Accounts Reconciliation Blog

A flowchart is a diagram or representation of a process presented in the form of boxes. The relationships among data represented by a box are shown by directional arrows. A flowchart is a way of simplifying complicated processes. They are useful in analyzing, designing or managing a process. It can be applied to almost anything including the different aspects of accounting.

An accounts payable flowchart will demonstrate the process flow of the accounts payable process from start to finish. It is a visual way of displaying the sequence of accounts payable activities.
Here’s a sample of a typical accounts payable flowchart:

1. Purchase order to the vendor
2. Receipt of bill
3. Bill recorded to accounts payable
4. Alphabetical filing of bills
5. Payment of bills
6. Issuance of check/ check cutting
7. Staple check stub to the bill
8. File bill with check stub in the paid bills file

I once worked for a medium sized company that was managed a coffee shop chain. There were only very few employees. There was the marketing division composed of three people, the sales people, the baristas and the finance people. Since our division was right beside the accounting department, I learned a few things about accounts payable payment terms. It was much more complicated than I thought.

I first thought that accounting was a simple procedure. We bought the beans, the napkins, the paper cups and the equipment and we paid them. It turns out that our company like most companies had accounts payable payment terms. The products and supplies were delivered and billed but payments were done much later. I asked the accountant why we couldn’t pay them as soon as they were delivered. She said the finance officer managed the flow of funds in the company, sometimes the company’s funds are made to earn a few interest first before it is used for payment.

If you work in a very close knit industry, gossip is rampant. The sellers or the suppliers all know each other because they often service or compete with each other to get the attention of the buyer. In the service or trade industry there are buyers and sellers. When a buyer becomes notorious when sellers complain that they are not paid or when they are paid late. These buyers are either unscrupulous or have lousy accounts payable procedures.

Every good business should employ proper accounts payable procedures. An accountant should always be present to mind the books. Once a service is used or a product is bought, the company can pay the supplier right away. This is the ideal scenario. In the simplest terms this is how accounts payable procedures should be done.

We all wish we can be wise when it comes to money. It will help a lot if you know about finance. Any growing company will need an accountant to handle their books. They will need someone who knows all about finances and book keeping. I took some accounting classes in college but I will definitely not be a reliable finance person. I even get confused and sometimes have to rethink what is full cycle accounts payable. 

So what is full cycle accounts payable? A full cycle accounts payable ends when the payment is done. The cycle begins when the company avails of a service or buys a product. The payment for these products and services had not been paid yet. The supplier gives the client or the company an invoice or a quotation for the product sold or the service rendered. That invoice is the basis for the payment. The company then issues the check payment and the supplier presents the company with an official receipt.

When studying finance, you need to understand how a ledger works. You will need this ledger when you study how to reconcile accounts payable. The first thing you need to do is to have a general ledger. You will also need a secondary ledger that will indicate the details of the entries in your general ledger. The accounts payable should be under one column and the details should be beside that column.

Figuring out how to reconcile accounts payable is relatively easy. If the details of the secondary ledger match the entries in the general ledger then the jobs is done. If the entries don’t match then adjustments will have to be made. The details have to be double checked and adjusting entries could be made. When the final amount on both columns matches then the accounts payable is deemed reconciled.

Being a student of business, there are several subjects I have to take. I had to study marketing, finance and accounting. I even had to study a bit of legal management. The most difficult subjects for me were the accounting subjects. The first subject involved basic journal entries. The accounts payable and accounts receivable were what we had to master the first semester.

The accounts payable column covers all products or services which the company had availed of but had not yet been paid for. Payments to suppliers, payments for products and raw materials fall under accounts payable. Rent, overhead cost, fees and other expenses also fall under accounts payable. I have to take a total of four accounting subjects and two finance subjects. I am sure that this knowledge will help me someday when I open my own business.

Good management of accounts payable contributes positively to cash flow. It also encourages mutually beneficial relationships with suppliers or vendors. Accounts payable best practices can have a significant difference when you get to minimize late payment costs. These include late-payment penalties, interest charges, and lost prompt-payment discounts.

Actions done to accounts payable have a great impact on the trust between a company and its creditors. Whenever a company honors agreed-upon payment terms and pays its bills on time, it helps strengthen the business relationship. A company that has a streamlined accounts payable operation also saves money through the efficient processing of invoices with a minimum of staff and low cost of materials.

Vouchers are accounting documents that represent intent to make payments to external entities such as service providers and vendors. An accounts payable voucher is usually produced after receiving a creditor invoice and the invoice has been successfully matched to a purchase order. The voucher has to contain detailed information regarding the payee, the monetary amount of the payment, a description of the transaction, etc.

In accounts payable systems, there is a process called “payment run”. This is executed to generate payments that correspond to unpaid vouchers. The payments can be released or held at the discretion of an accounts payable supervisor or the company controller.

Ensure that things are done properly as soon as you get your new business rolling. Establish policies and procedures clearly and make sure they are followed diligently. When it comes to finances, you will need to create an accounts receivable and accounts payable flowchart. This will make it easy for your employees to follow your policies.

A flowchart furthers helps managers and subordinates to review their workflow. Remember that an accounts receivable and account payable flowchart will begin with organizing the company’s payables which have to end with payments. Begin by identifying your sales and receivables as well as the deposits of received payments.

Running a company means having the need to report your finances regularly. You will need this to establish how much in taxes your business needs to pay. Big companies with several satellite offices will need more than an accounting department. You need an audit department too.

The audit department is the one to check on inventory and accounts payable. Your auditors must be able to submit weekly or monthly audit report introduction accounts payable. Audit reports can be prepared several ways. But the main purpose remains that these should immediately highlight all your payables.