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118 CHAPTER 4 The Procurement Process

Figure 4-30: Data needed for vendor payment

Tasks
Processing payment involves several steps: selecting a payment method and
a bank, deciding which invoices are ready for payment, calculating payment
amounts, posting the payment documents, and printing the payment medium.
When making payments manually, the user will select the payment method
and the bank and will provide the vendor number and the amount of the pay-
ment. The system will then display a list of open invoices for that vendor. The
user will next select the invoices that are to be paid. Any applicable discounts
based on payment terms are then applied. For example, if the payment term
is 2%/10Net 30 and payment is being made within the 10 days specifi ed in the
3
terms, the system will apply a 2% discount. Once the payment is posted in
the general ledger, the actual payment can be sent. If payment is made electroni-
cally, the system will automatically send the payment. If it is to be made via a
printed check, the user will print and send the check to the vendor.
If the company has an automated payment program, then the program
will retrieve and process all of the invoices that are due for payment using the
parameters specifi ed in the payment program. Users typically become involved
only if there are exceptions that require special resolution.

Outcomes
One obvious outcome of this step is payment to the vendor, either electroni-
cally or via a check. Appropriate general ledger accounts are also updated, as
shown in Figure 4-31, and a corresponding fi nancial accounting document is
created. As the fi gure indicates, the bank account is credited by the amount of
the payment, and the vendor account is debited, as is the associated accounts
payable reconciliation account.

3 The term 2%/10Net30 indicates that payment is due within 30 days of receipt of the invoice and
that a 2% discount may be taken if payment is made within 10 days of receiving the invoice.

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