Sure thing! When diving into a blog post about accounts payable terminology, unravelling the jargon surrounding this financial realm is important. From invoices to accruals, the terminology can sometimes feel like a maze.
This comprehensive guide will break down the key accounts payable terms, clearly understanding each concept.
Whether you’re new to the field or looking for a refresher, this post aims to be your go-to resource for navigating the world of accounts payable.
25 Most Used Accounts Payable Terms
Here’s the list of essential accounts payable terminology:
Invoice: A document detailing the goods or services provided and their costs sent by a supplier to a buyer.
Accounts Payable: The amount of money you owe your suppliers or vendors for goods or services purchased on credit.
Purchase Order (PO): A formal request issued by a buyer outlining the details of items to be purchased.
Accruals: Recognizing expenses or revenues before the cash transaction occurs, matching them to the period they relate to.
Payment Terms: The conditions under which a buyer has to pay the seller, including due dates, discounts for early payment, etc.
Credit Memo: A document issued by a seller to a buyer indicating a reduction in the amount owed due to returned goods or other reasons.
Aging Report: A report that categorizes accounts payable by the length of time invoices have been outstanding.
Vendor: A supplier or seller of goods or services to a company.
Three-Way Match: The process of matching the purchase order, invoice, and receiving report to ensure accuracy before payment
Early Payment Discount: A reduction in the amount owed to a supplier in exchange for paying the invoice before the due date.
Statement Reconciliation: Comparing a company’s internal records of transactions with the vendor’s statement to ensure accuracy
Payment Reconciliation: Verifying that payments made by the company match the amounts owed to vendors
Credit Terms: The terms and conditions under which a buyer purchases goods or services on credit from a seller
Receiving Report: A document confirming the receipt of goods, typically used to verify invoices.
Payment Approval: The process of authorizing payments to vendors, often involving multiple levels of review and authorization
Net Payment: The total amount paid to a vendor after deducting any applicable discounts or adjustments.
Vendor Master File: A database containing essential vendor information, including contact details, payment terms, and history.
1099 Form: A tax form to report payments made to independent contractors or freelancers.
Expense Report: A summary of business-related expenses incurred by employees that require reimbursement.
Duplicate Payment: When a company inadvertently pays the same invoice more than once.
Withholding Tax: A portion of payments withheld and remitted directly to the government as income tax.
PO Flip: Converting a purchase order directly into an invoice for payment
T&E (Travel and Entertainment) Expenses: Costs incurred by employees during business-related travel or entertainment activities.
Electronic Data Interchange (EDI): The electronic exchange of business documents between companies, including invoices and purchase orders.
Float: The time between when a payment is initiated and when it is processed and cleared by the bank.
“In conclusion, the terminology surrounding accounts payable might seem labyrinthine at first, but with a grasp of these essential terms, navigating this financial landscape becomes more manageable.
Whether it’s understanding invoices, payment terms, or vendor relationships, a solid grasp of these concepts is crucial for sound financial management. Stay tuned for more insightful content on managing your accounts payable efficiently and effectively.”