Accounts Payable Interview Questions and Answers

1 .

Accounts Payable (AP) refers to the amount of money a company owes to its suppliers or vendors for goods and services received but not yet paid for. It represents a short-term liability on the company's balance sheet and arises from credit purchases made by the business.

Key Points About Accounts Payable :

* Liability Account : Recorded under Current Liabilities on the balance sheet.

* Credit Purchases : Arise from purchases made on credit terms (e.g., Net 30, Net 60).

* Payment Terms : Payments are typically due within an agreed period (e.g., 30, 60, or 90 days).

* Invoice Verification : AP involves verifying invoices with purchase orders and receiving documents (3-way matching).

* Cash Flow Management : Proper management ensures vendors are paid on time while maintaining healthy cash flow.

Example of Accounts Payable :

If a company purchases office supplies worth Rs. 5,000 on credit from a supplier, the transaction is recorded as:

* Debit : Office Supplies Expense Rs. 5,000

* Credit : Accounts Payable Rs. 5,000

When the payment is made :

* Debit : Accounts Payable Rs. 5,000

* Credit : Cash/Bank Rs. 5,000

2 .

What are the steps involved in the Accounts Payable process?

* Receiving the Invoice : Obtain an invoice from the vendor.
* Invoice Verification : Match the invoice with a purchase order and goods receipt note.
* Approval : Get proper authorization for payment.
* Recording the Invoice : Enter the invoice into the accounting system.
* Payment Processing : Process payment on the due date.
* Reconciliation : Reconcile AP balances with vendor statements.

3 .

What is the difference between Accounts Payable and Accounts Receivable?

Aspect	Accounts Payable (AP)	Accounts Receivable (AR)
Definition	Money a company owes to suppliers/vendors for goods or services received on credit.	Money owed to the company by customers for goods or services provided on credit.
Type of Account	Liability Account (Current Liabilities on the balance sheet).	Asset Account (Current Assets on the balance sheet).
Represents	Obligations/Debts the company must settle.	Claims/Income the company expects to receive.
Nature of Transaction	Outflow of cash in the future.	Inflow of cash in the future.
Recorded When	The company purchases goods/services on credit.	The company sells goods/services on credit.
Financial Statement	Appears under Current Liabilities.	Appears under Current Assets.
Objective	Ensure timely payments to suppliers to maintain good relationships.	Ensure timely collection from customers to maintain cash flow.
Example	A company purchases raw materials worth $10,000 on credit.	A company sells products worth $15,000 on credit to a customer.

Key Takeaway :

* AP = Money you owe others (Liability)
* AR = Money others owe you (Asset)

4 .

What are the key responsibilities of an Accounts Payable professional?

An Accounts Payable (AP) professional ensures that a company's financial obligations to vendors and suppliers are managed efficiently and accurately. Their primary goal is to maintain smooth financial operations and strong vendor relationships.

1. Invoice Processing :

* Receive, review, and verify vendor invoices.

* Match invoices with purchase orders (PO) and receiving documents (3-way matching).

* Ensure correct amounts, dates, and vendor details are recorded.

2. Vendor Management :

* Maintain accurate vendor records and contact details.

* Resolve vendor inquiries and discrepancies.

* Build strong relationships with vendors to ensure smooth operations.

3. Payment Processing :

* Schedule and process payments (e.g., checks, electronic transfers, ACH payments).

* Ensure payments are made on time to avoid late fees and maintain good vendor relationships.

* Take advantage of early payment discounts when applicable.

4. Account Reconciliation :

* Regularly reconcile Accounts Payable balances with vendor statements.

* Ensure all outstanding invoices and payments are accounted for accurately.

* Investigate and resolve discrepancies.

5. Month-End and Year-End Closing :

* Assist in month-end and year-end closing processes.

* Prepare Accounts Payable reports (e.g., AP Aging Report).

* Ensure all invoices and payments are posted in the correct accounting period.

6. Compliance and Internal Controls :

* Follow company policies and financial regulations.

* Adhere to GAAP (Generally Accepted Accounting Principles).

