Accounts Payable

Definition

Accounts Payable is responsible for recording current account transactions (business relationships between two parties in which services are billed). It ensures that the company’s liabilities to the companies that have billed it for goods or services are settled. As the debtor, the company assumes the role of the customer in this case. The creditor, on the other hand, is in the role of the creditor. Accounts Payable is directly linked to purchasing and maintains the necessary overview of external suppliers and service providers.

What are the responsibilities of accounts payable?

The primary responsibility of accounts payable is to process invoices issued to the company by vendors. In addition to managing such incoming invoices, the following tasks may also fall within the scope of accounts payable.

• Processing incoming mail
• Reconciliation of quotes
• Management of open items
• Entry of travel expense reports
• Archiving of incoming invoices
• Maintenance of a vendor bank journal
• Correspondence with vendors

Is it worth maintaining an accounts payable department?

Whether a company should maintain only general accounting or also a dedicated accounts payable department depends heavily on its business and tax status. For larger companies with higher growth rates, separating financial accounting makes more sense than for smaller companies, for which general financial accounting—which covers all necessary accounting tasks—is sufficient.

What is the difference between accounts payable and accounts receivable?

Accounts receivable is the counterpart to accounts payable. Unlike accounts payable, accounts receivable deals with a company’s receivables arising from purchases on credit. One of the main tasks of accounts receivable is receivables management, which involves checking accounts receivable for outstanding balances.