Accounts Payable (AP) manages all outgoing payments to suppliers, invoice entry, purchase clearing, and payment tracking to maintain vendor relationships and cash flow.
Overview
The AP system provides:
- Supplier invoice entry with PO integration
- Purchase clearing report (received vs. invoiced)
- Payment tracking and history
- Aging reports for amounts owed
- Payment allocation to multiple invoices
- GL integration for all transactions
Entering a Supplier Invoice
1 Access Invoice Entry
Navigate to Accounting → Accounts Payable → Invoice Entry
2 Select Supplier
Click the supplier lookup field and select the supplier.
If entering an invoice for received materials, all open POs for this supplier will be displayed.
3 Invoice Information
- Invoice Number: Supplier's invoice number (required)
- Invoice Date: Date on supplier invoice
- Due Date: Payment due date (for aging calculations)
- Terms: Payment terms (Net 30, Net 60, etc.)
- Reference: Your internal reference or PO number
4 Entry Method
Choose how to enter the invoice:
Option A: Link to Purchase Order
- Select PO from list of open/partially received POs
- System loads all received items from that PO
- Verify quantities and prices match supplier invoice
- Adjust if necessary (price differences handled automatically)
- System clears the received items
Option B: Manual Entry (Non-PO Expenses)
- Select expense account from GL chart of accounts
- Enter description of expense
- Enter amount
- Add additional line items as needed
- Examples: Utilities, rent, professional services
💡 Purchase Clearing Process
When you receive materials on a PO:
- Materials are added to inventory at received cost
- Debit: Inventory, Credit: Purchase Clearing
- Purchase Clearing account shows what you owe but haven't been invoiced for
- When invoice is entered, system clears the purchase clearing entry
- Debit: Purchase Clearing, Credit: Accounts Payable
- If invoice price differs from received cost, variance goes to Price Variance account
5 Review Totals
Verify invoice totals before saving:
- Subtotal: Sum of all line items
- Tax (if applicable): Sales tax or VAT
- Total: Amount owed to supplier
- Total should match supplier invoice exactly
6 Save Invoice
Click "Save Invoice" to record the transaction.
System automatically creates GL entries and updates payables balance.
Purchase Clearing Report
Critical report showing received materials not yet invoiced:
1 Access Report
Navigate to Accounting → Accounts Payable → Purchase Clearing Report
2 Report Displays
| Column | Description |
|---|---|
| PO Number | Purchase order reference |
| Supplier | Supplier name |
| Product | Product code and description |
| Received Date | When materials were received |
| Quantity | Amount received |
| Cost | Per-unit cost |
| Total Value | Total amount in clearing |
| Days in Clearing | Days since receipt (aging) |
3 Using the Report
- Identify Missing Invoices: Items in clearing > 30 days may need follow-up
- Enter Invoices: Click any row to go directly to invoice entry for that PO
- Month-End Accruals: Total clearing balance = amount owed but not invoiced
- Reconciliation: GL Purchase Clearing account should match report total
⚠️ Important: Purchase Clearing Balance
Key points about purchase clearing:
- Clearing balance represents materials received but not invoiced
- This is a real liability even though you haven't been billed yet
- Should be cleared (matched to invoices) regularly
- Large balances may indicate missing supplier invoices
- At month-end, this balance is part of your accounts payable
- Report to suppliers if invoices are delayed beyond payment terms
Processing Payments
1 Access Payment Entry
Navigate to Accounting → Accounts Payable → Payment Entry
2 Select Supplier
Choose supplier and system loads all outstanding invoices.
3 Payment Details
- Payment Date: Date check was issued/payment sent
- Payment Method: Check, Wire Transfer, ACH, etc.
- Reference: Check number or transaction ID
- Amount: Total payment amount
4 Allocate to Invoices
Select which invoices this payment covers:
- Check invoices to pay in full
- OR enter partial payment amounts
- System tracks which invoices are paid/partially paid
- Remaining balance shows on aging report
5 Save Payment
Click "Save Payment". System creates GL entries:
- Debit: Accounts Payable
- Credit: Cash/Bank Account
AP Aging Report
Track amounts owed to suppliers by aging bucket:
| Bucket | Days Since Invoice | Priority |
|---|---|---|
| Current | 0-30 days | Normal payment cycle |
| 31-60 | 31-60 days | May be past due |
| 61-90 | 61-90 days | Past due - contact supplier |
| 90+ | Over 90 days | Severely past due |
General Ledger Integration
Invoice Entry (PO-based)
- Debit: Purchase Clearing
- Credit: Accounts Payable
- (If price variance exists, variance account is also debited/credited)
Invoice Entry (Non-PO Expense)
- Debit: Expense Account
- Credit: Accounts Payable
Payment Entry
- Debit: Accounts Payable
- Credit: Cash/Bank Account
💡 Best Practices
- Enter supplier invoices as soon as received
- Review purchase clearing report weekly
- Follow up on clearing items older than 30 days
- Match invoice prices to PO prices - investigate variances
- Pay invoices within terms to maintain supplier relationships
- Use reference numbers for easy payment reconciliation
- Reconcile AP sub-ledger to GL monthly
- Review aging report before processing payment batches
Common Scenarios
Price Variance on Invoice
Supplier invoice price differs from PO price:
- System shows received cost vs. invoiced cost
- Variance is automatically calculated
- Variance posts to Price Variance GL account
- Inventory value remains at received cost
- AP reflects actual invoice amount
Partial Invoice for PO
Supplier invoices only some items from PO:
- Select PO in invoice entry
- System shows all received items
- Uncheck items not on this invoice
- Save invoice (clears only selected items)
- Remaining items stay in purchase clearing
- Can enter additional invoices for same PO later
Non-PO Expense (Utilities, Rent, etc.)
Enter invoices not tied to purchase orders:
- Choose "Manual Entry" mode
- Select appropriate expense GL account
- Enter description and amount
- Save - creates invoice without PO link
- Pay same way as PO-based invoices