Tips to Understand Accounts payable Maui Hawaii
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Phone: 808-244-5600
Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet (a form of debt), sometimes referred as trade payables. When an invoice is received, it is added to the file, and then removed when it is paid. Thus, the A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received.
In households, accounts payable are ordinarily bills from the electric company, telephone company, cable television or satellite dish service, newspaper subscription, and other such regular services. Householders usually track and pay on a monthly basis by hand using cheques or credit cards. In a business, there is usually a much broader range of services in the A/P file, and accountants or bookkeepers usually use accounting software to track the flow of money into this liability account when they receive invoices and out of it when they make payments. Increasingly, large firms are using specialized Accounts Payable automation solutions (commonly called ePayables) to automate the paper and manual elements of processing an organization's invoices.
Commonly, a supplier will ship a product, issue an invoice, and collect payment later, which describes a cash conversion cycle, a period of time during which the supplier has already paid for raw materials but hasn't been paid in return by the final customer.
When the invoice is received by the purchaser it is matched to the packing slip and purchase order, and if all is in order, the invoice is paid. This is referred to as the three-way match. [1]The three-way match can slow down the payment process, so the method may be modified. For example, three-way matching may be limited solely to large-value invoices, or the matching is automatically approved if the received quantity is within a certain percentage of the amount authorized in the purchase order.
Expense administration Maui Hawaii
Expense administration is usually closely related to accounts payable, and sometimes those functions are performed by the same employee. The expense administrator verifies employees' expense reports, confirming that receipts exist to support airline, ground transportation, meals and entertainment, telephone, hotel, and other expenses. This documentation is necessary for tax purposes and to prevent reimbursement of inappropriate or erroneous expenses. Airline expenses are, perhaps, the most prone to fraud because of the high cost of air travel and the confusing nature of airline-related documentation, which can consist of an array of reservations, receipts, and actual tickets.
Internal controls Maui Hawaii
A variety of checks against abuse are usually present to prevent embezzlement by accounts payable personnel. Segregation of duties is a common control. Nearly all companies have a junior employee process and print a cheque and a senior employee review and sign the cheque. Often, the accounting software will limit each employee to performing only the functions assigned to them, so that there is no way any one employee – even the controller – can singlehandedly make a payment.
Some companies also separate the functions of adding new vendors and entering vouchers. This makes it impossible for an employee to add himself as a vendor and then cut a cheque to himself without colluding with another employee. This file is referred to as the master vendor file. It is the repository of all significant information about the company's suppliers. It is the reference point for accounts payable when it comes to paying invoices.
In addition, most companies require a second signature on cheques whose amount exceeds a specified threshold.
Accounts payable personnel must watch for fraudulent invoices. In the absence of a purchase order system, the first line of defense is the approving manager. However, A/P staff should become familiar with a few common problems, such as "Yellow Pages" ripoffs in which fraudulent operators offer to place an advertisement. The walking-fingers logo has never been trademarked, and there are many different Yellow Pages-style directories, most of which have a small distribution. According to an article in the Winter 2000 American Payroll Association's Employer Practices, "Vendors may send documents that look like invoices but in small print they state "this is not a bill." These may be charges for directory listings or advertisements. Recently, some companies have begun sending what appears to be a rebate or refund check; in reality, it is a registration for services that is activated when the document is returned with a signature."
In accounts payable, a simple mistake can cause a large overpayment. A common example involves duplicate invoices. An invoice may be temporarily misplaced or still in the approval status when the vendors calls to inquire into its payment status. After the A/P staff member looks it up and finds it has not been paid, the vendor sends a duplicate invoice; meanwhile the original invoice shows up and gets paid. Then the duplicate invoice arrives and inadvertently gets paid as well, perhaps under a slightly different invoice number.
Statements as the method of paying Accounts Payable known as Creditors Maui Hawaii
The strongest defence that a Company can have (against the duplications of payments known as double payments , short payments and/or partial payments and also the prevention of errors and/or mistakes and/or incorrect captured and posted entries and/or fraud) is the practice of Reconciliations of the General Ledger Entries and/or the Accounts Payable Book against the Statement.
It is posssible to reconcile to the value in the Suppliers Book that will reflect in their Books as Accounts Receivable and/or Debtors by comparing it to the internal company Account Values in the internal Accounting Package for e.g. Accpac or Pastel Evolution that is there reflected as Accounts Payable and/or Creditors by matching the values until only net outstanding items between the two sets of books to be taken into the final Reconciliation from where the adjustment Journals for processing in the Accounts Payable / Creditors Ledger is done.
