Describing Payables Management and Its Role in Company's Financial Operations


After completing this lesson, you will be able to:

  • Explain the concept of payables management and its role in the company's financial operations
  • Identify the business partner concept with the example of payables management
  • Recognise basic vendor processes

Payables Management Accountant Role

Meet José. He just finished his business administration studies and started working in the accounting department of the Bike Company. Bike Company produces bicycles and e-scooters made of sustainable materials.

During his studies, José learned about different accounting practices and in his new position, he will be mainly working in payables management or accounts payable.. So, what are the main tasks a payables management accountant would do? So, what would be the main tasks for a payables management accountant? Let’s first look at the operations of the Bike Company. They purchase raw materials and other supplies daily, which result in numerous deliveries, supplier invoices and payment runs that need to be processed. Although these tasks are distributed among different roles within the company, Jose’s main job is payables management accounting.

Payables Management Accountant Tasks

Payables Management Concept

José will be working closely with suppliers and other departments of the Bike Company that are involved with procurement. However, José has never worked with SAP before. So, he would like to understand how payables management domain is represented within the SAP system.

Payables Management is a work area within SAP that handles accounts payable transactions. The accounting department takes care of invoice entry and payment processes. It is tightly integrated with Sourcing & Procurement.

Payables Management functions within SAP can be summarized in 4 main parts:

  • The first part is Account Management. Here you will record and maintain all necessary master data for your suppliers.

  • The second part is Payment Processing. The functions of this domain support payables management accountants in executing payments to the suppliers and ensure that they are made at the best possible time. Payables are paid using the payment program. The payment program supports all standard payment methods as well as country-specific payment methods.

  • The third part is Correspondence. It enables formal communication with a supplier. You can send out balance confirmations, account statements, and other forms of correspondence according to your requirements.

  • Finally, we have Supplier Analytics. Here you can profit from various embedded business intelligence functions that provide key performance indicators, such as days payable outstanding, overdue payables, or aging analysis.

Business Partner Concept

On José’s first day of work, the Bike Company created a partnership with a new supplier, Tireless Tires, to supply them with tires for their bike production. Since this supplier is new, it needs to be represented in the company’s SAP system. This is a perfect chance for José to understand the process of how a new vendor is handled in the SAP system. First, a new master data record for Tireless Tires needs to be created in the SAP system. General data such as the company’s name, address, bank connection, etc. is entered. Now is when the concept of a Business Partner comes into use. By creating this Business Partner entity in the system, we can maintain relationships between other identified roles (such as suppliers and customers) and their relationship to our original Master Business Partner entity.

Business Partner Concept Vendor Master Data

Create a Supplier Master Record

Practice yourself using the interactive simulation to create a business partner master record using the SAP Fiori app Manage Business Partner Master Data.

End-to-End Payables Process

José created a new master data record for Tireless Tires just in time. A few days later an invoice arrives for the first batch of new tires that the Bike Company has ordered. Now it needs to be recorded in the system and eventually paid.

José recognizes that these tasks are part of a bigger process called Source-to-Pay.

E2E Payables Process

Source-to-pay is a business process that starts with finding, negotiating, and ordering the goods and culminates in the final payment for these goods. Many different areas of Sourcing, Procure to Receipt, Request to Resolution, Manage Supplier and Collaboration, and Invoice to Pay are part of the source-to-pay process. The accounting department and the tasks José is involved with are part of the subprocess Invoice-to-Pay.

E2E Invoice to Pay

Supplier Invoice Items

José enters the supplier invoice from Tireless Tires in the system. To make sure that all necessary information was recorded, he decides to take a closer look at its content. When an invoice gets posted it becomes an accounting journal entry or in other words a finance document. After browsing through the document’s content José recognizes 3 main areas:

  • Document header, where general or basic information is displayed
  • Document line items, where you can see the accounts and the amounts
  • Tax area, where all tax-related information is displayed

Finance Document

So, in a nutshell, when a supplier invoice enters the system, the amounts are posted to the relevant accounts (including taxes) and this invoice needs to be paid within the negotiated payment terms and with the preferred payment method.

Create Supplier Invoice

Practice yourself using the interactive simulation to create a supplier invoice for your supplier using the Fiori app Create Supplier Invoice.

Analyze Open Items in Payables Management

Practice yourself using the interactive simulation to view the balances and supplier line items for your supplier by using the SAP Fiori apps Display Supplier Balances and Manage Supplier Line Items..

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