Flow of Processing – Accounts Payable

Overview

Flow of Daily Processing

Processing Open Invoices

Processing Recurring Invoices

Processing Computer-generated Checks

Processing Manual Checks

Printing the Daily Detail Register

Processing Period End

Performing Period End Updates

Processing Checklist

 

Overview (return to top)

The Flow of Processing section shows how to operate the software for the first time and provides guidelines for operating the module after it is installed. Study this section in conjunction with the individual operations listed in this online help.

 

The Accounts Payable module, which can be integrated with the General Ledger module, maintains vendor invoices and credits, prints checks, supports recurring invoices and handles handwritten checks and check reversals. It keeps a record of vendor purchase and payment history, and lets you decide when to purge vendor invoice and payment history. The Bank Reconciliation feature in General Ledger keeps track of checks processed by Accounts Payable, collects information about other bank account transactions in other modules, and assists in reconciling this activity with the General Ledger cash accounts.

 

Flow of Daily Processing  (return to top)

The Accounts Payable daily processing tasks are usually performed regularly throughout the month. Recurring Invoice processing and Bank Reconciliation are performed monthly. Run through Period End Processing whenever it is necessary to close the accounts payable period.

 

Invoice Processing

Vendor invoices and adjustments are entered into the system and distributed to the proper general ledger accounts. The open invoices are analyzed in the Aging and Cash Requirements reports by invoice date, due date or accounting date. These reports provide information that can be used to make payment decisions.

 

Computer Check Processing

Items can be selected for payment by individual invoice, due date, discount date, accounts payable type or payment group.

 

Manual Check Processing

Handwritten checks, check reversals and voided checks are posted to the Accounts Payable and General Ledger modules where they are recorded in the Open Invoice file, Check History file and Disbursement file.

 

Recurring Invoice Processing

A one-time entry of vendor invoices and bills that remain the same month after month is made so that they can be automatically processed when they are due.

 

Printing the Daily Detail Register

The Daily Detail Register is printed to update the General Ledger module, if installed, or to manually post to another general ledger.

 

Period End Processing

Monthly reports such as the Purchase Journal, Disbursements Journal, and Monthly Check Report can be printed. After printing the reports showing the month’s activity, the Period End Update task is used to close the accounting period. At the end of the calendar year, vendor 1099 forms are printed before closing December.

 

Bank Reconciliation (in the General Ledger module)

Besides keeping track of bank account activity, the bank reconciliation feature helps balance the bank statement to the computer’s record for the account. Periodically, as statements are received from the bank, enter the statement balance into the system. Checks and other transactions that have cleared the bank are marked as paid or posted. The bank statement balance, adjusted by the open transactions, is compared with the general ledger account balance as of the statement date. If a discrepancy exists, it is reported and a detailed list of transactions is available to help in the reconciliation.

 

Processing Open Invoices  (return to top)

Enter vendor invoices into the system and distribute to the proper general ledger accounts regularly. Depending upon the extent of your business, it is most prudent to enter invoices daily, following the steps below.  If the Purchase Order module is installed, invoices with associated purchase orders are entered through the Purchase Order module. Accounts payable without an assigned purchase order, such as rent, utilities, office supplies, or freight are entered through the Accounts Payable module.

 

Entering Invoices

Before entering the invoices, determine the following information:

  1. The vendor code or vendor name assigned to the vendor. Use the Vendor Maintenance task to enter the vendor code, name, and other information into the Vendor Master File before entering the invoice.

  2. The distribution for the invoice. It may include the credit accounts (accounts payable liability account, cash accounts, and discount accounts) defined by the accounts payable distribution code and the general ledger (debit) distributions for expenses or purchases. Refer to the Distribution Code Maintenance task to obtain a list of codes and their associated general ledger accounts. Although the vendor expense (debit) distribution defaults to the general ledger expense account assigned in the Vendor Master File, the Invoice Entry task allows you to override the default account number and assign multiple expense distributions.

