When a company purchases goods or services on credit, they need to record the transaction in their accounting system. An accounts payable journal entry is used to record these transactions. Accounts payable refers to the outstanding amount a company owes its creditors for goods and services purchased. Continue reading to understand the account payable journal entries and the accounts payable process. What is the Journal Entry for Accounts Payable? Any transaction related to purchasing goods or services on credit results in an accounts payable liability. This liability is recorded based on the sellers’ invoice.Types of Accounts Payable Journal Entries:The following are the various types of accounts payable an enterprise needs to record in their books of accounts.Journal entry for the purchase of inventory on creditThe following is the journal entry for the purchase of goods or other inventory on credit:ParticularsDebit/CreditPurchases A/cDebitTo Accounts Payable A/cCreditJournal entry for returning the damaged or undesirable inventory to the supplierThe following is the journal entry for returning damaged inventory or inventory no longer required to the supplier: ParticularsDebit/CreditAccounts Payable A/cDebitTo Purchase Returns A/cCreditJournal entry for assets purchased on credit The following is the journal entry for purchasing assets on credit, such as equipment, furniture, tools, plant, or other similar fixed assets: ParticularsDebit/CreditRelevant Asset A/cDebitTo Accounts Payable A/cCreditJournal entry for services received on creditThe following is the journal entry for services received on credit, such as consultancy, audit, legal services, etc.:ParticularsDebit/CreditRelevant Expense A/cDebitTo Accounts Payable A/cCreditJournal entry for payment made to the creditorThe following is the journal entry for the payment made to the creditor: ParticularsDebit/CreditAccounts Payable A/cDebitTo Cash/Bank A/cCreditHow Should Accounts Payables be Recorded?To record accounts payable, the business needs to pass a journal entry that debits the expense or asset account and credits the accounts payable account. The debit amount is the purchase cost, whereas the credit amount represents the obligation to make the supplier.Here’s an example of how accounts payable journal entries are recorded in the books of accounts: On 14th June, ABC Ltd. bought raw materials worth Rs 50,000 on credit and promised to pay ABC Ltd.

 “As the CFO, you have to decide whether you control the function or the function controls you. The function will be whatever you decide it should be."Meet Mr. Siddhartha Khaitan, the financial maestro driving Esme Consumer Pvt. Ltd. to unparalleled success.

Today’s business world is evolving at a great pace, and amidst this evolution, it's essential to manage your suppliers well.In this blog, we'll look at how vendor management applications (VMAs) make things smoother, more efficient, and help build better vendor partnerships, when compared to old-school manual methods.What is a Vendor Management Application?A vendor management app is a one-stop solution for managing all vendors across the supply chain. It streamlines vendor management by easing the onboarding process, keeping vendor interactions smooth, tracking vendor payments, supporting smart decision-making, and seamlessly monitoring vendor performance.Key Features of a Vendor Management AppWhen looking for a system to manage your suppliers, here are the top features enterprises must keep in mind:Quick Setup: A VMA should let you onboard suppliers quickly, without all the paper hassle, by pulling information from databases automatically. Easy Self-Service: A good VMA lets suppliers and customers handle their own information, like updating orders or checking payments, making things smoother for everyone.Cloud-based Platform: Cloud-based vendor management apps offer seamless accessibility, enabling enterprises to onboard and manage vendors anytime, anywhere, fostering real-time collaboration among stakeholders.Easy Vendor Checks: A good system lets you swiftly access key details about your suppliers to verify their reliability and compliance history.Monitor Vendor Performance: VMAs should enable you to assess vendor effectiveness, such as punctuality and compliance, aiding in smarter negotiations. Further, the VMA should allow you to track vendor performance in real time.Manage Vendor Payments: The system ought to have the capability to track and control your spending on each supplier to prevent exceeding your budget.Inbuilt Vendor Communication: A good VMA should feature inbuilt vendor communication for quicker and seamless information exchange and query resolution.Automated workflows: Automating vendor workflows streamlines processes, enhancing invoice processing and payment cycles. This fosters cost savings and strengthens vendor relationships.Benefits of Using a Vendor Management AppSwitching to a vendor management application (VMA) can really smooth out a lot of the bumps in dealing with vendors. Here's how it can make things better:Easier Vendor Onboarding: A VMA makes it easier to onboard new suppliers.

