What Does Full Cycle Accounts Payable Mean?
Full cycle accounting refers to the collective transactions associated with a specific business function such as sales, purchasing, and payroll. You can apply the "full cycle" concept to individual accounting jobs as well. A person in a full cycle accounts payable position has responsibility for all tasks related to the payment of suppliers and vendors for goods and services.
Accounts payable departments strive to pay invoices on schedule, ensure the accuracy and authenticity of invoices, and conduct departmental duties with a minimum of expense. A company with a well-running accounts payable operation saves money by processing invoices with efficiency, skilled staffing, and low operational overhead. The process should contribute positively to cash flow and support mutually beneficial relationships with suppliers.
The accounts payable cycle begins with the vendor. Maintain a good relationship with your vendor in order to help facilitate understanding should you face cash-flow issues. Show respect. You may have the ability to negotiate your terms if you communicate your needs or demonstrate good intentions. After you place your order with the vendor, you will receive the product or service. Log the receipt to confirm that the business received the order. Enter a description and the number of items or type of service provided. You have now created a pending account payable to the vendor based on the mutually agreed terms.
Your vendor will send you an invoice for the goods they shipped or service they rendered. When you receive this invoice, log it into your accounting system. Include the vendor information, the due date, and the total amount due.
Verify the information included on the invoice to ensure accuracy. Check it against documents such as the receiving report, purchase order, or bill of lading. Match the quantities, prices, and descriptions on each document to the invoice. If all the information matches, then authorize the invoice for payment.
Once you authorize the invoice for payment, schedule the remittance for the next time your company prepares outgoing checks. When the check has printed, attach a copy of the invoice to the check and mail it to the corresponding vendor. File a copy of the check to ensure a clear audit trail.
John DuBois is a copywriter based in Portland, Ore. He earned a B.A. in history from Colorado State University and an M.S. in organization and management from Capella University.