* Implement and maintain internal controls to prevent fraud and errors.

7. Expense Reporting :

* Review and verify employee expense reports.

* Ensure expenses comply with company policies.

* Process reimbursements accurately and timely.

8. Documentation and Record-Keeping :

* Maintain accurate records of invoices, payments, and correspondence.

* Ensure all financial documents are properly filed and stored for audits.

* Support internal and external audits by providing necessary documents.

9. Reporting and Analysis :

* Generate reports such as AP Aging Reports and Vendor Spend Analysis.

* Provide insights into payment trends and cash flow impacts.

10. Collaboration with Other Departments :

* Coordinate with the Procurement and Finance teams.

* Ensure purchase orders and vendor agreements align with financial policies.

* Communicate with other departments for approvals and issue resolutions.

5 .

What are some common Accounts Payable documents?

Common Accounts Payable Documents : Accounts Payable (AP) relies on several key documents to ensure accurate and efficient processing of payments to vendors and suppliers. Below are the most common AP documents:

1. Purchase Order (PO)
2. Goods Receipt Note (GRN)
3. Vendor Invoice
4. Debit Memo
5. Credit Memo
6. Payment Voucher
7. Accounts Payable Aging Report
8. Vendor Statement
9. Payment Receipt
10. Expense Report
11. Tax Forms (e.g., W-9, 1099)
12. Bank Statement and Reconciliation Reports

6 .

How do you keep up with the latest news in finance?

Employers ask this question to see if you are interested in learning more about the accounting industry. They want to know that you will continue your education and stay up-to-date on new developments in finance. When answering, make sure to mention a few resources you use to learn about the latest news in the field.

Example : “I am always looking for ways to improve my skills as an accountant. I subscribe to several newsletters that provide tips and advice for accountants. I also have a subscription to a financial magazine where I can read articles written by some of the top minds in the accounting world. Another resource I use is online forums where I can connect with other professionals who share their experiences.”

7 .

Are you able to multi-task?

Employers ask this question to see if you can handle multiple tasks at once. They want to know that you are organized and able to prioritize your work. In your answer, explain how you stay on top of your work while also managing other responsibilities.

Example : “I am very good at multi-tasking. I have experience working in a busy office environment where there were many things going on at once. I learned early on that it’s important to be organized with my work so I could keep track of what needed to get done when. I find that being organized helps me manage my time better and complete my work more efficiently.”

8 .

Tell me about a time you had to collaborate with others.

This question can help the interviewer determine your ability to work with others and communicate effectively. Use examples from previous experiences where you had to collaborate with other employees or departments to complete a task or project.

Example : “In my current role, I have two coworkers who assist me in processing invoices for payment. We each take turns reviewing the documents before submitting them for approval. This helps us ensure we’re all looking at the same information when making our decisions about which invoices should be paid. It also allows us to provide feedback to one another if we notice something that needs to be addressed.”

9 .

What is a three-way match in Accounts Payable?

A three-way match is an essential internal control process in Accounts Payable (AP) used to verify and approve vendor invoices before processing payments. It ensures that the details on three critical documents match to prevent errors, fraud, and overpayments.

The Three Documents Involved :

Purchase Order (PO) :

* Issued by the buyer to the vendor.

* Includes details such as quantity, price, and terms of purchase.

Goods Receipt Note (GRN) :

* Confirms that the goods/services were received in the correct quantity and quality.

* Acts as proof of delivery.

Vendor Invoice :

* A bill sent by the vendor requesting payment for the goods/services provided.

* Lists the item details, amounts, and payment terms.

10 .

What is an Accounts Payable Aging Report?

An Accounts Payable (AP) Aging Report is a financial document that categorizes and summarizes a company’s unpaid vendor invoices based on their due dates. It helps businesses track outstanding bills, prioritize payments, and manage cash flow effectively.

Key Details in an AP Aging Report :

* Vendor Name : Name of the supplier or vendor.

* Invoice Number: Reference number for each invoice.

* Invoice Date: The date the invoice was issued.

* Due Date: The date payment is expected by the vendor.

* Outstanding Amount: The total unpaid balance.

