Account Receivable- It is the money that is owed to the company by customers for goods sold or services rendered on credit.
Account Payable- It basically means to pay the company’s bills and invoices that are legitimate and accurate, payroll is not considered in this.
If a company has account receivable in books it means there is credit sale which have not yet collected from the purchaser. Most of the companies operate by allowing some part of their sales to be on credit, offering their clients the ability to pay after receiving the service.
The accounts payable process or function is one of the most important process in company as it involves nearly all of a company’s payments outside of payroll so as to safeguard a company’s cash and other assets, the accounts payable process should have internal controls so that there are not payment issue like- Twice payment, excess/short payment etc.
Establishing Credit Practices: This is the basic step for which a process is required, Terms and conditions for credit sale should be set out, and interest rate after credit period should also be charged on Invoice
Invoicing Customers and Accounting: The longer company take times to bill a customer, more time he would take to clear that, a unique invoice should be prepared and send to each customer along with proper particulars. Invoice should be first accounted in books than it should be generated and send
Tracking Accounts Receivable: There is different process in each company for tracking account receivable, it would differ as per size of company and quantum of credit. Whatsoever is size, it should be tracked and reconciled with bank too
PO Report and Invoice Report: Purchase Order should be prepared for each expense apart from employee reimbursement, it should be done by Procurement Team. Also invoice report of invoices submitted by Vendor should be prepared before making any payment
Compare PO Report, Invoice Report and Invoice: Invoice should be checked properly, there are many compliances in an Invoice to look for, after approval of invoice, Invoice report and PO report to be look after before releasing payment and in case of any discrepancy it should be highlighted
Payment of Vendor: Payment of Vendor should be done after following above step and payment should be recorded in Vendor payment register
Establishing Credit Practices
Invoicing Customers & Accounting
Tracking Accounts Receivable
Payment of Vendor
Compare PO Report, Invoice Report & Invoice
PO Report and Invoice Report
Required Document would be communicated while finalization of scope of services.