By Merine Tulloch, FCCA
A business that is allowed to accept goods from suppliers before paying for them need to keep very accurate accounting of their payables. Here, I have provided instructions on how to make your own Excel template that will help you do just that.
- Why Accounts Payable (A/P) Tracking
When your suppliers allow you to open a credit account and you purchase from many vendors, how can you know your true accounts payables (A/P) and to which supplier? Without a proper tracking system, chances are you won’t, and when these credit accounts become due for payment, you’ll be searching for the invoices if you don’t have a good tracking system. Also, at month end you will be spending a lot of time trying to figure out the right expense account to allocate the disbursement to.
To help you appreciate accounts payable cycle, please see below snapshot of an accounts payable template in a Microsoft Excel format that can be utilized as a model for your A/P tracking.
- The A/P Ledger at a glance
On the screenshot, to the right you can see an accounts payable ledger that keeps track of each vendor, all the transactions done with this vendor, ending balances for each vendor, and total overall accounts payable balances for all vendors.
Almost all accounting software programs will allow you to set up vendors (your suppliers) and the expense accounts connected with those services or supplies that you acquire from them.
Tracking your own accounts payable can be easily done, even if you are without an accounting software program that carries the accounts payable module.
REMEMBER THAT THE ACCOUNTS PAYABLE BALANCE IS USUALLY A CREDIT BALANCE IN THE GENERAL LEDGER.
Here are some steps in using the accounts payable template provided-
- Collect all Invoices – First, batch all invoices for the month by credit supplier.
- Update Invoices – Next, you update each supplier with details from the invoices. This is posting in the accounts payables due. You debit the expense account (e.g. office supplies) and credit your accounts payable account. This entry to accounts payables will allow you keep a running total of what is owed to each vendor.
- Pay the Vendor – When you make payment to your credit accounts, the cash in bank account is credited and your accounts payable account is debited. Please note that this spreadsheet allows you to keep track of what is owed after each entry. It is very easy to insert a row if more is needed for that supplier.
- Subtotals – This accounts payable spreadsheet allows total for each vendor and gives a quick overall glance as to total accounts payable. It can be sorted by date and be maintained to provide an annual or a Year-to-Date position.
Where a business buys goods and services on credit it is imperative that accurate records of the accounts payable are kept in order to ensure that payments are made on time. This also allows for confidence in the reports generated from the monthly Balance Sheet. Finally, when you enter information for the credit suppliers and the corresponding entry is made to the expense account it allows for quick and efficient cross checking and accurate capture of the business activities.
© Merine Tulloch -2015
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