What is the Meaning of Account payable?
When a company purchases goods on credit and same needs to be paid in a short period of time, then it is known as Account payable. Account payable is a short-term debt payment which requires to be paid to avoid the default. Account payable Services can be considered as an obligation on part of Supplier or vendor for goods or services that were provided in advance payment. Account payable may also be referred to as trade payables. Account payable as a term is not limited to companies, even individual can get the benefit of account payable.
Before we discuss Account payable services, first of all, it is so important to know the meaning of Account payable.
Account payable is the amount owed by an entity to its vendors/suppliers for the goods and services received. Account payable refers to the account or a file which tracks the amount to be paid for services or products provided by the supplier.
In this blog, we will give you a brief elaboration on the topic of Account payable services. This blog includes
- What is the Meaning of Account payable?
- Why Account payable is so important for a company?
- Benefits of Account payable
- Account payable Process
- Let's explore the idea and knowledge of Accounts payable.
Why Account payable is so important for a company?
Account payable has a vital role in the smooth functioning process of a business entity/company. Why account payable is very important for a company discussed below.
1) Account payable takes charge of payment of an entity's bill on a timely basis.
2) Account payable ensures that no overdue charges, no late fee, and penalty require to be paid for the dues.
3) Account payable enables the business entities and companies to manage better cash flows.
4) If you are following the account payable process, then fraud and theft can be avoided to a large extent.
5) By following account payable process you will be ensured that all the invoices of the dues are tracked and paid properly. Account payable will help to avoid missing payments and making due payment twice.
Benefits of Account payable
Accounts payable enhances the image and credibility of a business entity or Organization. Apart from this, there are a number of benefits of account payable. List of the benefits of account payable is given below.
1) Reduction in Operating and Overhead Cost - Account payable offers the benefits of a huge reduction in operating and Overhead cost. If you are adopting an account payable process, then you will be free from spending amount towards hiring and training costs. By saving the operating costs, you can invest more money in your business.
2) Maintain supplier/vendor relationship - Account payable helps you in a matter of timely payment of your dues. By making timely payment, Account payable enables to maintain a strong and long term relationship between supplier and vendor.
3) Easy access to account report - If you are following the account payable process, then you can easily get access to annual, half-yearly, quarterly or monthly account reports. You can see a clear picture of your liabilities. Based on up to date accounts, you can able to make effective business decisions.
4) Improve cost inefficiencies - By reducing incidents of penalties on late payments also by reducing Operating and Overhead Business Cost, Account payable helps to improve your cost inefficiencies.
Account payable Process
Every business entity will have an account payable option. Account payable is set up based on the probable number of vendors and service providers. A small entity with less number of purchase transactions requires a basic account payable process. The account payable process involves:-
- Receiving the Bill - In the case of goods, the bill/invoice helps in tracing the number/quantity of goods received by the business entity. When the bill is received, it helps to know the validity time of the bill.
- Scrutinization of the bill - Name of the vendor, date, and requirements raised with the Vendor based on the bill and purchase order needs to be verified.
- Updating the records - Ledger accounts connected to the bills received need to be updated. When the bills are received then same have to be updated in the account record.
Conclusion
Account payable is a short-term debt payment which requires to be paid to avoid the default. It is distinct from notes payable liabilities.
If you are interested in the concept of Account payable, then kindly contact Enterslice which is an award-winning company in respect of providing Account payable service. You can learn more about Accounts Payable Services here:- https://enterslice.com
