0:02 hello everybody Welcome to the video on
0:04 accounts payable interview questions and
0:06 answers from career right accounts
0:08 payable professionals are hired by a
0:10 wide variety of companies across
0:13 different Industries some of the common
0:16 ones being large corporations retail and
0:18 e-commerce manufacturing firms
0:21 Healthcare organizations construction
0:24 companies hospitality and tourism
0:26 government agencies and NOS Tech and
0:30 finance companies educational Institutes
0:32 energy and utilities transportation and
0:36 Logistics Etc so if you're someone
0:38 interested in AP know that this domain
0:40 can give you some really good career
0:43 opportunities provided you are prepared
0:46 to grab them in today's video let's see
0:48 some very important conceptual and
0:50 general interview questions on AP that
0:53 can help you crack your next interview
0:55 so if you're really serious about
0:57 cracking your next interview make sure
0:59 you watch the complete video without
1:02 skipping any parts of it ready fantastic
1:06 let's start question number one what is
1:09 Accounts Payable a very basic and much
1:12 expected question so accounts payable is
1:16 an accountant company's general ledger
1:17 it refers to the short-term obligations
1:20 or debts a company owes to its creditors or
1:21 or
1:24 suppliers this typically includes items
1:26 like supplier invoices legal fees
1:29 contractor payments Etc now pay attention
1:31 attention
1:34 AP appears as current liability on the
1:37 balance sheet if AP increases over a
1:40 period of time it signifies that rather
1:42 than paying the bills the company is
1:45 buying more goods or services on credit
1:48 if AP decreases it signifies that the
1:50 company is paying its obligations at a
1:52 faster rate than making the new
1:55 purchases on credit management of
1:58 accounts payable plays a very important
2:00 role in management of cash flow in
2:03 company so you see a little detailed
2:05 information is what I've tried to
2:08 provide here because it is this extra
2:10 but relevant information that makes you
2:12 stand out from the crowd which is
2:14 exactly what you want during the
2:17 interview but to be able to do this you
2:21 need to be well prepared you need to
2:23 anticipate the questions and you need to
2:26 prepare your answers when in advance
2:27 okay let's move on to question number
2:30 two now and our question question number
2:32 two is a little tricky one many
2:35 candidates commit a mistake here the
2:37 question is are accounts payable business
2:38 business
2:41 expenses some people tend to mistakenly
2:43 believe that accounts payable refer to
2:45 the routine expenses of a company's
2:47 operations but that is an incorrect
2:49 interpretation of the term
2:52 expenses expenses of a company are found
2:55 on the income statement while if you try
2:57 to find payables you'll find them booked
3:00 as a liability on the balance sheet so
3:04 no accounts payable are not business
3:07 expenses question number three what is
3:08 Accounts Payable turnover
3:11 ratio now the accounts payable turnover
3:14 ratio is a measure to quantify the rate
3:17 at which a company pays off what it owes
3:19 in the short term the formula to
3:21 calculate accounts payable turnover
3:23 ratio is
3:26 this a decreasing accounts payable
3:28 turnover means that the company is
3:31 taking longer to pay off its supplier in
3:34 comparison to the previous periods now
3:37 the question arises what does this
3:39 indicate so according to me it could
3:42 indicate two things the first one is the
3:46 company is in financial distress that is
3:48 why it is paying off slowly the second
3:50 thing it could indicate is the company
3:53 has negotiated better payment terms with it
3:54 it
3:57 suppliers on the other hand if AP
4:00 turnover ratio increases it means that
4:02 the company is paying off its suppliers
4:05 at a faster rate than in the previous
4:07 periods which is an indicator of
4:09 sufficient supply of
4:12 money however this can also mean that
4:15 the company may not be reinvesting in
4:17 the business efficiently losing out some
4:20 good opportunities which could put it in
4:24 the problem at later stages so actually
4:26 both of these things if you see they
4:28 need further
4:30 investigation that is why this ratio is
4:33 very very important moving on to
4:35 question number four now what is the
4:38 difference between acred expenses and
