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The accounts payable department is responsible for paying all of the valid expenses of a company in a timely manner. Part of this responsibility is to make sure that all information relative to these expenses is gathered and verified. One tool used for this is the reconciliation of vendor statements. In most cases, vendors produce invoices once a good or service has been delivered to a customer. Invoices received in the mail room are usually routed directly to the accounts payable department for processing. If proper systems are in place, the accounts payable department should already have evidence that a liability (to pay an invoice) has been created, in the form of purchase orders, requisition forms, receiving department verification of goods received, shipping documents, or some combination of these forms. In addition, usually on a monthly basis, a statement is sent by the vendor to the customer listing recent history. The balance on this statement will be outstanding, i.e. unpaid invoices. Reconciling this statement to the records of the company means more than just simply making sure all payments sent out have been received by the vendor and properly credited. Proper reconciliation of this statement can be an important second step in assuring that the company is managing its account payable outflow in the most efficient manner. (The first step, of course, is the careful processing of the original invoice to make sure that the invoice is valid based on supporting materials, quantities are calculated correctly against per unit price, the correct discounts taken, etc.) It is very rare that a vendor’s statement will be a simple affair, requiring an A/P clerk to just tick off paid invoices, note invoices in process and arrive at a reconciled upon open balance. Today’s inventory, delivery and cash management techniques will usually mean that customer orders are filled as quickly as possible, and so some goods that may be on hand or easily sourced may be shipped before others. Most companies are highly computerized and savvy enough to make sure that their inventory is moving out and being invoiced as quickly as possible. An uninvoiced good is an unpaid good, and companies today want to be “shown the money” as quickly as possible. It is not usually acceptable in today’s fast-paced environment to hold back on paying invoices until an entire order is shipped. It would make life simpler if the accounts payable department could hold each invoice until everything on a given purchase order was received, take an early payment discount on a total invoice amount and thereby keep everything clean and simple. But, of course, it is in the company’s interest to pay slowly; it is in the vendor’s interest to receive funds quickly. A vendor statement, therefore, has to be checked for each invoice to make sure the amount paid was correct based on due dates and related discounts; credits for returns have to be calculated and included; shipment receipt must be confirmed for invoices listed but not paid. When these steps are taken, deductions and adjustments are made so that the customer balance and vendor balance agree on a reconciled basis. The accounts payable department should then research any discrepancies, since these outstanding balances will stay on the customer’s account, causing late fees or disallowed discounts.
Article Source: http://www.a1-articledirectory.com
Jacqueline is a partner at AuditSolutions LLC She writes for http:www.theaudits.com An accounts Payable Statement Audit Software Company. Jacqueline is also the the founder of Womancentric.com
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