* Aging Buckets: Categorizes invoices into aging periods:

0–30 days (Current)

31–60 days (Past Due)

61–90 days (Overdue)

90+ days (Significantly Overdue)

Purpose of an AP Aging Report :

* Payment Prioritization: Helps identify which invoices need to be paid first based on urgency.

* Cash Flow Management: Assists in planning and forecasting cash requirements.

* Vendor Relationship Management: Prevents late payments and maintains good vendor relationships.

* Audit and Compliance: Provides transparency and accountability for unpaid bills.

* Financial Health Assessment: Highlights trends in payment delays or potential liquidity issues.

11 .

What is the significance of the AP turnover ratio?

The Accounts Payable (AP) Turnover Ratio is a financial metric that measures how quickly a company pays off its suppliers and vendors during a specific period. It indicates the efficiency of a company in managing its short-term obligations and maintaining good vendor relationships.

Significance of the AP Turnover Ratio :

Liquidity Management :

* A high turnover ratio indicates the company pays its suppliers quickly, showing strong liquidity and good cash flow management.

* A low turnover ratio suggests delayed payments, which might indicate cash flow problems or strained vendor relationships.

Vendor Trust and Credit Terms :

* Suppliers may offer better credit terms or discounts to companies with a high turnover ratio.

* A low turnover ratio could result in strained relationships or stricter credit terms.

Cash Flow Optimization :

* Helps companies understand if they are effectively using credit terms to optimize working capital.

Financial Health Indicator :

* The ratio helps stakeholders and creditors assess the company's financial health and payment discipline.

Comparative Analysis :

* Comparing the AP Turnover Ratio with industry benchmarks helps evaluate a company’s performance relative to peers.

12 .

Do you have any experience using accounting software?

This question can help the interviewer determine your comfort level with using accounting software. If you have experience using a specific type of software, share what you like about it and how it helps you complete tasks more efficiently. If you don’t have any experience using accounting software, explain that you are willing to learn new systems if hired for the role.

Example : “I’ve used several different types of accounting software in my previous roles, including QuickBooks Online and Freshbooks. I find both of these programs very helpful when working on accounts payable because they allow me to create reports quickly and easily. In my last role, I also had access to an ERP system, which was great for tracking large amounts of data.”

13 .

What are some common types of errors in Accounts Payable?

* Duplicate payments
* Incorrect amounts recorded
* Payments made to the wrong vendor
* Missing or unauthorized invoices

14 .

What is an Aging Report in Accounts Payable?

An Aging Report in Accounts Payable (AP Aging Report) is a financial document that categorizes and summarizes a company’s unpaid vendor invoices based on their due dates. It helps businesses track outstanding obligations, prioritize payments, and manage cash flow effectively.

Structure of an AP Aging Report : The report typically groups invoices into categories (aging buckets) based on the number of days they are overdue:

* 0–30 Days : Invoices that are current or recently due.
* 31–60 Days : Invoices overdue by 1–2 months.
* 61–90 Days : Invoices overdue by 2–3 months.
* 90+ Days : Invoices significantly overdue.

Each entry in the report generally includes :

* Vendor Name
* Invoice Number
* Invoice Date
* Due Date
* Amount Owed
* Aging Category (e.g., 0-30, 31-60 days)

15 .

How do you handle a duplicate invoice?

* Identify the duplicate in the system.
* Verify the supporting documents.
* Reverse or void the duplicate entry.
* Communicate with the vendor if payment has already been processed.

16 .

What accounting software are you familiar with?

Some common tools include :

* SAP
* Oracle Financials
* QuickBooks
* Microsoft Dynamics
* Xero

17 .

How do you handle month-end closing activities?

* Reconcile AP balances.
* Verify outstanding invoices.
* Ensure all transactions are posted.
* Generate and review AP aging reports.

18 .

What is an invoice and why is it important to have an invoice number?