In order to prevent errors and/or fraud it is uttermostly important that no payments in any circumstances is made against invoices , but only against the actual statement.
Companies should also make sure that a statement is what it says : A Statement and not an internal allocation sheet of payments and entry values. It is also very important that allocations of values for debits and credits in both sets of books should be for full and not partial invoices as full allocations is necessarily to tick off the entry as complete and handled by the Accountant during tight Month End Deadlines for the Trading Results of the Company.
A correctly drawn up Statement at month end should only have the net outstanding debits and credits for e.g. invoices , credit notes and as yet unallocated payments.
There is a number of ways different companies Statements can look : 1. Statement as per system Month End Cut Off for e.g. 31 January 2011 2. Statement as per system Month End System Date but different Cut Off Date 3. Statement as per latest Invoice 4. Statement as per actual current Date 5. A combined Statement with the net debit and or credit entries when more than one internal software system is used for e.g. Accpac and Pastel Evolution
Age Analysis as a Management Tool of Accounts Payable and/or Creditors Maui Hawaii
Modern Advanced software packages such as Pastel Evolution gives an option for Accounts Payable and/or Creditors Age Analysis printout breakdown as an effective Report in the commitment for Managers for financial planning towards external Suppliers especially in medium size businesses that experience temporary Cash Flow problems.
It also allows successful businesses the best option to use credit terms from external Suppliers to the Companies maximum advantage.
The Accounts Payable Age Analysis Printout , also known as the Creditors Book is divided in categories for current , 30 days , 60 days , 90 days , 120 days , 150 days and 180 days and over due that are produced in Modern Accounting Systems in for e.g. Pastel Evolution. The printout is done in the order of the Chart of Accounts of the Accounts Payable and/or Creditors Book. The option to include Zero Balances outstanding or to specifically leave it out is also possible in the printout features.
Accounts Payable Chart of Accounts Maui Hawaii
Most big and medium size limited and/or Incorporated Companies are using a Chart of Accounts for the Accounts Payable and/or Creditors Book especially when their accounting system is modern for e.g. as in the case of Pastel Evolution.
In this Chart of Accounts (that is similar to the General Ledger or the Accounts Receivable Chart of Accounts also known as the Debtors Book) all Suppliers is included in the Approved Suppliers Listing , including those with Zero Account Balances.
Typical features of a Modern Accounting Package such as Pastel Evolution for the Accounts Payable and/or Creditors Book Maui Hawaii
The major parts are:
1.Maintenance
2.Transactions
3.Enquiries
4.Reports
Background of Accounts Payable Records and the Tracing through of Specific Financial Transactions Maui Hawaii
The capturing and posting of financial transactions is done in Accounting Packages such as Accpac and Pastel Evolution within period Cut Off , Month End and Reporting Deadline Periods and the Calculations is done in Excel Spreadsheets from where the net result further adjustments in the specific systems is done. Very large Companies use Systems such as SAP and older sytems such as JD Edwards are currently being phased out and updated by most Companies with more Modern Accounting Software and/or internal Company Financial Record Keeping Systems. Certain Accounting Software and/or Systems are written for specific industry purposes such as Exactus for Large Banking Institutions and Odyssey for medium size Hotels and Restaurants and Bars and other Medium size Enterprises such as Take Aways and Sit Down Restaurants. In many larger Groups of Companies different subsidiaries might use different systems from where the reports are done and Consilidations of Group Accounting Financial Records is done. Supporting Documentation is kept in files as part of the Companies' Financial Records.
Explanation of the net debits and credits of Outstanding Amount on Explanation Sheet Attachment Maui Hawaii
With the Reconciliation done at Month End should be a Explanation Sheet to explain in detail how the net outstanding amount in terms of debits and credits is made up.
The Totals of this Net Total Debits and Net Total Credits should Balance exactly with the Net Balance Brought Forward Outstanding , there should be no Variance Difference.
This Net Balance Outstanding at the End and/or Cut Off and/or Statement Date and/or Printout Date and/or Financial Report Date should be the same as the Next Financial Period Opening Balance.