4:41 accounts payable another important one
4:44 so acred expenses are basically expenses
4:47 that a company has incurred but is yet
4:51 to pay an record for example salaries
4:54 that it has to pay to its employees on
4:57 the other hand accounts payable are
5:00 amounts a company owes to the supply ERS
5:02 for goods or services it has received
5:06 and invoiced but not yet paid so if you
5:08 notice carefully acred expenses are
5:11 generally the obligations within the
5:13 company while accounts payable are
5:17 obligations to external parties and this
5:20 is a big difference between the two that
5:22 you must pay your attention to let's
5:25 move on to our question number five now
5:26 what do we understand by accounts
5:30 payable subsidiary ledger now see An
5:32 accounts payable subsidiary ledger is an
5:34 accounting Ledger that shows the
5:37 transaction history and amounts owed to
5:41 each individual supplier and vendor so
5:42 you can say basically it shows a
5:44 breakdown of the total amount of
5:47 payables listed on the general ledger
5:48 let me explain it to you with the help
5:51 of an example let's say maruti Suzuki as
5:54 a company has a general ledger balance
5:56 showing total AP balance of rupees 50
5:59 million now the management may want to
6:02 see how much money do we owe to whom
6:03 where should they look for it they
6:05 should look for it in the accounts
6:08 payable subsidiary ledger it would show
6:11 them something like supplier a is owed
6:14 rupees 5 million for gear boxes supplier
6:16 B is owed rupes 7 million for leather
6:19 covers supplier C is owed rupees 15
6:23 million for tires and so on so you see
6:24 this is a breakup of the accounts
6:27 payable and that is what you find in the
6:30 subsidiary ledger now our question
6:32 number six is regarding a very important
6:35 matric that is used in accounts payable
6:38 and the question is what is days payable
6:40 outstanding to answer this question you
6:43 can say days payable outstanding which
6:46 is also referred to as DPO is a matric
6:48 that indicates the average number of
6:50 days a company takes to pay its bills and
6:52 and
6:55 obligations if the DPO of a company is
6:57 high it indicates that the company
7:00 delays making the payment
7:02 it may be using the available cash for
7:04 short-term Investments or increase in
7:06 its working capital and free cash flow
7:09 or it may be under the financial
7:12 distress also depends on the situation
7:15 okay so that is why this matric is very
7:19 very important it is one of the kpis on
7:21 your report sheet okay now our question
7:24 number seven tries to dig a little
7:27 deeper into DPO and the question is is
7:30 the high DPO always a positive sign
7:32 so no while a company would like a high
7:36 DPO it is not always a positive sign if
7:38 a company is taking more number of days
7:41 to pay off its dues it could indicate a
7:44 cash crunch also at the same time it may
7:46 lead to stressed relations with the
7:50 suppliers also but having said all these
7:53 things large companies with more power
7:55 are usually in a position to negotiate
7:58 better payment terms and we have a high
8:01 GPU so basically this is a figure that
8:04 needs further investigation depending
8:06 upon the size of the company you can't
8:08 straight away jump to any conclusions as
8:11 such moving on to question number eight
8:14 which again tries to test your Concepts
8:16 what type of an account is Accounts
8:19 Payable so accounts payable is a real
8:22 account it has a continued existence
8:24 from one period to the text the
8:28 documents here are real so accounts
8:30 payable is a real account account moving
8:32 on to question number nine name some
8:34 critical documents involved in accounts
8:37 payable process this is pretty simple
8:40 some critical documents involved in AP
8:42 process are purchase order purchase
8:44 requisition invoice Goods received note
8:47 credit memo aging report vendor
8:50 statement Etc this is simple but just be
8:53 prepared to have all these names on your
8:55 mind when you're actually facing the
8:56 interviewer and trying to answer the
8:58 questions moving on to another basic
9:01 question but a very important one what
9:05 is an invoice is it a bill or a receip
9:08 so an invoice is a document that carries
9:10 a record of transaction between a buyer
9:13 and seller it carries details like date
9:17 and time unit cost of items total units
9:20 purchased shipping or any handling cost
