a warehouse and each one works as a customized solution for each business. Depending on the size of your warehouse and inventory, the manpower you have on hand, and the number of customer orders made each day, there may be certain methods that are more efficient for you than others.
This article discusses the key documents that gets generated during the import/export process. These documents may apply to both invoice to cash as well as order to cash cycles. Also learn the major custom docments for India.
At a high level, the essential elements in a warehouse are an arrival bay, a storage area, a departure bay, a material handling system and an information management system. As part of the process for enabling a warehouse layout, you must define warehouse zone groups, and zones, location types, and locations.
What is a Warehouse & why companies need them?
All organizations hold stocks. In virtually every supply chain, gaps exist between when something is produced and when a customer is ready to buy or receive it. Stocks occur at any point in the supply chain where the flow of materials is interrupted. This implies that products need to be stored during this period of gap.
Understand the Accounts Payable process. Understand the AP cycle and the various tasks that need to be completed during AP transaction processing. Learn the key activities and setups that are done in any typical system during the AP processing.
When a customer wants a product that has been stored in the warehouse, the same need to be picked off the shelf (or off the floor) and get it ready for shipping. Depending on how big is the warehouse, picking can take a while. (Many distribution centers cover more than 1 million square feet.). Hence, warehouse order picking methods are an important aspect within any warehouse.
Accounts Payable Journal Entry
Although in the large organizations the Procure to Pay Accounting process starts when the purchase order for supply of goods is released to the supplier. To keep things simple in the beginning we will discuss the core accounting entries related to the Accounts Payables process.
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