Accounts Payable is an accounting/ bookkeeping term, which simply relates to the accounts in which you pay as part of running a Business.
You receive an invoice in the appropriate manner, with the appropriate information included and then you pay it, according to the terms of payment, although we all know someone’s budget could determine when they pay a bill, e.g. some will pay before the payment terms are due, some may wait until after the payment terms have expired to pay the account.
Often after a small Business starts off, and continues to grow their Business, they get to the point where they need to either employ a Bookkeeper or contract a bookkeeper in to help with their financial information.
From time to time, some small Business owners will allow the chosen Bookkeeper/ Accounts person to pay the accounts, and therefore paying the bills, which can reduce some of the work in which the Manager needs to concentrate on.
One thing, I will say now, the majority of bookkeepers, account people in which you will find, are trustworthy and will never do the wrong thing, however from time to time, there is always the dishonest person in life, although only a small percentage, it may just be the one you hire, depending on how you research their previous work.
It is important, that the business owner, ensures the right processes are in place, which helps to protect everyone. One of these processes would include the accounts person/bookkeeper supplies the Manager with a regular update of the financial situation of the business, including income and expenses, to ensure the owner understand how the business is traveling.
One of the other important processes to have in place is the approval process of paying such accounts. The owner/ Manager of the business should always ensure there are multiple people ( minimum of 2) who approve the payment of any accounts within the Business. This is one way to ensure the money is going to where it should be, helps to ensure sufficient money is left in the account after payment of accounts and helps to ensure the work has been completed in the appropriate manner, at the appropriate standard acceptable to the business.
The approval process can also help if you have just taken over a Business, and yet the previous owners as part of their sale contract have agreed to continue working at the company for a period of time. It is possible they may still have access to your financial information, online banking etc, banking details, especially if you don’t change all the passwords.
You work hard for the money in which you receive through all your hard work, structures in place, procedures in place, you need to take every step to protect yourself, the last thing you need is someone to be taking money out of your account without approval or to fund their lifestyle. Remember those stories of people taking money out of their employer’s accounts to fund their own gambling addiction, or lifestyle, which is something you need to protect yourself against. Yes, you can speak to your insurance provider and discuss protection against this sort of action occurring.
Yes, it can be classed as theft from the business, it does not mean you will be able to recoup all or any of the money back, once the accused is caught, therefore having the best possible processes in place can help protect yourself.
Again, I must stress not everyone you come across is dishonest, or untrustworthy, however, you need to protect yourself, for the ” just in case” occurring. It is similar, to not all people will have a car accident each year, or your shop will be broken into, however, we have insurance in place for the ” Just in case it happens”, these Accounts payable process is a similar thing. But it also helps the Business owner to understand their true financial position within their company.
If you are ever unsure about any of your financial information, speak with your Accountant as soon as you notice something is wrong, e.g. it appears as if you are spending more money than you thought you were spending, a good Business owner often knows what something costs, and approx how much should be going out of their account each month.