9:22 involved taxes total amount payable
9:25 payment terms or anything else both the
9:27 parties have agreed to during the
9:30 negotiations Etc now now each invoice
9:32 has a unique identification number on it
9:35 which is also called as its invoice
9:37 number for a payment to be made the
9:39 invoice must be approved by the
9:41 responsible person in the
9:44 management now if you look at an invoice
9:46 it is generally used to document the
9:48 products or services that have been sold
9:51 and delivered to a customer so what is
9:54 it it is a bill it shows that the
9:55 payment is
9:58 owed however if you look at a receipt a
10:01 receip would show that the payment was
10:04 received so do you see the difference
10:06 make sure that such basic things are
10:10 very clear in your mind it is not the
10:11 big things that cost you the
10:13 opportunities it is not knowing such
10:17 basic things that is a bigger problem so
10:19 it is very very important that you brush
10:22 up your Concepts and prepare yourself to
10:24 answer such basic questions very well in
10:26 the interview moving on to another basic
10:29 and important conceptual question the
10:31 question is what is the difference
10:33 between a purchase requisition and
10:36 purchase order now these are two often
10:39 confused documents so as I said this is
10:41 another important question listen
10:44 carefully when the internal teams of a
10:45 company require certain things like
10:48 stationary supplies or anything else
10:50 they fill up a requisition form which is
10:53 called as purchase requisition form it
10:55 needs to be approved by the management
10:58 before the purchases can be made by the
11:00 purchase Department so do you see this
11:03 is an internal document on the other
11:05 hand when the purchase department wants
11:08 to order certain goods or services from
11:11 a vendor they issue a purchase order so
11:13 this is the basic difference between a
11:16 purchase requisition and purchase order
11:19 and again this type of things must be
11:22 very very clear in your mind before you
11:24 go to face the interview question number
11:26 12 what is the difference between a PO
11:30 invoice and non-po invoice
11:32 now you would notice that in the usual
11:34 purchase process buyer sends a purchase
11:36 order to the seller to make a purchase
11:38 based on which an invoice is generated
11:42 and the order is delivered but many of
11:44 times if a company requires anything
11:46 urgently it may just call the vendor
11:48 instantly and request them to send the
11:52 goods here no PO has been raised yet so
11:55 the invoice coming in would be nonp
11:58 invoice so do you see the difference
12:00 nonp invoice voices are generated
12:04 outside of a formal purchase procedure
12:05 okay now let's come on to another
12:09 commonly asked question what is a grn so
12:11 first of all as you would already know
12:15 grn stands for goods received note when
12:18 goods are delivered the store manager of
12:20 a company acknowledges the recept and
12:22 acceptance of goods by putting his
12:23 signature on the
12:27 grn so it is the buyer who sends it to
12:30 the seller pay attention because a
12:33 question can come from here also it is
12:37 the buyer who sends the grn to the
12:41 seller now what is the use of this grm
12:43 first of all it validates the quantity
12:45 and quality of the goods that have been
12:48 received then it works as a record for
12:50 the future to resolve any disputes
12:52 between the two parties and it also
12:54 helps in Inventory management and
12:57 accounting also so this is a bit of
13:00 information about grn that you must be
13:03 aware of to answer the questions on this
13:05 topic let's move on to question number
13:08 14 now what are duplicate invoices how
13:11 do you avoid the double payment now
13:13 duplicate invoices or making the double
13:16 payment can be a serious problem for any
13:18 company the invoices that are mistakenly
13:20 processed more than once within the
13:23 account payable system are called as
13:25 duplicate invoices first of all let's
13:29 make this clear now to avoid double proc
13:31 processing of an invoice it is very
13:33 important to have a centralized system
13:35 in place for the entry of invoices so
13:38 that no invoices are entered
13:40 twice then it is also very important to
13:42 have an approval
13:45 workflow conduct regular audits so that
13:47 you can identify any mistakes at the