An invoice is a document sent by a seller to the buyer that shows the quantities and costs of the products or services provided. An invoice specifies how much a buyer must pay the seller based on the seller’s payment terms. An invoice is a statement that has the following things involved in it:

* Date of the invoice
* Invoice number given
* Name and address of the person who is making the invoice (the seller)
* Name and address of the person who is demanding the invoice (the buyer)
* Details about all the goods and services that are involved
* Amount of the goods and services
* Quantity and quality of the goods and services
* Other specifications

19 .

What is the work done by the accounts payable processor?

An accounting payable processor gives payment to all third parties and the employees, scheduling and preparing cheques in the name of the firm.

20 .

How can a person handle an accounts payable process?

This is an important accounts payable interview question, to manage the account payable process a person needs to follow the steps given below :

* The person should centralise the invoice payment
* They should track every due payment
* The information regarding authorised payment should be known.

21 .

What is meant by a PO invoice?

A PO invoice is given when a purchase requisition process is in place and the PO is sent to the supplier.

22 .

What is the meaning of Non- PO invoice?

Non – PO invoice is given in the case of purchases made outside the regulated purchases process, Non- PO is also called an expense invoice.

23 .

What is the difference between a trade payable and a non-trade payable?

Accounts Payable (AP) can be classified into Trade Payables and Non-Trade Payables, depending on the nature of the transaction and relationship with the vendor.

Aspect	Trade Payable	Non-Trade Payable
Definition	Amounts owed to suppliers/vendors for the purchase of goods or services directly related to the company’s core operations.	Amounts owed for expenses not directly related to the core business activities.
Purpose	Linked to inventory purchase, raw materials, or direct business services.	Linked to overhead expenses or non-operational costs.
Examples	Purchase of raw materials for manufacturing.

* Goods bought for resale.
* Services tied to production (e.g., freight charges). | - Utility bills (e.g., electricity, water).
* Office supplies.
* Rent payments.
* Legal or consulting fees. |
| Financial Statement Placement | Recorded under Current Liabilities as part of Trade Payables. | Recorded under Current Liabilities as part of Other Payables or Non-Trade Payables. |
| Payment Terms | Often involve specific credit terms (e.g., Net 30, Net 60). | Payment terms may vary, often with less formal credit agreements. |
| Impact on Working Capital | Directly affects working capital management and cash flow. | Indirectly affects working capital but remains essential for managing operational costs. |

Key Takeaways :

* Trade Payables: Directly linked to core business operations (e.g., raw material purchases).
* Non-Trade Payables: Linked to operational or administrative expenses (e.g., rent, utilities).
* Both types are critical for a company's liquidity management and should be tracked accurately.

24 .

What do you understand by liabilities?

A liability is something a person or a company obliged from the bank. This is what a company owes, usually a sum of money. Liabilities are settled over time by transferring economic benefits, including money, goods, or services. In other words, we can say that liability is an obligation between one party and another which is not yet completed or paid for.

25 .

What do you understand by the term Debit Balance? How can we recover it if we won't have any future transactions from the supplier?

The debit balance is an amount of cash the customer must have in the account as security to follow the execution of a purchase order so that the transaction can be settled correctly. To recover the debit balance, we have to raise a credit memo for the regular vendors. However, if there are no future transactions from the supplier, we ask the vendor to send the check / make an EFT for the amount due from their side.

To recover the debit balance, we can follow up with the vendor to send us the excess amount or refund back, or we can adjust that extra amount in future invoices submitted by that vendor.

26 .

What do you understand by wire transfer?

Wire transfer is an electronic payment method used to transfer funds from one bank account to another bank account through SWIFT. It is a type of digital payment where the beneficiary account is added to another account which releases payment that is instantly credited t the beneficiary account.

27 .

What do you understand by IFA?

The term IFA stands for Institute of Financial Accountants. It is a professional accountancy body that represents and provides certification for financial accountants in the United Kingdom. The IFA is a full member of the International Federation of Accountants. It was founded in 1916 with the motto of making small businesses count.

28 .

What is STPI? What is the main objective of STPI?

The term STPI stands for Software Technology Parks of India. It is a science and technology organization established in 1991 by the Indian Ministry of Electronics and Information Technology. The main objective of this organization is to encourage, promote and boost the export of software from India. It is also responsible for providing infrastructure, skilling, mentoring, market connect, and supports startups.

