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Businesses and companies have vendors that they buy raw materials or services from. The money that is to be paid for these purchases are accounts payable. They should be paid for accurately and in a timely manner. In companies that manufacture products from raw materials, the number of purchases and bills that are to be paid is huge. Good management and settlement of these accounts payable becomes an important process in the company.
Accounts payable is the term used to refer to the money that the company is liable to pay to their suppliers or vendors. In companies that make a large number of purchases of raw materials and services, accounts payable needs a lot of attention and care.
Accounts payable bills should be paid in a timely manner and with due attention to the amounts due. Good management of accounts payable and timely settlements keeps the suppliers and vendors happy. Accounts payable or AP is classified as a liability on the balance sheet of the company. In double entry bookkeeping the amounts that are payable are credits in the accounts payable ledger and debits in the expense accounts.
The process of accounts payable is usually as follows:
When the accounts payable process is quick and efficient, the business pays all of its dues accurately and on time. This helps maintain a good relationship with the vendors and suppliers. It also ensures that the raw materials and services that are required for the company are obtained and supplied without delays and problems.
Accounts payable software maintains the entire process of accounts payable digitally. Accounts payable software makes it easier to create, track and pay for purchase orders of the company. It records the end-to-end data and allows access to different steps in the accounts payable process to different people in the company. Unlike a manual process, accounts payable automation software ensures accuracy and speed in the process. It also allows for the accounts managers to monitor the process unobtrusively and in real time.
Accounts payable automation software is usually a part of a business management software. This allows the seamless integration and updation of all the relevant books of accounts. A complete business management software such as TallyPrime allows the business to use a single platform for invoicing, accounts payable, procurement and inventory management.
Automation of the accounts payable process by using accounts payable automation software offers a host of benefits:
The accounts payable process involves different people and departments in the company. The data is obtained and gathered by the people in charge of supplies and purchases. Accounts payable is processed by the accounting and finance team. They must study the data, verify and match it with the right order and issue payments correctly and in time. This process is also audited regularly to ensure that payments are being made on time and that there is accuracy.
When you use accounts payable software the monitoring and auditing process does not intrude on the operation of the process. It is also unobtrusive as the monitoring is through the software and not visible. Accounts payable automation software such as TallyPrime also ensures that each designation has access to selective parts of the process on a need to use basis.
Accounts payables report By Tally
Accounts payable software works best when it is integrated with a business management software. TallyPrime is one of the top business management software that fully integrates purchase management, inventory management, accounts payable, financial accounting and payroll into one seamless system. All transactions in the company update the relevant books of accounts and this makes accounting and auditing easy. It also enables business owners and management to get a complete picture of the financials of the company.
Digitising the accounting process also has the advantage of making the data easy to analyse. TallyPrime has a range of analytics and reports that help drive informed decision making at all levels of the company. The software also has enhanced security features that allows you to permit access to selected areas of the software for different users.
TallyPrime’s accounts payable system helps ensure that all the company’s dues are tracked and recorded properly. TallyPrime improves the productivity of manpower who would otherwise be manually processing accounts payable. It also improves transparency and speed in the accounts payable approval process.
The layout and interface of TallyPrime is intuitive and easy to use. It is a smart alternative to cumbersome and dated accounts payable and financial accounting systems. By standardising and integrating all the finance modules of a business, it improves data analysis, reporting and decisions making.
Age-wise bills payable report in TallyPrime
Accounts payable can be easily overlooked as a minor process that happens in the company. But, it is actually vital to the entire manufacturing process. Efficient, timely and accurate payments strengthen the company’s relationships with their suppliers and vendors. If the accounts payable team drops the ball and overlooks a payment it could lead to legal consequences as well as lack of materials for the manufacturing and sales process . Depending on how critical the supplier is to the company, non-payment could potentially derail the entire manufacturing process and sales process.
So, it is vital that the accounts payable process and the people involved set goals to improve their efficiency and performance. This is easily achieved through the use of accounts payable automation software.
The goals of the accounts payable team could include:
Late payments spoil the reputation of the company. They also sour the relationship with vendors and the company loses its bargaining or price negotiating advantage with the supplier. Late payments may also attract fees and penalties that add to the production cost and eat into the profit margins. The fees incurred for late payments could grow over time and make a significant impact on profits especially when the profit margins are thin.
Manage cash flow and budgeting
Accounts payable teams have the best info on determining the patterns of expenditure in the company. Income and expenses in most companies rise and fall at certain times of the year in response to demand and other factors. The reports on patterns of accounts payable are very important when charting out the company’s budget and to manage the cash flow efficiently.
There may be cost savings or lower rates for timely or early payments. Streamlining the accounts payable process puts the purchase department in a better position to negotiate better prices and offers from their vendors.
It is easy to automate your entire accounting process with an intuitive business management software such as TallyPrime. It is easy to use and scalable to both small and large businesses. Business management software is an essential tool to smart business management and decision making. The business climate favours companies that are quick and agile to adapt and make changes. Automation improves the productivity and efficiency of all the personnel and speeds up decision making across all levels of management.