Accounts payable refers to the short-term money owed by a business to suppliers and vendors. On a balance sheet, it just appears as a liability, often shown under debit accounts payable adjustments and a credit entry when the company pays. For a small medical practice, the way you record accounts payable affects the company’s financial statements and your daily cash flow, so it’s something you ought to stay on top of.

Who handles bills in a business – is there an accounts payable department?

Yes! It’s more of a common thing in larger practices with big budgets and staff departments, but an accounts payable department or an accounts payable team handles everything from managing vendor invoices and matching them to purchase orders to overseeing invoice processing through to payment execution. 

If you recognize that your team needs this but don’t have the budget for it, it’s more cost-effective to outsource to PMN than hire a whole team in-house.

How does the AP process work?

First, a vendor invoice arrives. The AP process:

1. Checks the invoice against a purchase order or service record

2. Records accounts payable in the ledger

3. Schedules the payment process

4. Someone approves payment

5. A payment execution happens

6. An accounting software posts the credit entry that clears the liability

Done well, this efficient accounts payable process means far faster payments and fewer disputes.

What are common types of accounts payable activity?

You’ll see:

– Vendor invoices for supplies and services

– Early payment discounts offered by vendors

– Occasional manual adjustments whenever an invoice disagrees with a contract

In healthcare these usually tie back to operational needs, like clinical supplies or software subscriptions that affect patient care delivery.

How does accounts payable affect cash flow and financial health?

Faster payments mean you’ve got a steadier relationship with vendors, but stretching payables can also free short-term cash, which may be useful to you as a small practice that needs quick access to liquidity. That trade-off matters when claims lag or accounts receivable slow down. 

If you’re relying on faster reimbursements, you’ll be benefitting from an efficient accounts payable process since it helps match your outgoing payments to incoming payments and prevents any cash flow issues.

How does accounts payable link to accounts receivable?

Accounts payable and accounts receivable move together around cash flow. While AR captures incoming money, AP tracks money owed. Improving invoice processing on both sides shortens days in A/R and makes it easier for you to meet your payables without surprises.

Are there benefits to paying early or negotiating terms?

Yes! Early payment discounts can trim supply costs and build general goodwill, which are relationships you want to maintain as a small practice. But you should weigh the discount against the impact on cash flow. Your accounts payable team should track when a company pays and whether an early payment discount improves the bottom line.

How do you record accounts payable correctly?

Record the vendor invoice when goods or services arrive and the amount is verified. Post the debit accounts payable entry where your chart of accounts expects it, and then move to the credit entry when payments clear. Accurate entries like this are crucial for your company’s financial statements.

What trends shape accounts payable today?

There’s been a big shift to:

– Cloud accounting

– Real-time payment rails

– Tighter integration between billing and payment

Practices – from internal medicine to small laboratories – are also moving from paper vendor invoices to electronic ones, and that speeds invoice processing and reduces time spent chasing statements.

How should a medical practice approach AP without adding overhead?

Start small by handling tasks like defining approval rules and centralizing vendor invoices. From there, you can start to use basic accounting software to track approvals and payments. Also, train someone to oversee invoice processing. That single change improves visibility and reduces duplicate bills.

How does accounts payable relate to PMN?

PMN handles administrative billing tasks so clinicians can focus on care. Our Accounts Receivable Management page explains how we accelerate reimbursements and smooth cash flow for practices, which in turn helps your AP team manage vendor invoices more predictably. 

How PMN helps you keep the books in order

We’d be bringing 20+ years of medical billing experience to the table, and our workflows help practices reduce days in accounts receivable while keeping vendor relationships intact. We support everything from invoice processing and clear records to better cash flow, so your physicians spend less time on paperwork and more time on patients!

Want to know more about what we do? Contact us today at (949) 215-5055 or visit our office in Laguna Hills, Orange County, California.