Best Account Payable Software for Businesses

Wondering "What is account payable" and What are its benefits?

In this blog, we will share everything that you need to know about accounts payable.

Let's Jump in!

What is an account payable?

Account payable or AP is a term used in accounting that refers to the money that your company owes to third parties such as suppliers or creditors. This money is typically owed for goods or services that have been received but not yet paid for. When a company has an outstanding account payable, it means that it has not yet made payments on these invoices.

Outstanding accounts payable can create issues for a company, as creditors may start to demand payment or may refuse to extend further credit. This can put a strain on the company's cash flow and may lead to financial difficulties.

Companies need to keep on top of their account payable and make timely payments. This ensures that suppliers and creditors are happy and that the company does not experience any financial difficulties.

Most businesses have a separate AP department to process the bills/invoices received, as well as payments made to vendors. The AP department also handles in-house payments for business expenses, travel, and petty cash. Departments that have questions about the preparation of a payment request for submission to Account Payable, the payment status of the request, or other Account Payable-related questions are encouraged to contact AP personnel, who will be pleased to assist. Accounts Payable, sometimes abbreviated to A/P, is tracked monthly for many small businesses, but as a company grows, it is best to make it a weekly task to benefit from the discount of making payments earlier and resolving any backlogs from returning inventory.

Why Accounts Payable management is important?

Accounts payable management is necessary due to the following reasons:

• Poor Financial health: If you don't have clarity on how much money you owe to vendors and suppliers, it will become impossible for you to track your company's overall financial health which will make doing business challenging for you.

• No Penalty or late fees: AP management makes it easy for you to pay money that you owe to vendors or suppliers on time so that you can avoid late fees or penalties.

• Good Business Relationship with suppliers: Managing AP will help your company to make good business relationships with your suppliers and vendors. This will help your business run smoothly.

What Does the Accounts Payable Department Do?

The accounts payable department is in charge of providing financial and administrative support to the company: This team oversees the entire accounts payable process. This position entails the approval, payment, and reconciliation of vendor invoices.

The account payable department ensures that the payment process is as smooth as possible and that payments are made on legitimate and accurate bills and invoices.

With automation capabilities, AP teams can easily decide when to pay invoices (to avoid late fees or take advantage of early-pay discounts) and how to pay them (via paper check, ACH, or through virtual cards where you earn cash-back rebates). As a result, organizations gain greater control over their outgoing cash and can transform AP from a cost center to a profit center.

What is meant by account receivable?

Account receivable is a financial asset that represents the value of goods or services received by a company from its clients. This means that the company has to pay money to the client when payment for goods or services has been made.

Account receivable is usually recorded on a company's balance sheet as an asset and not as a liability because it represents the value of goods or services that have been provided to a client but have not yet been paid for by them.

The difference between an account receivable and an uncollected invoice is that an account receivable is an asset whereas an uncollected invoice is a liability.

What is account payable software?

 Account receivable software is a type of accounting software that helps businesses manage their accounts payable. This software can help you track your cash flow, manage your inventory, and perform other important tasks related to your business. But it's not just about tracking and analyzing financial data. Our account receivable software also provides you with real-time information on when customers owe you money, including the amount due and the amount they've paid. You can then use this information to make decisions based on customer behavior, such as when to send out invoices or when to send out regular statements.

What is the difference between accounts payable and receivable?

Account payable is a term used in accounting to refer to money that a company owes to its suppliers or creditors. This money is typically owed for goods or services that have been received but not yet paid for. When a company has an outstanding account payable, it means that it has not yet made payments on these invoices.

Outstanding accounts payable can create issues for a company, as creditors may start to demand payment or may refuse to extend further credit. This can put a strain on the company's cash flow and may lead to financial difficulties.

Companies need to keep on top of their account payable and make timely payments. This ensures that suppliers and creditors are happy and that the company does not experience any financial difficulties.

What Is the Accounts Payable Process?

The accounts payable process entails the following steps:

Receiving bill: This bill indicates the number of goods purchased, the amount owed to vendors and suppliers, and the number of days required to complete the bill.

Examine bill specifics: Make sure that the bill contains the vendor's name, authorization, date, and verified and matching requirements to the purchase order.

Update ledger accounts: Once the bill is received, the ledger accounts must be updated, and an expense entry is usually required. With the approval hierarchy linked to the bill value, managerial approval may be required at this stage.

Making timely payments: All payments should be made before or on the due date on a bill unless otherwise agreed upon between a vendor and a purchasing company. The necessary documents must be prepared and verified. The information entered on the cheque, the vendor's bank account information, payment vouchers, the original bill, and the purchase order must all be scrutinized. A managerial approval may also be required at this point.