Furthermore a precise on the cent Reconciliation should be possible with both the Statement and/or External Accounts Receivable and/or Debtors Book and also the Internal Accounts Payable and/or Creditors Book in respect of the same Accounting Period (that might differ from the actual Period or Month due to the fact that the Company Financial Year End is different than 31 December and might in the Majority of Cases be in fact a completely different ending for e.g. 31 March)
(If for instance the financial year end is 28 February then March will be Accounting Period as per Financial Year 1 and February at the end of the Financial Year Accounting Period (Month) 12 (and never for that specific Company 31 December)
Accounts Payable Book Reconciliation Methodology Maui Hawaii
Different Internationally Generally Accepted Accounting Methods how to do a Reconciliation from the Internal Accounts Payable Book and/or Creditors to the External Accounts Receivable Book and/or Debtors for net outstanding Reconciliation debits and credits
1. Start with the Accounts Payable Book and reconcile to the opposite mirror image adjusted of the Accounts Receivable Book. (Adjust the external debits to credits and external credits to debits to compare internal to internal)
2. Start with the Accounts Receivable Book and reconcile to the opposite mirror image of the Accounts Payable Book (adjust the internal debits to external credits and internal credits to external debits)
3. Use method 1 and furthermore work to 0.00 by listing the breakdown of the net outstanding debits and credits making up the amount outstanding (this will make the next financial periods (for e.g. month) Reconciliation much more easier.
4.Use method 2 and furthermore work to 0.00 by listing the breakdown of the net outstanding debits and credits making up the amount outstanding (this will make the next financial periods (for e.g. month) Reconciliation much more easier
5. Start with zero , work to the accounts Receivable Book and from there to the Accounts Payable Book.
6. Start with Zero , work to the Accounts Payable Book and from there to the Accounts Receivable Book.
7. Adjust the Values in the Accounts Payable Book to the way it should be after internal adjustment journal entries captured and posted for the internal Accounts Payable Ledger and adjust the Values in the Accounts Receivable Book of the external supplier how it theoretically should look after adjustment journals captured and posted should theoretically look in their system. If the Reconciliation is done correctly , these two values should be an opposite mirror image of each other for e.g if the Accounts Payable Book shows US $ 10 ' 000 ' 000 , 00 Credit Value in the Internal Accounts Payable Ledger (Ten Million United States Dollars Due and Payable within the Credit Terms Date Limit) , the Accounts Receivable Book should show US $ 10 ' 000 ' 000 , 00 Debit Value in the external Accounts Receivable Book (That after the transaction has been captured , posted , payment plan inclusive allocated and transferred should reflect as Ten Million United States Dollars direct Bank Transfer reflected in Bank Accounts as Bank Cleared and available as Cash and/or Values against which Company cheques can be issued)
8. An explanation how the internal Accounts Payable payments after captured and posted is come by.
9. An explanation how the external Accounts Receivable Collectable due and payable is arrived at (as per Statement)
10. An internal Accounts Payable Allocation sheet for the previous and current Financial Period (In the event of partial Allocations for invoices and/or payments this values and payments sheet is very important).
11. An external Accounts Receivable Allocation sheet for the external previous and current Financial Period. (In the event of partial Allocations for invoices and/or payments this values and payments sheet is very important).
12. A combination of all the above.
Theoretically the Statement of the External Accounts Receivable should have 3 major parts (of which the adjusted internal Accounts Payable Book plus Reconciliation(s) is a opposite mirror image reflection) :
1.The net outstanding items at the end of the previous period it est the net debits and credits making up the Accounts Receivable Book that is the Closing Balance of the previous month (and/or financial period applicable) and also the opening balance of the current month (and/or financial period applicable)
2. The external allocation sheet showing full allocations and/or full and partial allocations reflecting the internal values and payments/allocations/debit allocation/credit allocation/debit reversal/credit reversal
3. The net outstanding items (and a correct Statement sent out must have minimum this part) of only the net outstanding opening Balance (plus a subsection explaining which specific debits and credits makes it up) and also the additional only net outstanding debits and credits (debits for e.g. invoices and credits for e.g. unallocated as yet payments)
Matching of the internal Accounts Payable Book with the external Accounts Receivable Book Maui Hawaii
First tick off all Matching items to get only the Net Outstanding Non Matching Items in both sets of Books (the internal Accounts Payable and/or Creditors Book with the external Accounts Receivable and/or Debtors Book) (The external Accounts Receivable and/or Debtors Book should at least in theory , provided it is correctly drawn up be similar to the correct net outstanding debits and credits send out as per the balance reflected on the statement irrespected of whether or not this is Management Driven or Information Technology Departments' Driven or Consultants' Driven)
Note : In the event that you receive from an external supplier an Internal Allocation Sheet (that is sometimes incorrectly in the trade also called a Statement) it would be necessarily to first reconstruct how the correct Statement should have looked in the first place from the external supplier BEFORE the Reconciliation Process can successfully be undertaken. Such a Reconstruction can be positively done on an Excel Spreadsheet that is one of the pages for import in the Accounts Payable Excel Reconciliations Combined Spreadsheets Book for the Applicable Financial Period.
