We have some vendors, who for whatever reason, are billing us many months after work is complete. How do you handle it when a vendor delays invoicing you for work that has been completed or supplies that have been received?

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The answer to your question will depend on the type of accounting methods you are using: 1) accrual basis accounting 2) cash basis accounting and the terms of service with your vendor.

Generally Accepted Accounting Principles (GAAP) use the accrual basis accounting method. Assuming that your company is using the accrual basis method (GAAP) then when service is completed or a tangible product has been delivered and title to the tangible product has transferred then you should accrue for the value of the expected invoice amount (title to product shipped depends on whether shipping terms are FOB shipping point-- title transfers at the vendors shipping dock or FOB destination-- title transfers at the time product is received at your warehouse dock). The principle behind this is the fact that you have received a benefit from a completed service or receipt of a tangible product.

Companies will set up an accrual at the end of each month for services or products received but not invoiced yet. This accrual changes month-to-month depending on which vendors finally invoice. The accrual is reversed and the invoice entered into accounts payable.

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