13:50 earliest and correct them it is also
13:52 very important to have a trustworthy
13:54 relationship with the vendors so that
13:56 they themselves report such
13:58 discrepancies now some of you might
14:00 wonder why would a vendor get back to
14:01 say that they have received the same
14:04 money twice but let me make it clear
14:07 good vendors actually do it to maintain
14:09 a good relationship with the buyers and
14:12 for a continued long-term business with
14:14 them they may cheat once but they will
14:16 never receive the business again so this
14:20 is a business ethics thing that is why
14:21 they would definitely come back and
14:24 report it question number 15 what do you
14:27 know about invoice aging and invoice
14:30 aging report now now invoice aging is
14:32 actually the process of categorizing and
14:35 tracking outstanding invoices that is
14:37 the invoices that are overdue for the
14:40 payment now you then prepare a detailed
14:42 report that shows the invoice details
14:45 along with the Aging bracket like this
14:47 invoice is overdue for 30 days this is
14:50 for 60 days and so on this is invoice aging
14:51 aging
14:54 report this kind of an aging report lets
14:56 the company know its outstanding
14:58 liabilities which helps it in planning
15:01 the the finances making the decisions
15:04 regarding the payment and managing the
15:08 cash flow which ensures timely payments
15:10 any good business knows the importance
15:12 of clearing the payments on time to
15:14 maintain good relationship with the
15:17 vendors and that is where invoice aging
15:20 and invoice aging report play a very
15:22 important role okay now our question
15:25 number 16 is an interesting one pay
15:27 attention which process is bigger
15:30 procure to pay or accounts payable now
15:33 see procure to pay or P2P is an
15:36 integrated process that covers the full
15:38 cycle of activities involved in
15:40 acquiring the goods and services from
15:43 external suppliers and actually paying
15:46 for them so as you can see for yourself
15:49 accounts payable is just a small part of
15:52 this whole process so definitely P2P or
15:56 procure to pay is a bigger one moving on
15:58 to question number 17 now what is two
16:02 two-way matching now two-way matching is
16:04 a very basic control mechanism in AP to
16:06 ensure that the company pays only for
16:09 the goods and services it has ordered
16:11 this is done by matching the details on
16:14 the purchase order and invoice the
16:17 details you match are quantity unit
16:19 price and total amount two-way matching
16:21 ensures accuracy in payments and
16:24 prevents any possibility of frauds okay
16:26 now like two-way matching you have
16:27 something called as three-way matching
16:30 also and a question may arise from here
16:32 also and the question can be how is
16:34 three-way matching different from
16:37 two-way matching so to answer this
16:39 question you can say well the basic
16:41 difference between the two is in
16:43 three-way matching there's an additional
16:46 layer of security to ensure the accuracy
16:49 and payments made here in addition to
16:52 the PO and invoice you also check the
16:56 grn that is Goods received note it
16:58 ensures that the company pays only for
17:01 the goods of Services it has ordered and
17:03 actually received also question number
17:08 19 what is debit balance recovery now we
17:10 discussed a while back if a company by
17:12 mistake pays an amount more than the
17:16 invoice it needs to recover that money
17:19 from the seller this is debit balance
17:22 recovery okay now let's move on to some
17:24 questions related to the management of
17:26 AP and the first question that we have
17:30 got here is what do you know about AP AP
17:33 segmentation now AP segmentation refers
17:34 to the process of dividing accounts
17:36 payable into different categories or
17:39 segments to manage and analyze them more
17:42 effectively what it does is it helps you
17:45 in avoiding mismanagement of critical
17:48 a AP segmentation ensures that the
17:51 critical suppliers are paid on time
17:53 there could be various criteria for this
17:55 segmentation the first one could be
17:59 vendor type such as this person is a
18:01 supplier of raw material supplier of
18:03 critical Goods or which category does he
18:06 fall into the second one could be the
18:08 payment terms for example we have
18:11 negotiated a payment term of 30 days 60
18:13 days 90 days with this supplier and
