Accounts Payable (SOP)
Purpose:
This Standard Operating Procedure (SOP) outlines the step-by-step processes
and guidelines for the Accounts Payable department to electively manage and process
vendor invoices, payments, and related financial transactions.
Scope:
This SOP applies to all employees involved in the accounts payable process within
the organization.
Responsibilities:
Accounts Payable Team
Responsible for processing vendor invoices, reconciling accounts, and making
payments.
Finance Head/Manager/Authorized Signatory
Approves invoices for payment and initiates payment processing
Vendors: Provide accurate invoices and necessary documentation.
Procedure:
Invoice Receipt:
All vendor invoices should be sent directly to the designated accounts payable
department
Sort and organize invoices based on their due dates.
Verify that each invoice is accompanied by the necessary supporting
documentation, such as purchase orders, receipts, and contracts.
Log all received invoices in the accounts payable register or software system.
Invoice Verification:
Accounts payable personnel should thoroughly review each invoice for
accuracy, completeness, and compliance with company policies.
Verify that the goods or services were received and match the associated
purchase orders
Check for Mathematical accuracy and ensure that all calculations are correct
Conform that the invoice complies with applicable tax regulations
Ensure that payment terms and credit periods are consistent with vendor
agreements.
Check for duplicate invoices and ensure that the invoice has not been
previously paid
If discrepancies are identified, communicate with the vendor for resolution.
Approval for Payment:
The Finance Head/Manager or authorized signatory must review and approve
invoices for payment.
Approval should be documented either physically or electronically, depending
on organization's process.
Payment Processing:
Initiate the payment process through the organisation's approved payment
method (e.g., checks, electronic transfers).
Input the necessary payment details, including the vendor's banking
information, invoice amount, and payment reference
Verify the accuracy of the payment details before confirming the transaction
Ensure that the payment is scheduled to meet the vendor's payment terms and
due date.
Payment Confirmation and Record Keeping:
Upon successful completion of the payment transaction, obtain a confirmation
receipt from the payment system.
Store electronic copies of the payment confirmation, including transaction
reference numbers and me stamps.
Update the accounts payable register or software system to reject the payment
and mark the invoice as paid.
Account Reconciliation:
Regularly reconcile the accounts payable records with bank statements and
general ledger entries to ensure all payments are accurately recorded
Investigate and resolve any discrepancies promptly.
Document Retention:
Maintain a secure and organized record-keeping system for all vendor
invoices,
approvals, and payment conformations.
Retain records in compliance with the organization's document retention
policy and any legal requirements.
Compliance and Reporting:
Ensure compliance with all relevant financial regulations and tax laws
during the accounts payable process.
Assist in preparing financial reports and documentation as needed for audits or
financial analysis
Revision and Review:
This SOP should be periodically reviewed and updated to reject changes in processes,
regulation, or technology. By following this SOP, the organization can ensure a
systematic and secure process for managing accounts payable, reducing the risk
of errors and ensuring financial accountability.
Prepared by Finance Head
Issued by Legal
Reviewed by Chief Financial Officer
Approved Director
Effect from 1st Aug, 2024
