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Accounts payable reporting is the process of tracking what your business owes its suppliers and vendors.
Keeping track of the money your business owes its suppliers and vendors is crucial to its financial health and long-term viability. That’s why all businesses need an accounts payable reporting process that provides visibility into their cash flow and outstanding debts. We’ll explain accounts payable reporting, why it’s essential, and how accounting software can make the process easier.
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Accounts payable reporting is the process of tracking and reporting your business expenses. It’s an ongoing reporting process that ensures your business maintains accurate financial records.
Accounts payable reporting is closely tied to accounts payable (AP), which refers to the money your business owes vendors and suppliers. These purchases may include overhead costs, inventory, and other business operational expenses. When you make a purchase, the vendor or supplier invoices you. You then make the payment at a later date.
“Accounts payable is more than just paying bills,” said Swapnil Shinde, CEO of bookkeeping software company Zeni. “It’s a systematic process that starts when an invoice is received or a purchase is made until the financial obligation is closed by settling the payment.”
Here’s a look at standard accounts payable reports, what they represent, and how they can help your business stay on top of its finances.
An invoice aging report includes a list of all unpaid accounts payable invoices. The information can help determine how much the business owes and which invoices must be paid first.
An invoice aging report includes details such as:
An invoice aging report will help you spot missed payments and see how far past due an invoice is. To avoid getting behind on vendor payments, you should run an invoice aging report daily or weekly.
The AP trial balance lists the ending balance in each general ledger account and includes any unpaid or partially paid invoices. The report ensures a business’s debts match its credits and that all journal entries are accurate.
Generating an AP trial balance is similar to balancing a checkbook. It reviews all payments to ensure they match the total amount due. If you accidentally overpay a vendor or miss a payment altogether, your AP trial balance will help you catch the issue. If your credits and debits don’t match, it could be because your business received inventory but hasn’t yet received the invoice. Once you’ve received the invoice, your accounts will reflect that.
A payment voucher is a document businesses use to track supporting information needed to approve an invoice payment. It’s an internal auditing control that ensures each invoice is paid and the company receives the goods and services it purchased.
A voucher activity report includes the following information:
A voucher activity report tracks payment vouchers made over a specific period. It can help you see how much the business spent on a particular project or how much you’re spending in different departments.
The open reconciliation report shows all accounting activity concerning payment vouchers over a specific period. The report helps you determine whether your business makes accurate and timely payments to its vendors.
You can use the open reconciliation report to check for unpaid liabilities. The report will also show whether you’re sending payments to the correct vendor.
Inaccurate reporting and missed payments can cause differences in the ledger. Business bank account reconciliation can help you identify discrepancies and spot any issues with fraud.
A payment history report details payments you’ve made over a specific period. The report can help you see how much you’ve paid a particular vendor. It can also help with budget planning, because you can see how much you’ve spent in a certain category.
Every company has monthly recurring bills, such as rent, insurance payments, or software subscriptions. A recurring invoice report helps ensure these bills are paid on time and makes forecasting spending easier. The report can also help the AP department flag any unusually high or low bills.
Many vendors offer an early payment discount to companies that pay invoices in full before the due date. A discount report can help your business take advantage of early payment discounts. It will show you the early payment discounts you’re currently receiving from vendors and identify opportunities to save you may have previously overlooked.
A credit memo is an adjustment that either reduces the amount of a current vendor bill or lowers future bills. Credit memos can be issued for various reasons, including product returns or incorrect pricing. A credit memo report shows how many credits are currently available so your company can apply them to future invoices.
A top vendor report ranks your company’s top suppliers based on transaction volume and value. The report can help you determine which vendors are most crucial to your business and which invoices should be paid first. It can also help you negotiate more favorable terms with your suppliers.
An AP turnover report tracks the efficiency of your company’s AP process and shows how quickly your business pays its vendors and creditors. A high turnover ratio means your company is paying its bills quickly, while a low ratio could indicate it’s having difficulty paying its bills.
Businesses of all sizes can benefit from an accounts payable process that includes accurate reporting, but an accurate accounts payable reporting process is particularly crucial for small business accounting. You must know whether you’re paying invoices on time and paying the correct amounts.
Here are a few reasons accounts payable reporting matters:
Improving the AP process can help your company free up working capital and reduce business expenses overall. Below are some steps you can take to improve the AP process.
Accounting software is an excellent way to stay on top of your AP reporting. Instead of manually entering your financial data, the best accounting software can do the heavy lifting for you while automatically generating reports and displaying payment trends over time.
“Accounting software using AI streamlines workloads and improves efficiencies for highly structured and repetitive tasks, like reporting, with a high degree of speed and accuracy,” said Paul Wnek, founder and CEO of accounts payable app ExpandAP.
Here are a few ways accounting software can benefit your business:
As a business owner, you must keep up with your accounts payable reporting. Tracking the most pertinent reports will ensure you’re aware of outstanding invoices, maintain excellent vendor relationships, and keep accurate financial records.
If you need help with your AP reporting, the right accounting software can make the process easier. Accounting software reduces the risk of human error and automatically generates the reports for you. That way, you know your financial records are always accurate and up to date.