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