18:15 let's categorize them
18:17 accordingly then your classification
18:19 could also be based on the geographical
18:22 location so that you can operate as per
18:23 the regional regulations cultural
18:27 differences and time zones Etc your
18:29 fourth criteria could be the contra ual
18:31 obligations such as long-term contract
18:35 onetime purchase Etc now see once your
18:37 payables are classified you would
18:39 clearly know paying out which invoices
18:41 early can give you the advantage of
18:44 early payment discounts or help you
18:47 avoid the penalties for late payment at
18:49 the same time It prepares you to comply
18:51 with regional regulations for
18:54 international vendors also so the
18:56 advantage of this segmentation is it
18:58 leads to better cash flow stronger
19:00 vendor relationships and improve
19:03 operational efficiency and that is why
19:06 AP like any other department pays a lot
19:10 of attention on managing their accounts
19:13 well AP segmentation is a way to manage
19:15 those accounts okay now let's move on to
19:17 one of the most important questions as
19:20 during an AP interview and the question
19:23 is what are the different criteria Ed to
19:24 prioritize the
19:27 AP now there are various criteria based
19:29 on which you can class classify and
19:31 prioritize your AP this can include
19:34 things like number one due date that
19:37 helps you avoid the late fees then there
19:41 could be early payment discounts you may
19:43 use this criteria also so that you can
19:46 save some money by paying before the due
19:49 dates vendor priority depending on how
19:53 critical the supplier is then your
19:56 criteria could also be invoice amount so
19:58 that you can manage larger invoices
20:01 first for significant cash outflows and
20:04 align the payments with the available
20:07 cash your payment terms and Regulatory
20:10 compliances could be another criteria so
20:12 that you can adhere to the agreed upon
20:14 terms and also if there are
20:16 international sellers involved you
20:19 adhere to the compliances
20:23 also dispute resolution to resolve any
20:25 invoice discrepancies before the payment
20:28 could also be a criteria then the
20:30 history of the vendor could also be a
20:32 criteria in many cases so that you can
20:34 maintain a good relationship with your reliable
20:35 reliable
20:38 vendors critical business needs this is
20:40 very very important critical business
20:43 needs you always try to pay for
20:45 essential goods and services first
20:47 because you know without this material
20:50 my business cannot run smoothly so you
20:52 see these are the different criteria
20:55 that you use to prioritize your AP okay
20:57 now our question number 22 is a pretty
21:00 simple one but all of these things that
21:02 are mentioned in the answer here may not
21:04 occur to you on the spot that is why it
21:06 made sense to have it on the list here
21:08 and the question is what are the
21:10 different payment methods used in
21:13 accounts payable so the different
21:15 methods that are used in accounts
21:18 payable include things like checks efts
21:21 AC payments that is automated Clearing
21:24 Houses wi transfers credit cards
21:27 purchase cards which you also refer to
21:30 as P cards PayPal and other online
21:34 payment services virtual cards Etc the
21:36 correct choice of method can boost
21:39 efficiency reduce cost and help in
21:41 maintaining strong relationships with the
21:42 the
21:45 vendors so you can pause the video here
21:47 and just take a quick look at all these
21:50 options okay now our question number 23
21:52 is again a very important question from
21:55 the point of view of managing your own
21:58 performance and the question is what key
22:00 Matrix do you track an accounts payable
22:03 and why are they important so some of
22:05 the most common Matrix used to track AP
22:09 performances are number one days payable
22:12 outstanding that is DPO as we discussed
22:15 just a while back this indicates the
22:17 average number of days a company takes
22:21 to pay its invoices a higher dpu can
22:24 improve cash flow but excessively High
22:26 DPO might strain the relationship with
22:28 the vendors
22:30 the second one is Accounts Payable
22:33 turnover ratio this also we discussed a
22:36 file back it measures how many times a
22:38 company pays off its accounts payable
22:41 during a period a higher ratio indicates
22:43 faster payment
22:45 Cycles the third one is invoice
