The Complete Guide to Accounts Payable Reporting

Accounts payable (AP) is the money your business owes to its vendors and suppliers. These purchases could include rent, utilities, inventory and the cost of doing business. When you make a purchase, the vendor or supplier invoices you. You then make the payment at a later date. 

In comparison, accounts payable reporting is the process of tracking and reporting these business expenses. This ongoing reporting process ensures your business maintains accurate financial records.

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Why is accounts payable reporting important?

Businesses of all sizes can benefit from accounts payable reporting, but it's essential for small businesses. You need to know whether you're paying invoices on time and paying the correct amount. 

Here are a few reasons why accounts payable reporting matters:

• Ensure bills have been paid. Accounts payable reporting allows a business to track credit spending and ensure bills are paid on time. If your business consistently pays its vendors late, your credit rating could suffer. A poor credit rating can negatively impact future lending decisions. 

• Prepare for tax season. Accounts payable reporting also ensures you have the information you need come tax season. This information makes it easier to collaborate with your accountant and meet your tax filing deadlines. 

• Maintain a good relationship with your suppliers. By staying on top of your accounts payable reporting, your business can maintain a good relationship with its supplier. This positive relationship can lead to more favorable payment terms or opportunities to save money with early payment discounts.

• Keep accurate financial records. Accounts payable reporting ensures your company's financial data is correct. This information can help you gauge your working capital, determine which invoices need to be paid and document issues as they arise. 

Types of accounts payable reports

Let's look at some of the most common types of accounts payable reports your business will run.

Invoice aging report

An invoice aging report includes a list of all unpaid accounts payable invoices. This information can help determine how much the business owes and which invoices need to be paid first. 

An invoice aging report includes details like these:

• Vendor names
• The amount you owe each vendor
• When the invoice is due
• How long you've held the debt

An invoice aging report will help you spot missed payments and see how far past due an invoice is. To avoid getting behind on vendor payments, you should run an invoice aging report daily or weekly. 

Did you know? This report can help you manage cash flow, plan for future expenses, determine which vendors to pay first, and find ways to negotiate payment terms.

AP trial balance

The AP trial balance lists the ending balance in each general ledger account and includes any unpaid or partially paid invoices. This report ensures that a business's debts match its credits and that all journal entries are accurate.

Generating an AP trial balance is kind of like balancing a checkbook. It reviews all payments to ensure they match the total amount that's due. If you accidentally overpaid a vendor or missed a payment altogether, your AP trial balance will help you catch this. 

Tip: If your credits and debits don't match, it could be because your business received inventory but hasn't yet received the invoice. Once you've received the invoice, your accounts will reflect that.

It's a good idea to generate an AP trial balance monthly or quarterly. Running the report too soon could lead to inaccurate information. 

Voucher activity report

A payment voucher is a document businesses use to track supporting information needed to approve payment on an invoice. It's an internal auditing control that ensures each invoice is paid and that the company receives the goods and services. 

A voucher activity report includes this information:

• A vendor's name
• The company's purchase order
• The total amount due
• The due date
• Discount terms offered

A voucher activity report tracks payment vouchers made over a certain period of time. It can help you see how much the business spent on a particular project or how much you're spending in different departments. 

Reconciliation of accounts

The open reconciliation report shows all accounting activity concerning payment vouchers over a specific period. This report helps you determine whether your business is making accurate and timely payments to its vendors. 

You can use the open reconciliation report to check for unpaid liabilities. This report will also show you whether you're sending payments to the correct vendor. 

If there's a difference in the ledger, this was likely caused by inaccurate reporting or a missing payment. Account reconciliation can also help you spot any issues with fraud.  

How accounting software can help with accounts payable reporting

The best way to stay on top of your AP reporting is by using accounting software. Instead of manually entering your financial data, the right accounting software does the heavy lifting for you. 

You can use this software to automatically generate reports and see your payment trends over time. Here are a few ways accounting software can benefit your business:

• View vendor information. You can use accounting software to view information about a specific vendor. You can see how much you currently owe that vendor and how much your business has paid them over the past year. You can also see if your company has any opportunities to save money by taking advantage of early payment discounts. 

• Retain accurate financial records. Manually entering your financial information is not only tedious, but it's also prone to error. Accounting software automatically syncs to your bank account and reconciles your financial transactions for you. And if your company is ever audited, accounting software will save you a lot of time since you'll already have the financial data on hand.

• Generate reports automatically. You can use your accounting software to generate financial reports for your business automatically. These reports help you track how much your business is spending and see how much it currently owes. You can generate these reports as often as you need to. 

Tip: If you're not sure how to pick accounting software, check out our reviews of the best accounting software for businesses. The right accounting software for you will largely depend on the size of your company and how you plan to use the software. Learn more about top options in our QuickBooks review and our review of Xero.

The bottom line

As a business owner, you need to stay on top of your accounts payable reporting. Tracking the reports outlined in this article will ensure that you stay on top of outstanding invoices and maintain a good relationship with your vendors. It will also help you keep accurate financial records. 

If you need help with your AP reporting, the right accounting software can make this process easier. Accounting software reduces the risk of human error and will automatically generate these reports for you. That way, you know your financial records are accurate and up to date.