Note : In the event with a large number of transactions in two sets of Books applicable it is highly recommendable to use Excel Spreadsheets and Data and Sort Methodology for this purpose. It is furthermore extremely important to use different theme colour highlights in the Excel Spreadsheets. In the Spreadsheet will be the one side all the Accounts Payable Book transactions that is Colour highlighted and Matched with on the other side all the Accounts Receivable transactions. This will help to let unmatched items in both sets of Books clearly stand out for the next part of the Reconciliation process
AFTER this step has been taken the following RECORD from two sources will remain (the non Matching items of the internal Accounts Payable and/or Creditors Book PLUS the Non Matching Items from the External Accounts Receivable and/or Debtors Book)
Such a RECORD would normally consist of the opening Balance (and for successful Reconciliations to be done you would need to start with US $ 0.00 (and or the applicable currency value) in both sets of Books and take it from there)
Plus Debits for invoices in the Accounts Receivable Book of the Supplier /Contractor and Credits in the Accounts Payable Books of the receiver of Goods/Products/Services/Values/Benifits Plus Debits for additional charges such as interest or Not Specifically Claimed in Contract Charges in the Accounts Receivable Book of the Supplier/Contractor and Credits in the Accounts Payable Books of the receiver of Goods/Products/Services/Values/Benefits Plus Debits in the Accounts Receivable Book for Payment Reversals and Credits in the Accounts Payable Books Plus Debits in the Accounts Receivable Book for Subcontract Work charged directly to the Main supplier Of the Contract and credits in the Accounts Payable Book Plus Credit notes Reversals that is either an Invoice with a new number or the reissue of an invoice Or a cancelled Credit note entry or a specific issued with reference number Official Credit Note Reversal Plus Any additional charges such as agreed upon legal costs (Debits in the Accounts Receivable Book and Credits in the Accounts Payable Books) Plus Unique situations such as Rebates Reversals (Debits in the Accounts Receivable Book and Credits and the Accounts Payable Book)
Minus Invoice Reversals normally in the trade referred to as Credit Notes (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Interest Claimed rejected by Recipient (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus External payments already made to 3rd parties or sub contractors by main issuer of Contract (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Payments (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Additional Charges Claimed Reversal (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Rebates (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Commission Claimed by the giver of the Contract or Business Reference Referral directly either For self or somebody indirectly in the Group (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Claims back for substandard work done or not done according to the best practice in the trade or not done according to instructions/requests received and minus advanced equipment borrowed not returned or missing And minus equipment broken or that need to be replaced (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) And minus internal group percentage work or engineering authorization for payments reversal (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Benefits claimed for early payments (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Invoice overcharge Reversals or claims against overcharge Invoices (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Benefits claimed for high value payments (in the essence a rebate or lower charge For high value contracts) (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Unique Situations (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Partially allocated payments such as a per month or per period or per quarter or per half year Or per year Payment off plan (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book) Minus Benefits Claimed on the payment of full and final settlement of an invoice , Sets of Invoices , Total outstanding at Month End , Total outstanding at Cut Off Date , sub contract , contract And/or full net outstanding amount (Credits in the Accounts Receivable Book and Debits in the Accounts Payable Book)
In the overwhelming majority of statements only invoices and payments will reflect.
Audits of accounts payable Maui Hawaii
Auditors often focus on the existence of approved invoices, expense reports, and other supporting documentation to support checks that were cut. The presence of a confirmation or statement from the supplier is reasonable proof of the existence of the account. It is not uncommon for some of this documentation to be lost or misfiled by the time the audit rolls around. An auditor may decide to expand the sample size in such situations.
Auditors typically prepare an ageing structure of accounts payable for a better understanding of outstanding debts over certain periods (30, 60, 90 days, etc). Such structures are helpful in the correct presentation of the balance sheet as of year end.
Accounts Payable automation Maui Hawaii
ePayables are defined as the technology or process automation solutions that automate any part of the accounts payable ("AP") process.
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