1. Deciding what to pay if you don’t have enough money to pay everything
1. Check if invoice should be paid (Could be done by purchasing)

• purchase order frequently retained by purchasing (copy can be sent to A/P)
• receiving document (purchase order without pricing information) sent to receiving area (copy may go to A/P)
• goods come it and receiving dept checks against receiving document
• note what was actually received and send to purchasing, A/P or both (2 copies could be sent to receiving area and copies distributed - make that 3 copies if receiving wants to keep one)
• A/P gets receiving document (directly or routed through purchasing - if routed accuracy probably confirmed)
• vendor sends invoice to A/P - check against purchase order (for price) and receiving document (for count) - can send invoice to purchasing and they check and pass to payables
• shipping document comes with goods - checking against receiving document - notify vendor, purchasing and A/P if problem - shipping document frequently attached to receiving document and follows paperwork

Purchasing:

• Prepares purchase order ->vendor, ->file, ->A/P
• Copy of purchase order with outprices = receiving document -> receiving

• Goods and shipping document received from vendor
• Compare shipping document against receiving document and note changes
• Send to ->purchasing, ->A/P

(could be sent to purchasing for validation and then to A/P)

• Either purchasing or receiving will notify vendor of problem

• Receives invoice from vendor
• Checks to make sure order placed and price correct against purchase order
• Checks number received against receiving document/shipping document forwarded from receiving (if not done by purchasing)
• Flags problems for further action - holds
• Okays payment of invoice

Input to Confirmation Stage:

• Invoice
• Purchase order
• Receiving document with shipping info

• Confirmed invoice
• Disputed invoice

• Payment decisions
• Outstanding payables file
• confirmed invoices
• credits
• adjustments

• Invoices to be paid
• Invoices to be held
• Checks to vendor

Payment stage involved decisions on who is to be paid. Usually start out with money you have to pay bills and list of invoices to be paid. Decision instructions given to choose most advantageous use of money available (consider discounts, payment terms, credit status, age of bill etc.) Interactive process with management looking at different alternatives - some suggestions being rejected and others being forced. Results in invoices to be paid and invoices to be held.

NOTE: We are only looking at paying for merchandise. There is another whole side of this - payment for expenses to run company such as utilities, supplies etc.

• Purchase order file contains purchase orders received but not invoiced, partially received purchase orders, not received purchase orders.
• Contains both receiving and pricing information so can be used to verify invoices
• After received and invoiced goes to history file
• PROBLEM: How to handle invoices that arrive before the goods have been received - invoice can’t be confirmed - one option is to create a pending file for them
• Processing:
• Current invoices transactions go into process that checks for duplicates
• P/O and Receipts go into process that matches P/O and Receipts
• Open A/P receives those that match and can be paid
• No receipts or problem goes on pending
• Pending checked against P/O and receipt for transfer to A/P and then added to vendor owed on vendor file
• Open A/P used to determine what to pay - flag those to pay and create cash requirements report
• Cash and requirements as well as vendor file (checking owed, requirements here etc) manipulated to come up with invoices to pay - can create payment file during this processing
• Using open A/P with flagged to pay or payment file checks and check register created - vendor file also involved
• Create entries on open check file used for check reconciliation
• Delete paid from open A/P and add paid to A/P history - if payment file it is used to update open A/P and A/P history - update vendor file as well - might use check file here

• does it handle retail, wholesale, service etc - A/P is very important to retailer and wholesaler
• categories - trade (things buying and reselling) and administrative/overhead (rent, lights etc.)
• some retailers want to flag as not due for a long period of time (for example toys and jewelry order for Nov, bill after Christmas)
• if you do things on consignment does it handle
• does it handle recurrent payment - regular amount each month for a long etc. (monthly, quarterly, yearly)
• does it handle different time periods
• if multi branch company may want to break out by branch to get costs for each branch etc.
• want to be able to deal with and take advantage of wide variety of payment plans offered by vendors
• purchase order goes one place and check another - can it handle it
• want to keep track of amount of business you do with a vendor - can it handle it
• handle selection of bills you want to pay using a variety of criteria - reiterate until you have what you want to pay or can pay
• handle 1099 vendors - consultants you need a 1099 for at end of year - they are in a sense vendors
• connection to inventory