Accounts Payable

DigiSonos

From: DigiSonos A/P

To: you

The A/P department's main responsibility is to pay the vendors. We are adopting the pay-upon-receipt model, as opposed to pay-upon-invoice. This means that AP pays the vendors right away, based on what we receive. There is no invoice. We authorize payment when the receiving department notifies us that it accepted some goods. We only pay for the quantities accepted by the receiving department and we pay the prices indicated in our purchase order, which we receive from the purchasing department.

Each order is sent to a single vendor, but may include several items. We need to keep track of partially fulfilled orders, i.e., orders that require multiple shipments to be fulfilled. Even in that case we still pay upon receipt of the goods.

At this point, disagreements on payments are resolved by a reconciliation specialist (an AP employee) who contacts the vendor by phone and then manually changes entries in the system. We call these occurrences "reconciliations" and we record them. Reconciliations are associated to shipments and include a date, the AP employee, the new payment (or credit) and a brief note explaining what happened.

Our database keeps track of all payments so that our analysts can review them at any time. All our payments are electronic. An Electronic Funds Transfer module (part of the system) is used to credit the vendors checking accounts at the vendors' banks. We store the necessary parameters, such as vendor ID, bank routing number, account number, etc.

Thanks again for your help in doing all this.

- Lois Lane, CPA, AP Manager