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:
In the normal course of business, customers are likely to return orders from time to time due to various reasons and business should design processes the manage and accept such returns. A well designed returns management process can reduce costs and issues associated with returns or exchanges.
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.
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.
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.
Payables are often categorized as “Trade Payables” & “Expense Payables”. “Trade Payables” are the monies due for the purchase of physical goods that are recorded in Inventory. “Expense Payables” are the monies due for the purchase of goods or services that are expensed.
One of the warehousing best practices that retailers like Walmart, Amazon, and Target have adopted is known as cross-docking. During this process the inbound products are unloaded at a distribution center and then sorted by destination, and eventually reloaded onto outbound trucks. In real parlance, the goods are not at all warehoused but just moved across the dock (hence the name).
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.
Warehouses may seem like a simple, straightforward concept, but they actually include a variety of different types of warehouses that all have their own niche. The type of warehousing that’s right for you depends on your specific industry, location, and needs. From private warehousing, distribution centers, and climate-controlled warehouses, there’s an option to suit every business.
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.
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.
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