How sap overcomes challenges in accounts payable process in sap?

Whenever an organization purchases product or service from vendor, vendor sends bill to organization. The amount of money which is to be paid to vendor is called accounts payable.

Procurement department raises the purchase order, Goods/ services are received. Bills received from vendor are handed over to finance department. Finance department creates vendor invoice. It’s the responsibility of finance department to pay to vendor on time.


What are the challenges in accounts payable process?

  1. Making sure that vendor gets paid on time.

Organization have huge list of vendors. Organizations keep receiving goods/ services from vendor and vendor sends bills accordingly. Out of thousands of bills, keeping track of which bill is paid and which bill is due for payment becomes difficult.


  1. Different payment method involved

A vendor may need to be paid by ‘check’ but other vendor may need to be paid by online bank transfer. Hence different payment method for different vendors, hence bills need to be segregated depending upon payment method. This makes is difficult to track.


  1. Sending payment information to banks

Employee needs to prepare payment information to bank so that bank can process the payment to vendors. Manual intervention invites scope for error and hence lot of rework.


  1. Bank reconciliation

When vendor payment is done, money is deducted from organization’s bank account and paid to vendor’s bank account. Hence employee working in accounts payable module needs to coordinate with bank to reconcile organization’s account books with balance in bank account. Employee also needs to communicate with vendor to keep the vendor informed that payment has been initiated for so and so bills.

With large number of vendors and huge list of bills, it becomes very difficult for employee working in account payable to keep track of all the things.


How sap helps to overcome these challenges?

  1. Sap makes tracking of vendor invoices very easy: open & cleared status of invoice

Whenever bill from vendor is received, vendor invoice is posted in sap. Vendor invoice by default is created in open status, open status means that payment is not yet done for the invoice. Once invoice is paid, status of the invoice changes from ‘open’ to ‘cleared’.

Vendor invoices can be segregated into open & cleared by simply executing report (T code: FBL1N).


  1. Automation of payment process, reduced manual intervention

Sap helps in automation of below manual activities:

“Selecting invoices for payment and segregating them as per due date for payment, sending the information to bank for payment, providing information to vendor regarding payment of invoices.”

Using sap, invoices due for payment are automatically picked, payment file is auto generated which is sent to bank for payment, bank reconciliation process is automated, e mail with attached payment advice is sent to vendor automatically whenever payment of vendor invoices is initiated by  organization.


  1. Easy bank reconciliation

Employees don’t need to spend their entire time on coordinating with bank to reconcile organization’s account books with balance in bank account.

Sap automates the process of bank reconciliation which reduces time consuming manual activities.

Organization receives bank statement from bank (in the form of files over internet), these files are picked and processed by sap jobs. On successful processing of bank statement, document is posted which enables bank reconciliation.

accounts payable in sap

Above picture summarizes the accounts payable process in sap.