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:
Business Case of Multiple Warehouses
Adding extra warehouses to business provides many benefits such as reducing shipping costs, increasing storage capacity, and having warehouses for specific purposes to simplify overall warehouse management. Multiple warehouses allow you to organize your inventory in a way that helps your business be more effective.
We need a strong payables process so that it provides us with a high-productivity accounting solution to process vendor payments. An integrated payables process provides strong financial control so you can prevent duplicate payments, pay for only the goods and services you order and receive, and maximize supplier discounts. Understand the key features of an effective accounts payable system.
Miscellaneous Warehouse Processes
At the end of each inventory control, the Contractor provides the Ordering Person with an inventory report which contains a list of all stock adjustments. The Ordering Person uses the report to create, by use of his/her own means, necessary value and accounting adjustments related to the stock. Let us look at some to the mislaneous warehouse processes not covered earlier.
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.
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.
Before shipping, businesses need to make sure that the items will arrive in good condition. Packaging is a form of protection against environmental threats that the product will face from the time it leaves warehouse facility until the time it reached the customer. The packaging is intended to provide protection for the item as it is being handled in the warehouse or when the item is being shipped.
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.
Warehouses can be places where piles of packed or loose products occupy space. If left disorganized, it will become very challenging to identify products for packing or picking. Hence, proper organization of warehouse is very important. Warehouse labeling systems eliminate this problem by making sure products are easily identified and managed during the warehousing and shipping process. Labeling is the most functional and cost-effective way to keep your warehouse organized and operating efficiently.
After products have been received and passed a quality inspection, they need to be stored so that you can find them when you need them. This process is called putaway. The spot where you store a particular product is called a location. One section of a warehouse might have small locations for light items; another area may have large locations on the floor for heavy items.
Companies and businesses have huge transactions pertaining to their accounts payable process. They receive goods and services from various suppliers and they need to manage timely payments to these creditors to avoid default and adhere to the payment terms.
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