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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

Accounts Payable Outsourcing Services

Account payable is basically the money that a business or a company owes to its suppliers that features as a liability in the balance sheet of the company. It is a type of credit that the supplier offers the company against goods or services that have already been sent to the company and received by it.

There are two types of payables – one is the Trade Payable which is payable against purchase of physical goods that enter the inventory and the other is the Expense payable which is payable for purchase of goods and services that are expensed like advertising, travel, office supplies, utility bills etc. Businesses need to maintain a log of this liability account and generally use accounting softwareto keep a track of invoices that are pending payments and invoices that are paid. 

Why is it important to manage Accounts Payable optimally?

·         The first reason is that it helps set a strong long-term relationship with suppliers.

·         Optimizes working capital

·         Enables an organisation to develop cash saving initiatives and sustain it.

·         Helps the organisation comply with regulatory policies

·         Overall, helps the organisation maximize profits and work in a congenial atmosphere

In view of the above benefits, there is trend with more and more organizations going in for outsourcing their Accounts Payable system where the outside agency helps the organisation streamline their finances and accounting processes to achieve set business goals in the most efficient manner. 

Why outsource Accounts Payable?

All business entities that consider Account Payable Outsourcing to a third party vendor should first weigh the advantages and disadvantages of doing so.

Advantages of outsourcing Accounts Payable:

a.    The first and the most important reason to consider this option is the level of efficiency that comes with an experienced and well-trained outsourced agency. The agency has not only got the knowledge and required information of the industry; it will also have access to the latest technology and processes in the field. The work will not only get done accurately, it will also get done fast because that is the core service area of the agency.

b.    Evenwith off-site Accounts Payable system of the outsourced agency, the business will be able to track in real-time the accounts payable information. Hence even when no permanent employee of the business is involved in operating the system, the business owner is always informed of the current status of Accounts Payable of his business.

c.    Another important pro of hiring an outsourced agency or Accounts Payable expert is the reduced costs in doing so. While maintaining an in-house accounts payable system implies hiring an appropriately trained staff along with expenditure on the required software and hardware and training; outsourcing implies that all the above part is handled by the agency. Overall, the expenses incurred in going in for the first option is way high compared to the second option.

d.   The advantage of working with an experienced and professional outsourced firm means that the chances of error are minimal. The outsourced firm will also offer customizable services to its client so that the accounts payable system is aligned perfectly to the business goals and strategies.

e.    The business owner can concentrate and focus on the core competency of his business without having to bother about physical invoices, tracking pending payments and managing it all.

f.     Lastly one important derivative of outsourcing Accounts Payable is that the outsourced partner will work hand-in-hand with the business to make it stronger. Hence they would advise on ways and methods to improve, suggest areas of improvement and keep the owner updated on the latest technology available in the market, benefits of the same etc. A professional outsourced agency will ensure that it works with complete transparency and practices utmost flexibility when handling their business clients.

In the same breath, there are people who might argue about the cons of hiring an outsourced agency. One of the biggest arguments would be that there are chances of data mix-up between different clients. It is important to mention here that there are modern methods and technology to ensure complete data security and confidentiality so that there is zero risk of data of one company being shared with another.