22:49 processing time it indicates the average
22:51 time taken to process an invoice from
22:54 recept to payment shorter is the
22:57 processing time better is the efficiency
22:59 and the chances of penalties due to late
23:01 payment also reduced the next one is
23:05 invoice exception rate it indicates the
23:08 percentage of invoices needing manual
23:10 intervention on account of discrepancies
23:13 or errors a high exception rate may
23:16 indicate issues with the procurement or
23:19 invoicing process the next one is
23:22 percentage of invoices paid on time this
23:23 is an indicator of good vendor
23:26 relationships and payment
23:28 penalties the next one is discount
23:31 capture rate it indicates the early
23:33 payment discounts that you were able to
23:37 actually utilize it helps in maximizing
23:39 cost savings by taking advantage of
23:41 early payment discounts offered by the
23:44 vendors and any company prefers that the
23:47 next one as you know is very important
23:50 one and it is AP aging report this is a
23:52 report that categorizes accounts payable
23:54 by the length of time and invoice has
23:57 been outstanding the next one is payment
23:59 error rate pay payment error rate
24:01 indicates the percentage of payments
24:04 with errors in them example overpayments
24:07 under payments or duplicate payments
24:09 this is again an indicator of what it is
24:12 an indicator of
24:14 accuracy number of Supply disputes you
24:17 have could be another matric this
24:19 indicates the total number of disputes
24:22 with suppliers over invoices or
24:25 payments it again indicates accuracy and
24:28 reliability of the AP process lesser the
24:31 number of disputes better is the vendor
24:33 relationship so this is a very very
24:35 important question I can't stress more
24:38 on this but be prepared to answer this
24:40 question very effectively if need be you
24:43 can pause the video here or you can just
24:45 replay this much part of the video to
24:47 make sure that you have got these things
24:49 well because this question is definitely
24:51 going to be asked to you and finally
24:53 moving on to the last question for
24:55 today's video and if you really want to
24:58 work for a big company an MNC
25:00 this question is going to be definitely
25:03 asked you what are the major challenges
25:05 in managing accounts pable across
25:07 multiple International
25:10 locations now see if the company is big
25:12 if it is a multinational company it is
25:14 definitely going to have vendors and
25:17 officers across different geographical
25:19 locations managing accounts people
25:21 across multiple International locations
25:24 can be a really challenging task the
25:26 challenges are usually related to a
25:28 difference in the number one current
25:31 icies because fluctuating exchange rates
25:33 may make the transactions
25:36 costlier then regulatory compliances
25:38 play a major role here because this
25:40 could mean a difference in tax laws
25:43 regulations and Reporting requirements
25:46 also time zones play a very important
25:48 role here because they could lengthen
25:50 the payment cycle banking systems in
25:53 different countries are different which
25:54 may mean a difference in the payment
25:59 methods transaction fees penalties Etc
26:02 security of transactions may be at a
26:04 risk depending on how advanced the
26:06 country is
26:09 technologically and lastly the cultural
26:11 difference between the two countries may
26:13 make the communication and negotiations
26:16 difficult so these are some of the major
26:18 challenges that the accounts payable
26:20 people working in international market
26:23 face but see as I have been saying since
26:25 the beginning these type of things don't
26:27 occur to anybody on the spot until
26:29 unless you have have a lot of work
26:31 experience so it is always better to
26:34 brush up your knowledge always better to
26:36 anticipate the questions and be prepared
26:39 to answer them very soon I'm going to
26:41 get you a video on accounts receivables
26:44 also if you are interested in that part
26:46 of the domain make sure that you watch
26:48 that video also I sincerely hope that
26:50 today's video was useful to you if it
26:52 was make sure that you give it a thumbs
26:55 up and share it with your friends also
26:57 for more such videos subscribe to the
26:58 channel now I'll see see you very soon
27:01 with a new one till then bye-bye and
