Paying bills isn’t very exciting, but it’s essential. They’re debts and need to be controlled closely – with one thought for your suppliers and another for your bank account. This process only pertains to purchases made on credit. This is the fundamental area through which a business records expenses and pays other parties.
You want to keep good terms with suppliers – if you’re delaying paying them, they may stop your credit or delay deliveries. It is also essential to think about cash flow. Your bank balance could come up short if you pay everyone at once. And that would take you with little cash to cover other expenses, unanticipated costs, or to fund business growth.
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Bills from vendors are recorded as payable bills. The goods and services received are verified against bills received from the vendor. After the verification process, payment is scheduled according to the agreed vendor’s payment terms. The better cash flow depends on longer payment terms, but on the other hand, you can take advantage of early payment discounts. When payment is made, the relevant bills should be marked as paid. Remember your balance sheet? It is better to ensure that your accounts receivable is more than accounts payable.
Modern accounting software like QBO and Xero enables easy bill entry. You can enter bills into your accounting system by typing, scanning, or directly emailing them to your accounting software. There are also clever software apps that read and extract data from bills and automatically send it to your accounting software like bills.com, Hubdoc. The accounting software creates the entry, helps you schedule payments, and updates your ledger when the bill is paid.
1: Purchase order
Create and send purchase order to supplier.
2: The Supplier Confirmation
After negotiations and confirmation from supplier the order is placed.
3: Received goods/services
Goods or services received from supplier along with bills.
4: Date Entry
After verification, bills are entered in accounting system manually or automatically and sent for approval to relevant person.
5: Payment schedule
After approval of Bills, payment schedule is setup for approval and sent to relevant person before due date.
6: Payment sent
Payment sent to supplier according to due date. A confirmation email with payment receipt also sent to supplier.
The payment will be applied to the bills and matched with banking transaction in accounting system.
There are several tasks involved in the accounts payable, including the following:
Regularly reconcile the accounts payable account to confirm that the account balance equals the actual amounts payable to suppliers.Send 1099 forms to vendors at the end of the calendar year if total payments to each vendor exceed a threshold limit.Contact suppliers to confirm that they have cashed all checks. Otherwise, the uncashed checks may have to be sent to a state government as unclaimed property.
Accounts Payable Bookkeeping completed quickly, accurately, and efficiently.
Fast and Accurate Data Entry of bills Into Your accounting SystemMaintaining and Updating Records of ExpensesResolving Payment DiscrepanciesReviewing your open bills and send AP aging report
Ensuring Payments are Made on Time and according to Company PolicyResponding to Vendor emails and entering Invoices into the accounting systemProviding Regular and Accurate Reports
Your accounting records play a vital role in your decision-making process, hence the need for reliable AP bookkeeping. Knowing where your money goes can determine your budget allocations and stabilize your cash flow- paramount to any business, new or established.
More ways to stay on top of accounts payable
Go paperlessUse purchase ordersCreate accounts payable aging schedule
Put them into your calendarFocus on accounts payable turnover ratio