What is accounts payable?

A wholesaler receives invoices every day from manufacturers, hauliers and the company that supplies its stationery. Every purchase invoice follows the same route: arrival, checking, approval, posting and payment. That route is the daily work behind the term.

It is about more than paying. You check that what is on the invoice was actually ordered and received. In a business with a warehouse you compare the invoice, the order and the goods receipt. You record who approves, and you watch the payment terms so that you neither miss any discount for early payment nor pay late.

The list of open invoices is also your picture of what you owe, which matters for cash flow. If you know what has to be paid in the coming period, you can plan your cash and avoid unpleasant surprises.

Once a payment has gone out, you link it to the right invoice. That step is payment matching. Skip it and a paid invoice stays open, or an invoice is paid twice. A bank connection can speed up the loading of bank statements.

What goes wrong? Invoices lie on a desk or in a mailbox, suppliers phone for their money, or you pay twice because an invoice arrived twice. Check the bank details of a new supplier before you pay, and be alert to messages in which an account number has suddenly changed. That is a well-known type of fraud. If in doubt, phone the supplier on a number you already have, not the one in the message. Also record who may approve invoices and who may make payments, so that these tasks do not rest with one person.