  3. The invoice date, accounting date, due date, and discount date for each invoice. Take the invoice date from the invoice, bill, or statement to be entered. The accounting date is used (on an accrual basis system) to determine the date the general ledger liability and expense accounts are posted during the Invoice Register update. The due date is the last date the invoice can be paid before it is considered delinquent. The invoice due date is determined automatically from the terms code used during the invoice entry, although it can be overridden during data entry. The Discount Date is the discount expiration date. It is calculated from the terms code assigned to the invoice but can be overridden during data entry.

(Optional) Before posting the invoices, make an adding machine tape of all invoice totals and discounts so that the balance can be totaled against the figures printed on the Invoice Register.

 

Use the Invoice Entry task to enter invoices. Mark each invoice “posted to computer” immediately after it is entered.

 

Running the Register

 

Print the Invoice Register after all the invoices are entered. This register shows the invoice transactions entered since the last register was printed and updated.

 

If you made adding machine tapes, balance the tape totals to the Invoice Register totals. Use the Invoice Entry task to make any necessary corrections. Pay attention to dates and general ledger account numbers. Reprint the register and check the totals again. When printing more than one register for a batch, keep only the latest copy.

 

Updating the Register

After the Invoice Register is printed, you are prompted to update the register. When the Invoice Register is in balance with the tape totals and the accounting dates are correct, Click [Yes] to the update prompt. The update affects the module in several ways:

 

  1. The invoices appearing on the Invoice Register are added to the Accounts Payable Open Invoice file.

  2. The Purchase History Inquiry option Vendor Maintenance is updated.

  3. When the Cash Basis parameter marked in Application Parameters, the General Ledger Daily Detail file is updated with the accounting data as follows:

A credit for the total invoice amount is posted to the Accounts Payable general ledger account identified by the Accounts Payable distribution code.

 

NOTE:  If the Multiple Distributions checkbox in Application Parameters is marked, one posting is made to each accounts payable account identified by a distribution code assigned to invoices during the invoice entry process. If the Multiple Distributions checkbox in not marked, the default distribution code set up in the Application Parameters is used to identify the accounts payable account for general ledger posting.

 

A debit posting is made to the general ledger for each account distribution indicated during invoice entry.

 

NOTE: A credit posting to a general ledger account can be made during Invoice Entry by entering a negative amount for the account distribution.

 

The terms discount amount is not posted to the general ledger during the Invoice Register update process, even though an amount may be calculated. Instead, the discount amount is carried with the invoice until the payment is made. The general ledger posting for discounts taken, as defined by the distribution code associated with the invoice, is posted during the Check Register update process.

 

  1. When the Retention checkbox in Application Parameters is marked, the retention amount is credited to the retention account and the accounts payable account is credited using the difference. Both accounts are determined by the distribution code assigned during the invoice entry process.

 

After the Invoice Register update is complete, file the invoices and the Invoice Register.

 

Adjusting Invoices

 

When an invoice is entered through the Invoice Entry task, you can re-access it and make changes anytime until the Invoice Register update is performed.

 

Once an invoice is updated, an invoice must be adjusted if changes are necessary. The process of adjusting an invoice is described in the Invoice Entry.

 

Reporting Outstanding Invoices

The Accounts Payable module provides an Aging Report and a Cash Requirements Report for all open invoices. These reports can help determine which invoices should be paid and in what amounts. Print them at any time; however, the Aging Report should always be printed as part of the accounts payable closing process to determine whether the subsidiary ledger of open invoices is balanced to the general ledger.

 

Aging Report

The Aging Report provides information on outstanding invoices in the Accounts Payable module. Invoices can be aged by invoice date, accounting date, or due date. The report can be printed in detail or summarized by vendor.

 

Cash Requirements Report

Print this report before the payment selection process, and use it to make payment selection decisions. It shows the future cash needs for a specified period of time based on the invoice date, accounting date or due date. The report can be printed in detail or summarized by vendor.

 

Recording Credits

A vendor usually sends a credit memo when he issues a credit for returned merchandise, an incorrect billing, or another reason. Use the Invoice Entry task to enter the credit memo. The invoice amount should be negative and the credit/debit memo number should be entered in the Invoice Number field. Enter the word Credit or the number of the invoice to which the credit pertains in the Reference field of the invoice header.

