Process of Accounts Payable (AP)
The accounts payable process or function is immensely important since it involves nearly all of a company’s payments outside of payroll. The accounts payable process might be carried out by an accounts payable department in a large corporation, by a small staff in a medium-sized company, or by a bookkeeper or perhaps the owner in a small business.
Regardless of the company’s size, the mission of accounts payable is to pay only the company’s bills and invoices that are legitimate and accurate. This means that before a vendor’s invoice is entered into the accounting records and scheduled for payment, the invoice must reflect:
- what the company had ordered
- what the company has received
- the proper unit costs, calculations, totals, terms, etc
What is the Accounts Payable Process?
The accounts department will have a set of procedures to follow before making a payment. Set guidelines are essential because of the value and volume of transactions during any period of time.
The process involves:
- Receiving the bill: If the goods were purchased, the invoice helps to trace the quantity of what was received. The validity of the bill can be known during this time too
- Review bill details: Ensure that the bill includes vendor name, authorization, date and matching requirements to the purchase order
- Updating records: Ledger accounts need to be updated based on the received bills and expense entry is usually required.
- Making timely payment: All payments should be processed before or at their due date of the bill, as agreed upon between a vendor and a purchaser. Required documents need to be prepared and verified. Details entered on the cheque, vendor bank account details, payment vouchers, the original bill and purchase order need to be scrutinized. A managerial authorization might be required at this point
The process at ProConnect warehouses is no different but it is well managed
From Warehouse End – The following process is for small and/or regular monthly vendors:
- New Vendor to be enrolled with Supplier Enrollment Form
- Vendor code creation in RAMCO systems (after obtaining KYC details from Vendor)
- KYC Details – are
- Filled Supplier Enrollment Form
- Vendor PAN card
- Vendor GST Certificate copy
- Cancelled Cheque leaf
- Creating PO for expenses by Warehouse in-charge
- PO Approval will be flown as per the Matrix set-up in RAMCO
- Upon PO Approval, GRN will be prepared by Warehouse in-charge and Freeze the movement for further accounting
- Receipt of Vendor Invoices along with PO & GRN number written on the voucher
- Marking the date of receipt on top of Voucher by the Regional Accountant
- Checking the Nature of Expenses raised by Warehouse in-charge
- Checking the Vendor Status with respect to GST Compliance
- Submission of Vendor invoices to GST team to know on the filing status of GST Invoice received from Vendor
- GST Team will confirm the above and put the seal on the reverse side of the invoice (GST Filed)
- Converting the PO & GRN raised, to SOBI (Supplier Order Base Invoice)
- Authorisation of SOBI by Regional Supervisor (to whom the Regional Accountant reports)
- Pay Batch will be created for the Vendor Invoices
- The Supervisor checks the bank details and generates a file for bank upload
- Payments and vouchers are kept for Senior Manager approval
- Upon approval, payment will be authorized on the bank portal by the signatories.
The following process is for Freight Vendors:
- The vendor will submit the invoices to Warehouse
- The warehouse will check and send the vendor invoices to HO along with the soft copy details for accounting at HO
- Upon receipt of invoices, the following will be checked
- GST Compliance
- GST Filed status for the invoices received at HO
- Vendor NDC status has the following process
- The soft copy details will be checked along with provision details
- Any clarification required during the process on the soft copy, the regional accountant will be initiating the mail to the warehouse for getting the details/clarity
- Upon confirmation from Warehouse team, Regional accountant will book the invoices in RAMCO
- Any debits to be charged on supplier invoice will be adjusted and the balance amount will be processed
- A processed invoice will be kept for regional supervisor authorization
- The authorized invoices will be further processed for payment in RAMCO
- Pay Batch will be created for the Vendor Invoices
- The Supervisor check the bank details and generate a file for bank upload
- Payments and vouchers are kept for Senior Manager approval
- Upon approval, payment will be authorized in the bank portal by the signatories
– Vijay Chandrasekaran