29 .

How do you reconcile Accounts Payable balances?

To reconcile accounts payable balances, you can follow these steps :

* Gather documents : Collect all relevant documents, including invoices, payment receipts, and bank statements.
* Compare balances : Compare the balances in the accounts payable aging report with the balances in the balance sheet.
* Verify payments : Verify payment records and ensure that the invoices and statements from suppliers match the bank statement.
* Adjust statements : Adjust vendor statements as needed.
* Review and finalize : Review the reconciliation and finalize it.

Here are some best practices for accounts payable reconciliation: Standardize processes and create a clear framework, Prioritize invoices, Implement two- and three-way matching, and Use automation to reduce errors and increase efficiency.

Reconciling accounts payable is important for calculating profits and expenses, identifying overdue invoices, and maintaining strong vendor relationships. It also helps to ensure that your company pays only what it owes and maintains financial accuracy.

30 .

What is a debit memo?

A debit memo (also called a debit memorandum) is a document used to adjust or reduce the amount owed by a customer or to correct an error in the amount billed. In Accounts Payable, a debit memo is issued by a vendor to notify the buyer that the previously issued invoice amount is being reduced, often due to returned goods, overbilling, or adjustments to terms.

Key Uses of a Debit Memo :

Invoice Adjustments :

* When the buyer is overcharged for goods or services.
* When a discount is applied after the original invoice was issued.

Returned Goods : When goods are returned to the supplier or are found to be defective, the supplier issues a debit memo to reflect the reduction in the amount owed.

Pricing Errors : If the original invoice had incorrect pricing or quantity, a debit memo will adjust the balance owed by the buyer.

Account Adjustments : A debit memo can be issued to correct discrepancies in the Accounts Payable balance or to handle credit terms adjustments.

31 .

What is the difference between Consignor and Consignee?

Consignor : The consignor is the owner of the goods and is responsible for delivering the goods to the Consignee. For example, goods producers, wholesalers, etc.

Consignee : Consignee is the person who receives the goods, and he possesses the goods and not the owner. For example, suppliers, distributors, etc.

32 .

What would you do if you didn�t know how to solve a problem?

This question can help the interviewer determine how you approach challenges and solve problems. Use your answer to highlight your problem-solving skills, attention to detail and ability to learn new things quickly.

Example : “If I didn’t know how to solve a problem, I would first try to find someone who could help me. If no one else in my department knew how to solve it either, I would look for resources online or ask other departments if they had any advice. I would also talk with my supervisor about what I was doing so that they could give me more guidance.”

33 .

What are the risks of a non-PO invoice?

A non-Purchase Order (PO) invoice might be troublesome for your Accounts Payable (AP) department. And manually processing invoices can be an expensive and time-consuming administrative burden.

Non-PO invoices can result in late payments, damaging your credibility with your suppliers. Late payments could also lead to suppliers pausing services or goods being delivered.

34 .

How do you prioritize your workload in Accounts Payable?

In Accounts Payable (AP), effective workload prioritization is crucial for maintaining smooth operations, meeting deadlines, and managing cash flow. Here’s how to prioritize tasks effectively:

1. Review Payment Terms and Due Dates

* Identify Due Dates: Review the payment terms and due dates for all invoices to avoid late payments and associated fees.

* Sort by Urgency: Prioritize invoices that are due soonest or have passed their due dates.

* Flag Urgent Payments: Mark invoices that are critical to maintaining vendor relationships, especially those with frequent, high-value transactions.

2. Manage Cash Flow

* Track Available Funds: Understand your company’s cash position to ensure you have the liquidity to meet obligations.

* Consider Cash Discounts: Prioritize invoices that offer early payment discounts to save money (e.g., 2% discount if paid within 10 days).

* Balance Cash Flow Needs: If there’s a tight cash flow, prioritize payments to vendors who provide essential goods or services.

3. Handle Discrepancies and Errors First

* Address Discrepancies Early: If there are discrepancies in invoices (e.g., pricing errors, quantity issues, or mismatched PO numbers), resolve them promptly with vendors.

