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What Does Full Cycle Accounts Payable Mean?

  Reviewed by: Jayne Thompson, LLB, LLM
  Written by: Madison Garcia      Updated January 26, 2019

Companies have two major business cycles: the revenue cycle and the expenditure cycle. Full cycle accounts payable is part of the larger purchasing and expenditure cycle. It consists of the full range of necessary accounting activities required to complete a purchase once the order has been placed and the product or service received. The full cycle of accounts payable entails matching documents, approving invoices, issuing checks and recording payments.

Tips

  • Full cycle accounts payable can either refer to the full process of receiving, verifying and paying an invoice, or a job position that entails responsibility for the entire process.

The Accounts Payable Cycle

Three major documents are involved in the accounts payable process: a purchase order, a receiving report and a vendor invoice.

  • When the company is ready to make a purchase, a purchasing department will send a purchase order to a vendor. This document details the merchandise requested, the price and the quantity. The purchase order triggers the vendor to send the goods.
  • Once the company receives the goods, the receiving department will complete a receiving report. This report documents the exact goods contained in the shipment. If the shipment contains any damaged items, the employee notes it in the report.
  • The vendor sends a vendor invoice requesting payment for the goods or services rendered. This document is sent to accounts payable and triggers the payment process.

Accounts Payable Procedures

A well-run accounts company sets up carefully defined procedures to guide the accounts payable process, in order to prevent errors and detect them when they occur. The same procedures can also deter and detect deliberate falsification, and provide an audit trail for later use in the event that a discrepancy should pass undetected. Those procedures vary between companies and departments, but generally follow a similar pattern:

  • After receiving the vendor invoice, the accounts payable team performs a three-way match by comparing the information on the purchase order against those on the receiving report and vendor invoice, to ensure the information is consistent.
  • If accounts payable can verify that the goods on the vendor invoice were ordered and received by the company, the invoice is approved for payment processing. This is done through a voucher, signature or stamp.
  • If there are discrepancies – if the quantity received doesn't match the quantity ordered and invoice, for example, or if the product isn'texactly as ordered – accounts receivable will attempt to track down thesource of the issue by following up as needed with the receivingdepartment, the vendor or the end user who placed the order.
  • In large companies, the actual payment is processed by the treasury department. However, accounts payable is responsible for issuing payments in most small companies. After an invoice is vouched for, accounts payable sends the vouched documentation along with a check to a company check signer. 
  • After the check signer approves and signs, accounts payable mails the check and marks the invoice as paid in the accounting system.

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Full Cycle Accounts Payable Roles

Accounts payable job descriptions are also often labeled as "full cycle." This means the accounts payable employee is responsible for every part of the payment process, as opposed to specializing in one or more specific areas. Potential responsibilities might include three-way matching, reviewing expense reports for accuracy, applying payment discounts and issuing payments to vendors.

When these positions are advertised, the HR department or the manager responsible for the hire will usually try to construct accounts payable interview questions that accurately assess an applicant's familiarity with the entire process, and identify any weaknesses or areas of inexperience.

About the Author

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

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