 

Debit versus Credit  

It should also be noted that throughout this module, a reference to a ‘credit’ memo may also mean ‘debit’ memo to some users. Typically a vendor issues a ‘credit’ memo to a company for defects, delays, freight, etc. The receiving company treats it as a ‘debit’ memo to accounts payable as it reduces that credit balance. For consistency, this accounts payable module will make reference to these amounts as ‘credits’.

 

A credit is calculated in the Payment Selection task and applied toward payment when the check is printed. The Payment Selection task determines the total amount (of the selected invoices) that is owed. If selected credit amounts are greater than the selected invoice amounts, the Payment Selection Report shows a credit amount for the check total. In this case, de-select the vendor for payment.

 

If the Payment Selection Report is not printed or the person reviewing the report does not notice the credit amount in the check total, the module prints a void check. When the update is run, both the invoice and the credit will remain open.

 

Processing Recurring Invoices  (return to top)

A recurring invoice is one that must be paid regularly and usually for the same amount. Recurring invoices are entered much like a standard invoice; however, you do not have to enter a recurring entry each time it is paid.

 

Unlike a standard invoice, the invoice due date for a recurring invoice contains only the date of the month the invoice is due, not the month or year. When recurring invoices are updated each month, new invoices with the current month and year are automatically created and entered into the regular invoice entry file.

 

Entering Recurring Invoices

 

Use the Recurring Invoice Entry task to enter all recurring invoice information.

 

Running the Recurring Invoice Register

Print the Recurring Invoice Register to confirm that the invoice amounts, general ledger distributions and due dates are correct. Use the Recurring Invoice Entry task to make any corrections before updating the Recurring Invoice Register.

 

Updating the Recurring Invoice Register

When the Recurring Invoice Register is correct, enter the accounting month and year to be assigned to these invoices, and proceed with the update. The update transfers a copy of each of the updated recurring invoices to the standard invoice entry file. There they can be modified or deleted like any other invoices before printing and updating the Invoice Register.

 

NOTE: The Recurring Invoice Register Update task appends a unique four digit sequence number to the existing six character recurring invoice number. The Recurring Invoice Entry task of the Operations section explains this process.

 

File the Recurring Invoice Register for future reference.

 

Print the Invoice Register to view the recurring invoices that were updated by the Recurring Invoice Register update. This register may also contain invoices that were entered through the Invoice Entry task. Use the Invoice Entry task to make adjustments or corrections. Reprint the Invoice

 

Register.

 

After confirming that the Invoice Register information is correct, proceed with the Invoice Register Update. When the update is complete, the recurring invoices are added to the Open Invoice file and can be selected for payment in the normal manner.

 

Processing Computer-generated Checks  (return to top)

The frequency of printing computer checks depends on the number of checks that are written monthly, and on the time of the month that payments are due to your vendors. The fewer the number of open invoices, the less often checks are printed.

 

Use the Manual Check task to enter checks not suitable for printing by the computer. Processing a C.O.D. payment, for example, is usually done immediately and you might not have enough time for the steps required.

 

Reporting Aging and Cash Requirements (Optional)

Print the Aging Report to determine which invoices to pay. This report shows the open invoices aged by time periods specified at the time the report is printed.

 

Print the Cash Requirements Report as needed. The report shows the total amount needed to pay the invoices that are due.

 

NOTE: You can skip printing the Aging and Cash Requirements Reports and proceed directly to selecting an invoice for payment.

 

Selecting an Invoice for Payment

Based on the information provided by the Aging and Cash Requirements reports, use the Payment Selection task to select invoices to be paid by computer checks.

 

Make selections by individual invoice, invoice due date, discount date or payment group. After selecting the invoices to be paid by computer checks, print the Payment Selection Report. Confirm that the payment selections are correct.

 

NOTE: Review the report carefully so that you do not need to reverse checks created in error.

 

Printing Checks

Load the check forms into the printer, and use the Check Printing task to print the checks. Checks are normally printed in vendor number order.

