A clear understanding of the term accounts payable is fundamental to run a successful business. No matter the industry, each and every company has an accounts payable. It’s important to note that purchase order accounting and cash disbursements are very important and closely related to accounts payable, as well.
All businesses at one point or another will buy something for their company. A perfect example is when the company orders office supplies. Accounts payable is how a business keeps track of the money that is owed to its suppliers. This is shown as a liability on a balance sheet. Whenever an invoice is received for a product or a service rendered, it’s entered into the accounts payable ledger for approval. Accounting Seed allows you to pay vendors easily. With our application, you can manage your credit cards, accounts payable, and purchasing with ease.
How is this Different from a Cash Disbursement?
A cash disbursement is when money is taken out of the bank account to pay for a good or service. After an invoice has gone through the approval process in accounts payable, it is authorized for payment in the form of a cash disbursement.
Purchase Order Accounting
A purchase order is an official order issued by a buyer to a seller. It has information on the specific products or services ordered as well as the quantities and the prices that were agreed upon. This is a legally binding agreement on the part of the purchaser to actually buy and pay for what was ordered.
Link Between Accounts Payable and Purchase Order Accounting
Before any account payable can be approved for cash disbursement, it must first go through an approval process. This is to make certain that the invoice is for the proper amount. Compare the invoice to a purchase order. This ensures that you are being billed for the correct amount. This can serve as an automated approval. When the invoice matches the purchase order, then it is able to be disbursed to the vendor.
Tips from Accounting Seed
Reach out to Accounting Seed to discuss how we can successfully manage your company’s accounts payable and purchase order accounting. Request a free demo or speak to one of our account executives by calling (410) 995-8406 today.