Simplify Invoice and Payment Processing

Accounts payable or procure to pay refers to an account within the general ledger that represents a company’s obligation to pay off a short-term debt to its creditors or suppliers/vendors.

From an accounting standpoint, the procure to pay process is considered a form of cash, since they represent funds being borrowed from suppliers/vendors. When procure to pay invoices are paid, this is obviously considered a use of cash. Given these cash flow considerations, suppliers/vendors tend to push for shorter payment terms, while creditors/customers want to lengthen the payment terms. When a business is short on cash, management frequently mandates that the payment of procure to pay be delayed, since this essentially represents a no-interest loan from their suppliers/vendors.

Within an accounting system, when a purchasing company approves an invoice, they will record the total amount of the invoice in the general ledger as a credit to the procure to pay account, with an equivalent debit in the appropriate expense account. Once payment has been issued for the invoice, the total amount will be debited from the procure to pay process, with a credit made to cash.

Yes, the AP cycle is also referred to as the Procure to Pay (P2P) cycle. The P2P cycle encompasses the process which take place when a company purchases, receives, and pays for goods and services. The activities that make up the procure-to-pay process range from identifying the initial need for procurement of goods or services, to the final steps of approving invoices and paying suppliers/vendors. The process of the P2P cycle includes:
Need Identification
Identifying the need for specific goods and services and chalking out a budget for the same.

Sourcing Goods
This may include researching vendors, looking up products and negotiating prices. Companies may source products from an approved catalog, or by issuing a request for quotation (RFQ) inviting vendors to outline details of the products or services they can provide and the cost of the same.

Requisition
When a vendor has been selected, the buyer canformalize approval for the purchase by moving into the requisitioning stage. This is done by creating and approving a requisition order, which is an internal document used when a purchase needs to be made.

Issuing Purchase Orders
A purchase order (PO) is a document issued by a buyer when placing an order, which will include details such as the type, price, and quantity of the products or services being purchased. This will be sent to the supplier. It is important to note that not every organization will create requisition orders and PO’s as part of their AP process.

Receiving Orders
This includes receiving goods, or services, from the supplier, checking them against the details outlined in the purchase order, identifying any damage that may have occurred during shipment, preparing a receipt, and entering receiving details into the relevant systems.

Receiving Supplier Invoices
After the good or services have been delivered, the supplier will provide an invoice outlining the amount the buyer needs to pay and the date by which the invoice needs to be settled. For organizations that create PO’s, invoices will need to be reconciled with the purchase order(s) and entered into relevant systems. Ideally, if invoices can be received electronically, they can/should be directly integrated into relevant systems for processing.

Supplier Invoice Payment
The next step of the accounts payable process includes paying supplier invoices within the agreed payment terms and accounting for the transactions in the organization’s general ledger system. As part of this process, the purchasing company will need to check that vendor details are up to date in their systems, as well as taking steps to avoid the risk of accounts payable fraud.

AP Reporting and Process Review
After the supplier has been paid, the organizationmay review various reports about their total outstanding AP, payment discounts availed and other key AP metrics to be tracked on an ongoing basis. Additionally, the organization should regularly review their AP process to identify any opportunities for improvement in the future to ensure attainment of organizational goals as related to AP metrics.

AP outsourcing is the practice of using a third-party vendor to manage invoices or bill related processes. The list of services varies but the vendor will generally perform functions such as invoice capture, purchase order (PO) matching, data processing, payments, archiving records, and reporting.
The benefits of outsourcing the AP cycle include:
1. Increasing the efficiency and timeliness of invoice processing and payments
2. Actively screening for duplicate payments to avoid double payments
3. Streamlining process to reduce errors and fraud whilecomplying with global regulatory rules
4. Shifting focusof in-house employees from transactional to higher-level tasks
5. Providing the organizationwith automation technology to support enhancedAP process tracking and cost savings

Quatrro’s P2P services ensure companies are able to efficiently optimize their working capital. Consequently, business processes are streamlined and smart cash management ensured.
Quatrro’s primary areas of focus in this respect include:
1. Mailroom Services
2. Purchase Order Matching
3. Invoice Processing and Disbursements
4. Approval Workflow and Portal
5. Vendor Management
6. Electronic Invoice Integration
7. Statement Research
8. Utility Tracking
9. Positive Pay
10. 1099 Reporting
11. W9 Tracking
12. Tax and License Processing
13. AP Aging Reports