Tail spend is an important part of procurement that is often overlooked. It includes the various low-value and high-volume transactions in your company.While tail spend mostly represents a small portion of your procurement budget, its influence on your bottom line is anything but small. Consequently, managing these insignificant expenses becomes significant. You must be wondering– what is tail spend management? And more essentially, why is tail spend important? But first, it is essential to understand the concept of tail spend. Please read the article to learn more about it and how to manage tail spend.What is Tail Spend?Understanding the tail spend is nearly impossible without discussing the Pareto principle. Simply put, tail spend is based on the 80/20 rule or Pareto curve.In procurement, this rule implies that about 80% of the total spend involves only 20% of the vendors.

Managing accounts payable can take a lot of time and mone­y when running a busine­ss. As the business expands, having a smooth financial structure­ gets even more­ important. Here, accounts payable outsourcing­ can be the viable solution.What is Accounts Payable Outsourcing?It is a process when a company hires an outside service to handle their accounts payable tasks. Why do the­y do this? It lightens their internal workload. These outsourcing firms are­ experts.

Mistakes are a part of any business, but what if you mistakenly pay a bill twice? This is known as a duplicate payment and can cause a loss of money.In this blog, we will talk about how to avoid this common financial pitfall and some ways by which you can avoid making duplicate payments.What are Duplicate Payments?Payments made more than once for a single invoice are known as duplicate payments. Duplicate payments happen entirely because of mistakes, which results in a loss of money for the business.Common Reasons for Duplicate PaymentsCommon reasons for duplicate payments include:Mistakes in entering data: Sometimes, when people type the information for a bill, they might make an error or enter it twice by mistake.Duplicate vendors: There might be a possibility that your company has a vendor listed more than once in the database. Another situation may also arise where two suppliers have similar names. This may lead to confusion, resulting in duplicate payments.Multiple invoices: A vendor might accidentally send the same bill more than once, and the company pays each one without realising they're the same.How to Detect Duplicate Payments in Accounts Payable?After explaining why payments might be made twice, here's how to spot and stop duplicate payments:Use a good software or tools: There are good accounts payable solutions designed to help you detect duplicate payments. These tools can also warn you in advance if it looks like you're about to pay the same invoice again.Regularly check your payment records: It's important to routinely go through the records where you keep information about payments and suppliers.

Operating a retail enterprise presents unique difficulties, among which managing an extensive volume of invoices stands out significantly. Maintaining supplier relationships is essential to ensure inventory availability and potentially secure advantageous terms in the future. Implementing automation in accounts payable emerges as a critical solution for retailers, streamlining their financial operations and enhancing efficiency.Let's talk more about how this works and why it's helpful.What is the Accounts Payable Process in the Retail Industry?In the retail sector, the accounts payable process is an essential operation that involves managing the business's financial commitments to its suppliers for the procurement of goods and services. This procedure entails the reception, processing, and validation of invoices against purchase orders and delivery documentation, followed by the execution of payments within agreed-upon terms.It plays a pivotal role in maintaining accurate financial records, ensuring fiscal discipline by preventing overpayments or duplications, and fostering strong vendor relations through timely payments. Handling invoices involves four simple steps:Getting the invoice from the supplier or service provider.Checking the invoice to make sure the order matches what was received.Getting the approval from the respective authority to pay the invoice.Paying the supplier or service provider.Challenges of accounts payable in the retail industryThe Accounts Payable (AP) process in the retail industry faces several challenges:1. A large number of invoicesIn retail, where business moves quickly and there are lots of transactions, dealing with many vendors leads to handling a huge pile of invoices.

