Accounts Payable

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Accounts Payable System

The three main functions of the Accounts Payable System (A/P) are purchases invoice accrual, cash disbursements with check writing, and management reporting.

As invoices from vendors arrive, they are accrued into the system. The operator enters three dates for each invoice that have separate functions. The first is the vendor's invoice date, which is usually found printed somewhere on the invoice. If the vendor master record has terms specified (i.e., net 10 days), the program calculates the next date, which is the pay date. The pay date designates when you want to pay the invoice. In the case of terms that allow discounts, the program also calculates the discount amount that can be taken. The final date is the date you desire to use for posting into the ledger files. The posting date defines which accounting period you incur the expense. Since the posting date is usually the same as the invoice date, the program defaults the posting date to the invoice date already entered, and allows the operator to accept or overwrite it. By specifying the pay date, you can manage cash flow almost effortlessly (notice we did not say painlessly!). Time-saving features of the A/P System includes the ability to look up a vendor number by name and interface to the Purchase Order System which automatically verifies quantity received and cost information. In addition, the A/P System handles recurring expenses such as office rent. Recurring expenses are initially entered into a file that gets posted periodically, usually once per month or accounting period. Vendor invoices are posted to the A/P Open Item File, which is used to calculate cash disbursements and other information for reporting purposes.

Selecting bills to be paid is done either manually by you or by data queried automatically through the Cash Requirements Report program. The Cash Requirements Report ages unpaid invoices into dated columns reflecting past due, currently due, due next pay cycle, and future due. The totals of these columns show the cash required to pay bills now and in the future. If you choose to have the Cash Requirements Report query by due date, it produces check images for each vendor that has at least one invoice showing in the past due or currently due columns. You can then make changes or additions to these check images through the Cash Disbursement Entry program. If no changes are necessary, the checks are ready to be printed and posted. The entire check cycle can be performed in a few minutes by only one person from beginning to end. If you choose to select bills manually, the Cash Disbursement Entry program allows you to select each vendor and invoice to be paid without regard to its "due status". Prepayments are also accommodated by this program. When the checks are posted, the invoice records in the A/P Ledger Card File are updated with the check number that paid them. This saves countless hours in research time when a vendor requires an explanation of when an invoice was actually paid.

The reports available for management in the A/P System include the Cash Requirements Report as discussed above, which enables critical cash management and allows you to get the most interest on available funds. Also the A/P Ledger Card Report serves two purposes. It provides the balance of the control account in the general ledger for a given period when run in summary mode. It also provides a tool for tracing problems with a particular vendor when run in detail.