Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a company's balance sheet.
Vouchered, or vouched, means that an invoice is approved for payment and has been recorded in the General Ledger or AP subledger as an outstanding, or open, liability because it has not been paid.
AP 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.
Payment terms may include the offer of a cash discount for paying an invoice within a defined number of days.
Householders can track and pay on a monthly basis by hand using cheques, credit cards or internet banking.
However, AP staff should become familiar with a few common problems, such as "Yellow Pages" ripoffs in which fraudulent operators offer to place an advertisement.
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".
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."
Auditors typically prepare an aging structure of accounts payable for a better understanding of outstanding debts over certain periods (30, 60, 90 days, etc.).
[11] Some of the most common AP automation solutions include e-invoicing, scanning of documents, optical character recognition, automation of workflow rules, online tracking, reporting capabilities, electronic invoice user interfaces, supplier networks, payment services and spend analytics for all invoices.
[11] Effective automation functions include freeform recognition (ability to interpret invoice documents regardless of layout or the need to create a supplier template) and automatic learning capabilities.
(Financial Operations Networks, 2008) These solutions usually involve a third-party company that provides and supports an application which allows a supplier to submit an electronic invoice to their customer for immediate routing, approval, and payment.
Because E-invoicing includes so many different technologies and entry options, it is an umbrella category for any method by which an invoice is electronically presented to a customer for payment.
[14] Since the mid-1967s companies have begun to establish data links between their trading partners to transfer documents, such as invoices and purchase orders.
These systems were unique to the respective company that developed them, meaning they were difficult to deploy across a large number of corporations.
Companies began to appear offering more robust user interface web applications with functions that catered to both supplier and customer.
These services allow suppliers to present invoices to their customers for matching and approval via a user-friendly web application.
This is because all the transactional information is stored in the data centers of the third-party company that provides the invoicing web app.
[16] As companies advance into the digital era, more and more are switching to electronic invoicing services to automate their accounts payable departments to reduce errors and save costs.
The US Treasury estimated that implementing e-invoicing across the entire federal government would reduce cost by 50% and save $450 million annually.