Manufacturing companies often deal with many suppliers, sometimes reaching hundreds or even thousands. These suppliers provide essential components required for manufacturing products, as well as standard office and business supplies. This complex web of supplier relationships generates numerous purchase orders and invoices that must be handled. However, managing these invoices manually can quickly become overwhelming, leading to discrepancies and errors in the process. This is where accounts payable automation steps in.In this blog, we'll delve into accounts payable (AP) automation for manufacturing industries and uncover how it can significantly reduce turnaround times, optimise processes, and cut costs.What is the accounts payable process in manufacturing?The accounts payable process in manufacturing refers to a crucial financial operation within manufacturing companies, and plays a vital role in managing the company's cash flow.

Credit and debit memos are documents like invoices that help to fix any mistake in charges or bills.This article will discuss how debit and credit memos are crucial in keeping your accounts in line and your business running smoothly.What is a Debit Memo in Accounts Payable?This is a document from a seller indicating the buyer owes the seller more money. This debit could be for various reasons, such as adjustments to an invoice, corrections to pricing or quantities, or additional charges. What is a Credit Memo in Accounts Payable?This is a document from a seller indicating that they owe the buyer a certain amount. This could be because the buyer has returned an item, was overcharged, or another reason. Difference Between Credit Memo and Debit Memo in Accounts PayableAspectCredit MemoDebit MemoPurposeReduces the amount the buyer owes to the sellerIncreases the amount the buyer owes to the sellerEffect on Accounts PayableDecreases Accounts Payable (buyer's perspective)Increases Accounts Payable (buyer's perspective)Typical Reasons for IssuanceReturned goods, billing errors, discounts/rebates after invoicingAdditional charges, services not provided as agreed, invoice adjustments, price or quantity changesHow to Use Debit Memos and Credit Memos in Accounts Payable?Using debit memos and credit memos effectively in accounts payable involves understanding their functions and implementing them to adjust financial transactions accurately. Here’s how they can be used in practice:Using Credit MemosCorrect Overcharges: Credit memos are used to reduce the amount owed due to overcharges or returns.Apply Discounts: They can be used to account for late discounts or rebates.Record and Reconcile: Credit memos must be entered and reconciled with corresponding invoices for effective accounting.Using Debit MemosAddress Undercharges: Debit memos increase the payable amount for undercharges or additional services.Communicate: Buyers must be notified about the adjustment for mutual agreement.Update Records: Debit memos must be entered and reconciled with corresponding invoices for effective accounting.Managing debit and credit memos well is key to keeping business finances clear and correct. Making this process smoother helps avoid mistakes and keeps a company's money matters stable and in good shape. .

Understanding what open invoices are is vital for vendors to track client payments and as well as help buyers manage cash flow efficiently. In this article, we'll delve into open invoices, their types, functionality, and the key benefits they bring to financial dealings.What are Open Invoices?An open invoice is a detailed document for goods sold or services rendered that remains unpaid. In simple words, it is an invoice that is yet to be paid. It outlines the amount owed and the payment deadline, typically sent by vendors to the company's accounting or accounts payable department to the customer.Why are Open Invoices Important?Here are the reasons why open invoices are crucial in business, profoundly impacting a company's financial health and market reputation:Cash flow managementOpen invoices assist in tracking incoming payments, aiding businesses in maintaining a consistent cash flow to fulfil financial obligations and support growth initiatives.Expense managementBy keeping tabs on open invoices, businesses can effectively manage their spending, making sure they allocate resources wisely and avoid unnecessary costs.Mitigating financial riskMonitoring open invoices allows companies to address any payment delays or disputes promptly, reducing the risk of financial setbacks and safeguarding their reputation in the market.Types of Open InvoicesThere are several types of open invoices commonly handled by accounting departments, each with its unique characteristics:Manual, offline pending paymentsThese open invoices involve payments made through cash, cheques, or bank transfers that are in a "pending" status. While they may need more processing time, they require manual confirmation to complete the transaction.Online pending paymentsTermed as "invoice automation," these invoices are triggered automatically by payment processors when customers initiate online payments.