 

NOTE: If you want to use different check stock for different accounts payable types, print the checks in accounts payable type sequence. Refer to the Check Printing task in the Operations section. For this option to be available, the Multiple AP Types checkbox in the Application Parameter must be checked and the Print Checks in AP Type Sequence checkbox must be marked.

 

After the checks have printed, review them to verify that they were printed correctly. If the checks were not printed correctly, reprint them before continuing. The reprint option voids the original numbers of the checks that are reprinted.

 

Load the regular blank paper back into the printer, and print the Check Register. It lists the checks that were in the batch, including voided checks.

 

Updating the Check Register

 

Confirm that the final Payment Selection Report balances with the Check Register, and proceed with the Check Register Update. The update has the following effects:

  1. The checks are added to the files accessed by the Monthly Check Report and Disbursements Journal.

  2. The vendor payment history is updated for each vendor that was paid.

  3. A payment record is written to the Open Invoice file for each check processed.

  4. The General Ledger Daily Detail file is updated according to the distribution codes associated with the invoices during the invoice entry process. If the Accounts Payable module is on an accrual basis, the total amount paid during the check run is debited to the accounts payable account(s). On a cash basis, the appropriate expense account is debited. The cash account is credited, and the discounts-taken account is credited by the amount taken in discount.

  5. When the Bank Reconciliation checkbox is marked in Application Parameters, the check numbers are posted to the proper bank account (as identified by the general ledger cash account(s) being posted).

 

Processing Manual Checks  (return to top)

 

Use the Manual Check Entry task to record payment and accounting information from handwritten checks, reverse previously written checks and void unused checks. Checks are usually written manually when you cannot wait for the scheduled computer check printing process.

 

Reversing a check is the process of canceling the information on a check that was updated in the Accounts Payable (and General Ledger) module. A check can be reversed regardless of whether it was generated manually or by the computer. Reverse checks because payment was stopped, the check was lost, funds were insufficient and so forth.

 

A check is voided, rather than reversed, if it has not been added to the Accounts Payable or General Ledger permanent transaction files (no accounting information was updated), and it is rendered unusable by the module. Void a check whenever a blank check is lost, defaced or when a manual check is written, voided, and never entered into Accounts Payable through the Manual Check Entry task. Voiding a check has no effect on the accounting information in the Accounts Payable or General Ledger modules. It does, however, record the check as voided in the files accessed by the Monthly Check Register and the Disbursements Journal, and in the bank reconciliation files. Remember that checks are voided automatically by the module if they are used for producing a test pattern or if a check print run must be restarted.

 

Entering Manual Checks

 

(Optional) Before entering a batch of manual checks into the computer, calculate the total of the check amounts on an adding machine tape.

 

Determine the invoice number, the invoice amount, the vendor and the correct general ledger distribution for each check. Use the Manual Check Entry task to enter one or more manual checks.

NOTE: If a manual check is processed for an invoice that was previously entered and updated through the Invoice Entry and Invoice Register Update tasks, the general ledger distribution will come from the previously posted invoice distribution.

 

Running the Manual Check Register

 

When all the manual checks are entered, print the Manual Check Register. It lists the transactions entered through the Manual Check Entry task (including check reversals and voided checks) and provides a general ledger distribution recap. If an adding machine tape was made, verify that the register total agrees with the tape total for the checks.

Check the report to be sure that the information is correct before updating. To make corrections, Click [No] at the update prompt. Return to the Manual Check Entry task to make changes. Reprint the Manual Check Register.

 

Updating the Manual Check Register

 

When the Manual Check Register is correct, proceed with the update. The update has the following effect on the module:

  1. The vendor purchase and payment history is updated in the Vendor History file.

  2. The check information is added to the Monthly Check Report.

  3. For manual checks - If the check is payment for a previously entered open invoice, that invoice is reduced by the amount of the payment. On an accrual basis system, the accounts payable general ledger account is debited for the amount of the payment. Cash and discount accounts are credited according to the distribution code associated with the original invoice. On a cash basis system, the expense/purchase distributions originally entered with the invoice are debited and the cash account credited. This is because no postings were made when the invoice was entered. If the check is for payment of an invoice not previously entered, the expense account is debited for the amount entered in the distribution, and the cash and discount accounts (determined by the distribution code associated with the check) are credited.

