Accounts payable overview

- [Instructor] A major sub-ledger of the general ledger in SAP financials is accounts payable. An account payable is a liability owed to either an external business partner, like a supplier or to an internal stakeholder. The accounts payable sub-ledger is used primarily for managing our supplier accounts and issuing payments for goods and services that we've received from those suppliers. Let's see how accounts payable fits into common business processes in SAP S/4HANA. We're now going to review what is often referred to as the procure-to-pay process in SAP. Procure-to-pay captures the buying, receiving, and payments of goods or services from an external vendor. This whole process is triggered by a need from the business. Let's say, to continue manufacturing microchips we need to purchase a raw material like copper. To initiate the process, a buyer at a company creates a purchase requisition for 100 flat sheets of copper. The buyer's manager reviews the purchase requisition and they agree that yes, the business needs 100 sheets of copper to continue production. So the purchase requisition is approved. Next, let's assume we have a supplier in the system already and every time we order copper, we order from this preferred supplier because a price has been pre-negotiated. A purchase order with 100 sheets of copper from our preferred supplier with our agreed upon price is created and sent off to them. Then, a week later, our 100 sheets of copper arrive in our warehouse. At this point, a goods receipt confirming the order is correct and has been received into inventory is generated in the system. Next, because we now have the copper in our possession we can verify and then process the invoice. Finally, we can pay our supplier. Let's say we've negotiated net 30 payment terms. We have 30 days from receipt to pay the supplier. Payments commonly occur through electronic transfer, check, or wire. These payments can also occur automatically when payment programs are set up. These last two steps of the procure-to-pay process where an invoice document is created and the supplier is paid for goods or services received are usually handled by the accounts payable team. Throughout this entire process, we can run reports. For example, we can run specific reports by individual supplier or by invoice due dates. All postings that are made in accounts payable are also updated in the general ledger in real time, so reports can be run to keep track of all items whether they are open or closed. Like most modules and sub-modules in SAP, accounts payable is tightly integrated with other areas. As outlined in the procure to pay process, purchasing in the materials management module handles purchase requisitions, requests for quotations, purchase orders, goods receipts, and inventory and warehouse management. Information from these transactions flows automatically into accounts payable. For example, a goods receipt in the purchasing area automatically updates the supplier's account balance in accounts payable. Accounts payable also integrates with the general ledger via reconciliation accounts. When a supplier is paid and the payment document is created, this document is automatically posted in the general ledger reconciliation account and a general ledger clearing document is created. Through tight integrations, the account's payable subledger is a powerful tool for issuing payments for goods and services to the appropriate suppliers.