Managing payables is the process of ensuring that a business pays its suppliers, vendors, and service providers accurately and on time. Proper accounts payable management is essential to maintaining supplier relationships, avoiding late payment penalties, preserving business credit ratings, and optimizing cash flow. In Pakistan, this process is particularly important for businesses that work with credit-based supply chains, especially in manufacturing, retail, trading, and services sectors.
The following steps outline how to manage payables effectively.
Record Purchase Transactions
Whenever a business makes a purchase on credit, the transaction should be recorded in the Purchase Ledger or accounting software immediately. This record should include:
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Date of the purchase
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Name of the supplier
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Invoice number
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Description of goods or services purchased
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Payment terms (e.g., Net 30, Net 60)
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Amount payable including any applicable taxes (such as GST or sales tax)
Maintaining accurate records of all credit purchases ensures that liabilities are not missed and payments are made within the agreed time frame.
Monitor Accounts Payable
The Accounts Payable Ledger should be reviewed regularly, ideally on a weekly basis, to track all outstanding amounts and upcoming payment deadlines. This helps in:
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Avoiding missed payments or duplicate payments
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Ensuring suppliers are paid as per contract terms
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Identifying disputes, credit notes, or deductions in time
Monitoring is particularly crucial before month-end closings and bank reconciliations, as unpaid liabilities directly affect financial statements and cash flow planning.
Prioritize Payments
Not all payables need to be paid immediately. Businesses should prioritize payments based on:
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Due dates of invoices
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Early payment discount opportunities
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Importance of the supplier to operations (e.g., raw material vendors)
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Impact of delayed payment on business relationships
Creating a payment schedule helps in managing limited cash reserves and meeting strategic obligations without defaulting.
Take Advantage of Discounts
Many suppliers in Pakistan offer early payment discounts (e.g., 2% off if paid within 10 days). Accountants should identify such offers and coordinate with finance teams to make early payments when possible. These discounts, while small per transaction, can significantly improve cost savings and margins over time.
For example, a 2% discount on a PKR 100,000 invoice is PKR 2,000, which, if repeated across multiple suppliers monthly, leads to substantial annual savings.
Negotiate Payment Terms
Strong supplier relationships enable businesses to negotiate favorable payment terms, such as:
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Longer payment windows (e.g., Net 90 instead of Net 30)
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Part-payment agreements
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Seasonal billing adjustments
In periods of low liquidity or high receivables, extended payment terms can ease cash flow pressure and allow time for collections to be realized.
Use an Accounts Payable Automation System
In 2025, many businesses in Pakistan are shifting to automated payable systems to:
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Digitize and store all invoices and supplier contracts
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Automate payment scheduling and alerts
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Prevent errors and detect duplicate invoices
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Integrate with banking platforms for e-payments
Software like SAP Business One, QuickBooks Online, Zoho Books, and Odoo are popular among SMEs and large businesses. Some are even integrated with FBR’s electronic invoicing and sales tax portals.
Example – Managing a Payable of PKR 100,000
Suppose a business purchases goods worth PKR 100,000 on credit on February 1, 2025, with a payment term of 60 days. The business follows this process:
• Record the purchase in the Purchase Ledger with invoice details and due date (April 1, 2025)
• Regularly review the Accounts Payable Ledger to ensure the due date isn’t missed
• Identify this payment as important because the supplier is key to the supply chain
• The supplier offers a 2% discount if paid by March 20
• Business decides to pay early on March 20 and receives a discount of PKR 2,000
Ledger Update:
| Ledger Account | Date | Amount | Payment Due Date | Status |
|---|---|---|---|---|
| Accounts Payable | Feb 1 | PKR 100,000 | Apr 1 | Paid (Early Payment Discount of PKR 2,000 applied) |
Reporting and Compliance
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Monthly payable reconciliations should be done to match supplier statements with company records
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Aging reports help in tracking how long payables have been outstanding (e.g., 0–30 days, 31–60 days)
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Businesses should regularly compare actual payment performance against credit terms to improve working capital management
Legal and Tax Implications in Pakistan
Under the Income Tax Ordinance, 2001, accurate documentation and retention of supplier invoices is mandatory. Failure to maintain records can result in:
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Disallowance of expenses
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Non-claim of input sales tax under Sales Tax Act, 1990
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Penalties during FBR audits
Additionally, payments made to unregistered suppliers may result in higher withholding tax deductions, which increase the tax cost for businesses.
Importance in Business Decision-Making
Proper payables management:
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Helps maintain supplier trust and uninterrupted supply chains
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Improves the business’s credit score and financial credibility
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Enables accurate cash flow forecasting and budget planning
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Reduces risk of legal disputes or late payment penalties
