A Beginner’s Guide: How to Align Accounts Payable Process?

• Reading Time: 4 Minutes
• Published: November 17, 2021
• Last Updated: February 14, 2025

Depending on the size, structure, activities, and the nature of the business, every organization needs an effective monitoring of its finances. Whenever it is the concern of the accounting department, error in the recording is possible, especially in the case of accounts payable and accounts receivables. Paying your creditors on time and receiving payments from debtors is crucial for effectively managing a company’s finances. But, when it comes to aligning the accounts payable process, many enterprising personalities do not know its unerring process. So, to share insights on the topic, we are here with a beginner’s guide on how to align the accounts payable process.

In this article, you will learn about the alignment of the accounts payable process and why it is crucial for your business.

What is Accounts Payable?

Accounts payable is a liability for your business. Businesses have to purchase goods or services from their suppliers, and it is inevitable for a business to purchase the same on credit at one point or another. The payment is made within the agreed upon period, typically less than 90 days. The amount you have to pay to your suppliers or credits forms the account – Accounts Payable. It is a column in a ledger representing a company’s obligation to pay off a short-term debt to its creditors or suppliers.

What is The Need for Aligning The Accounts Payable Process?

Alignment of accounts payable is crucial for the overall effective functioning of a business. But, the three main reasons are-

1. Spend analytics

The foremost benefit of aligning the accounts payable process is that it gives the accurate spend analytics of the company. It is impossible to remember every spending detail in the human mind when dealing with numerous vendors that sometimes result in monetary errors. Aligning the accounts payable process provides you with a complete record of your monthly expenses, and you can keep an eye on unnecessary expenditures and reduce them. It will help you to avoid faulty and double payments.

 2. Act as a safeguard against all accounting frauds

As already mentioned, a company’s accounting book is a composition of various transactions. And, sometimes, it is possible to make double or mistaken payments to any vendor. But keeping accounts payable will give you an edge on all odds and act as a safeguard against all accounting frauds.

3. Vendor relationship management

For the smooth flow of the business activities, it is necessary to maintain good relations with your vendors. And, luckily, aligning the accounts payable process helps you with it. By keeping the records of all sales and purchases on credits, you can make timely payments that will help you win your vendors’ trust. Hence, they can trust you for more oversized credit orders in future.

Essential Documents in the Accounts Payable Process

The accounts payable process includes three primary documents-

1. Purchase orders

A purchase order is a document of goods/services which a company wants to buy. It includes agreed-upon prices, the quantity of the goods, details of the products and other essential factors.

2. Vendor invoices

The vendor invoice is the invoice you received with the final delivery of your order. It includes the quantity delivered, the price of the goods and services, taxes and other necessary information. It helps you to pay your vendor on time.

3. Receiving reports

Receiving report is the document that includes the details of the quantity received, any needed details about the goods and any notes of the shipment and issues with the shipment.

Process of Aligning Accounts Payable

A simple workflow of the accounts payable process consist of the following six steps-

1. Prepare a purchase order document.

The first step of the successful accounts payable alignment process is preparing a purchase order document stating all the required details such as agreed-upon prices, quantity, and details of the products.

2. Receive the bill/invoice from the vendor

The second step is to receive the appropriate invoice from the vendor mentioning the delivered quantity, price of the goods, and product details.

3. Verify the data on the invoice

This step shows the importance of verifying the received quantity with its invoice. You should adequately examine all the items carefully.

4. Update the record of invoices

Now, after careful examination of your order, it’s time to record invoice details into your books of the ledger. This step is considered crucial for future references.

5. Make payment within the due date

Now, the fifth step shows the importance of making the payment within the due date. Making timely payments is considered necessary for the successful alignment of the accounts payable process because it helps in the effective management of vendor relationships.

6. Closing of the ledger account for the transaction

Last but not least, a successful account payable process demands a proper closing of the ledger account for the transaction to avoid any confusion and misrepresentation of data in the future.

Key Takeaways-

• Accounts payable refers to the statement that shows the record of the company’s purchases on credit from its creditors or suppliers.
• Accounts receivables show the record of the company’s sales on credit to its debtors.
• Aligning the accounts payable process helps in effective vendor relationship management and report of spend analytics of the company. It also acts as a safeguard against all accounting frauds.
• The accounts payable process includes three primary documents, i.e., purchase orders, receiving reports and vendor invoices.
• The accounts payable process consist of six main steps.

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