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Accounts Payable as a Balance Sheet Liability and Its Benefits
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Posted On :
Dec-05-2011
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Article Word Count :
495
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Payable are also sometimes known as Accounts Payable and represents money that is owed by a company to its suppliers. In simple words, it the management of business bills those are unpaid.
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Payables are also sometimes known as Accounts Payable and represents money that is owed by a company to its suppliers. In simple words, it the management of business bills those are unpaid.
How Accounts Payables Are Recorded on the Balance Sheet
Let's say ABC wants to order a new LCD which is being released by XYZ. ABC orders 500,000 pieces for its stores. XYZ receives the order, and within a week, ships the LDC to one of ABC's warehouses. Included in the shipment is a bill (let's say XYZ charged ABC $50 per LCD for half a million pieces - that's $25 million). XYZ has already sent the LCDs to ABC, even though ABC hasn't paid a penny. In essence, ABC is buying on credit and promising to pay XYZ's the $25 million. The $25 million would go on ABC's balance sheet as accounts payables.
Accounts payable Terms
Generally a company that buys a product on credit sets a term for its accounts payables. The term is the number of days supplier must pay their bill before they are charged a late fee, fine or turned over to a collection agency (most terms are, 30, 60 or 90 days). If XYZ sold the LCDs to ABC on a 30 day term, ABC must pay its bill during that time.
While accounts payables are good, they can bring serious problems to a business if they aren't handled properly. What if ABC would not pay it on time then XYZ would have a right to take legal action against ABC. This would make vendors angry and possibly damaging the business’ credit rating and can also stop future supply of goods. Once a consistent procedure is developed, the accounts payable process can go smoothly.
Benefits of account payable:
It Improve Strategic Vendor Relationship
It Improve Accuracy of Information
You can save huge amounts of profits through the outsourcing work
Monthly, quarterly, half-yearly and annual reports are simply made available.
Tax related work is done without loss of man-hours at the company level
Every reference to any particular account can be assessed immediately and action taken.
Paying the invoices on the due date as per the company's policies.
High Accuracy
Superior Quality
Real-time Tracking and Reporting
Reduced Annual Accounts Payable Ledger Costs
Centralized Control over Payables across the Enterprise
Accounts Receivable (AR)
A well prepared accounts receivable financing management function is important to the cash flow of any business. To have an effective accounts receivable financing function it requires an investment of time, talent, reliance and business resources.
By outsourcing accounts receivable processing, business managers are able to focus on core business tasks while simultaneously trimming costs of finance and accounting, and boosting the company’s productivity and profitability.
Outsourcing your accounts receivable financing management tasks and get benefits:
Increased Cash Flow
Fewer Delinquencies
Reduced Operating Costs
Improved Customer Services
Improved Management Control
Reduced Outstanding Daily Sales
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Article Source :
http://www.articleseen.com/Article_Accounts Payable as a Balance Sheet Liability and Its Benefits_114470.aspx
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Author Resource :
Kevin Clymer is a business manager at Heka Support Services having 10 years of experience in accounts payable and other accounting services. He has written many articles on accounts payable and Bank Reconciliation. For more information on accounts payable visit at http://www.fna.heka-finance.com
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Keywords :
Account Receivables, Bank Reconciliation,
Category :
Business
:
Business
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