  4. For check reversals -  A check reversal is recorded as a separate transaction in the Open Invoice file, causing the open invoice(s) to be returned to open status. The cash and discount accounts are debited, and the accounts payable account is credited. The distribution code associated with the original invoice determines which general ledger accounts are posted.

 

Printing the Daily Detail Register  (return to top)

 

When the General Ledger module is installed, you can print and update the Daily Detail Register at the end of each day to capture the accounts payable processing that has taken place.

 

Processing Period End  (return to top)

 

All the transactions (invoices and checks) for the period must be entered and updated before beginning the accounts payable period-end update. When the processing for the month is completed for invoices, computer checks and manual checks, proceed with the period-end process.

 

NOTE: You can enter invoices and checks that fall into the next period before the current period is closed.

 

Printing the Aging Report

 

Print the Aging Report by accounting date (Aging Option) by marking the Include Activity Past Aging Date field. If the module is on the accrual basis, the total of the invoices on the Aging Report should balance to the amount of the accounts payable liability account in the general ledger. If it does not, review all related general ledger and accounts payable transactions posted since the last closing to find the erroneous or missing transactions.

 

Printing the Purchase Journal

 

Print the Purchase Journal for the selected period to see the invoice activity in either general ledger distribution sequence or vendor sequence.

 

NOTE: The Monthly Purchases file is used to create the Purchase Journal.

 

Producing the Disbursements Journal

 

Print the Disbursements Journal for the selected period to see the accounts payable disbursements for the selected period, in either check number sequence or vendor number sequence.

 

NOTE: The Monthly Disbursements file is cleared by the Period End Update.

 

Running the Monthly Check Report

 

Print the Monthly Check Report. Confirm that the checks on this report belong to the current period and that all the checks for the period are listed.

 

Printing 1099 Forms

 

Before closing the December period, perform the Export 1099 Data to Text task. This exports the form 1099 Misc. vendor information and total invoice amounts to a text file for use in transfering the information into a third party 1099 form printing software such as Account Ability from www.idmsinc.com. Contact them for further information.

 

Performing Period End Updates  (return to top)

 

After the period-end reports are printed and the Accounts Payable Aging Report balances with the general ledger, perform the Period End Update task. It has the following effect on the module:

  1. The Accounts Payable Current Period number is incremented. When you are in the last fiscal period, the period number is reset to 1 and the year number is incremented.

  2. Paid invoices are cleared from the monthly purchases file (unless the Retain Zero Invoices checkbox is marked in Application Parameters).

  3. The Monthly Disbursements file is cleared.

  4. The Monthly Check file is cleared of the period’s checks. The check date is compared to the period-ending date to determine whether to remove the check from the file.

  5. The Temporary Vendor file is cleared of all zero invoices.

  6. When the last period in the fiscal year is closed, each vendor’s year to date figures are cleared for purchases, discounts and payments. When processing for the next year begins, the next year to date figures are moved to the current year to date figures.

  7. If the current period is December, the calendar year to date disbursement figure is reset to zero.

NOTE: The Accounts Payable module has a two part Period End Update. The first part updates the fields that are fiscal year-related on a The Period End Update updates the fields that are kept by fiscal year

 

Processing Checklist  (return to top)

Daily Processing

__ Invoice Entry

__ Invoice Register

__ Aging Report

__ Cash Requirements Report

__ Payment Selection Report

__ Check Printing

__ Check Register

__ Manual Check Entry

__ Manual Check Register

Month End Processing

__ Recurring Invoice Entry

__ Recurring Invoice Register/Update

Period End Processing

__ Aging Report

__ Purchase Journal

__ Disbursements Journal

__ Monthly Check Report

__ Export 1099 Data to Text  for Printing (before December closing)

__ Period End Update

 

 



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