* Investigate and Correct Errors: Prioritize invoices that need manual adjustments or verification, such as those that don’t match the purchase order (PO) or goods receipt notes (GRNs).

4. Reconcile Accounts Regularly

* Perform Regular Reconciliations: Schedule time to reconcile vendor statements and your accounts payable ledger. This ensures accuracy and avoids missing or incorrect payments.

* Balance Aging Reports: Review your AP aging report regularly to ensure overdue invoices are flagged and prioritized for payment.

5. Communicate with Vendors

* Vendor Communication: If you’re unsure about payment deadlines or have questions about an invoice, reach out to vendors early.

* Negotiate Payment Terms: If you’re running low on cash, consider negotiating extended payment terms with vendors to manage cash flow better, especially for non-urgent invoices.

6. Plan for Monthly or Weekly Payment Cycles

* Set Payment Dates: Schedule batch payments based on invoice due dates, making sure to process larger or priority payments earlier.

* Use a Payment Calendar: Use a payment schedule or calendar to track recurring monthly payments (e.g., utilities, rent, subscriptions).

7. Balance Routine and Emergency Tasks

* Routine Tasks: Daily tasks like data entry, invoice processing, and matching POs should be scheduled early in the day or week.

* Emergency Tasks: If a vendor contacts you about a last-minute payment issue or urgent invoice, address these after handling time-sensitive payments or discrepancies.

8. Automate and Streamline Where Possible

* Use AP Software: Leverage AP automation tools to streamline invoice processing and reduce manual data entry.

* Set Automated Reminders: Automate reminders for upcoming invoice due dates and follow-ups with vendors.

9. Create Categories for Different Tasks

Group tasks based on priority and urgency:

* High Priority (Urgent Payments): Overdue invoices, high-value vendor payments, critical operational payments.

* Medium Priority (Regular Payments): Standard monthly or quarterly payments.

* Low Priority (Routine Tasks): Data entry, filing, regular reconciliations, and non-urgent vendor communication.

10. Delegate or Collaborate (If Applicable)

* If you're part of a team, delegate tasks such as vendor inquiries or routine reconciliations to colleagues to ensure efficiency.

* Collaborate with other departments like Procurement or Inventory to get timely information and avoid delays in processing invoices.

35 .

What steps do you take to prevent fraud in Accounts Payable?

Here are some steps you can take to prevent accounts payable fraud :

Implement strong internal controls :
Establish policies and procedures that make fraud difficult, such as :

* Segregation of duties: Ensure different people handle different tasks, such as supplier approvals, purchase requests, and payments

* Dual authorization: Require more than one person to authorize payments

* Account reconciliation: Regularly reconcile accounts

Automate the process : Use automated workflows to ensure transactions follow a verified process. Automated payment processes can also flag suspicious activity in real time.
Conduct regular audits : Regular audits help detect fraud and errors, ensure compliance, and identify areas for improvement.
Educate employees : Provide training and awareness programs to help employees spot and prevent fraud.
Verify vendors : Validate suppliers to ensure they are legitimate. Match invoice amounts to purchase orders or contracts to prevent duplicate or inflated invoices.
Compare documents : Compare purchase orders, invoices, and receiving reports to ensure payments are only made for legitimate goods and services.

36 .

How do you handle tight deadlines during month-end or year-end closing?

When handling tight deadlines during month-end or year-end closing, you can try these strategies :

* Prioritize : Focus on one task at a time, and start with the most important tasks.
* Plan : Create a to-do list, and use a calendar, spreadsheet, or project management tool to track your progress.
* Break down tasks : Divide large tasks into smaller, more manageable chunks.
* Set milestones : Create clear deadlines for each milestone to keep you motivated and focused.
* Review and adjust : Regularly review your plan and make adjustments as needed.
* Take breaks : Schedule time for rest and interruptions.
* Ask for help : Don't be afraid to ask for help when needed.
* Use technology : Take advantage of time management tools and automation tools.
* Be flexible : Be open to changes and issues that arise.