Accounts payable process

While the process of finding suppliers, ordering and receiving goods or services can vary widely depending on the type of business or industry, a typical accounts payable (AP) process that usually follows consists of five distinct steps:

1. Processing (or matching) incoming invoices: invoices are received and entered into your system, while details are checked against purchase orders or other data to verify you would be paying for goods or services ordered and delivered. If any issues are identified, they must be resolved before moving to the next step.
2. Approving invoices: correct invoices are sent for approval in accordance with internal rules or policies. With increasing risks of payments fraud, having one- or two-level approvals is also key in preventing fraudulent transactions.  
3. Schedule payment dates: once approved, invoices can be paid as soon as possible or scheduled for a later date. In certain industries, invoices are paid to align with commercial journeys (e.g. releasing goods or the next contractual step). Organising when you pay invoices can help optimise invoice discounts or preserve working capital. Increasing solutions, such as HedgeFlows, can help schedule payment runs to save time on scheduling and processing multiple invoices.
4. Paying invoices: centralising payment processing is critical for the safe and robust functioning of the Accounts team. Individuals who are authorised to instruct payments must ensure invoices are approved, payment details used are correct and have not been changed by an erroneous or fraudulent process.
5. Recording payments and reconciling: Once payments have been processed, the General ledger needs to be updated - debiting accounts payable and crediting cash/bank accounts. Invoices that are paid in the process must be marked as paid.