A Step-by-Step Guide to Accounts Payable Workflow Processes

Effective and automated accounts payable (AP) workflows are essential for businesses seeking to enhance their financial operations, minimize errors, and uphold compliance standards.

Let’s examine a comprehensive overview of an accounts payable workflow, outlining key components, challenges, and best practices for optimizing your processes.

Key highlights:

• A streamlined accounts payable workflow improves accuracy, reduces manual effort, and supports timely payments, all while strengthening vendor relationships.
• Key AP components, such as validation, approval routing, and compliance, ensure efficiency and financial control throughout the process.
• Automating AP processes with tools like ExFlow helps eliminate bottlenecks, enforce best practices, and increase transparency within Microsoft Dynamics 365.
  Organizations using AP automation significantly reduce processing costs and cycle times, enabling better forecasting, compliance, and long-term growth.

What Is a Workflow in Accounts Payable? 

The accounts payable workflow refers to the process by which a company manages its obligations to pay off short-term debts to its creditors or suppliers. Working effectively, these workflows ensure that invoices are processed, approved, and paid in a timely and efficient manner. Therefore, optimizing your department is essential to maintaining strong vendor relationships and healthy cash flow.

Key Components of an AP Workflow

Understanding the key components of your AP workflow is essential to managing it effectively. A well-structured workflow doesn’t just process invoices; it connects people, systems, and financial data to support clarity, control, and continuous improvement. From intake to audit readiness, each piece of the process plays a role in keeping operations smooth and spending transparent. 

The table below breaks down the core components and explains how each one contributes to a reliable and scalable AP process.

Key Components of an AP Workflow	How the Components Work
Document Management	Involves the organized intake, storage, and retrieval of invoices and related documents. Whether invoices arrive via email, upload, or e-invoicing systems, they must be captured accurately and stored securely.
Validation System	Ensures that all invoice data matches existing purchase orders, contracts, or delivery receipts. This step typically involves three-way or two-way matching, checking for discrepancies in price, quantity, or terms.
Approval Framework	Routes invoices to the appropriate decision-makers based on predefined rules like invoice amount, department, or vendor. A strong framework allows for multiple approval levels, escalations, and notifications.
Payment Infrastructure	Executes payments once invoices are approved. It includes scheduling, selecting payment methods (ACH, wire, check), and ensuring funds are available.
Compliance & Recordkeeping	Adheres to internal policies and external regulations, such as tax laws and audit requirements, and involves recordkeeping. Recordkeeping ensures that every action, such as submissions, validations, approvals, and payments, is documented and stored.

7 Steps of an AP Workflow Process in AP

From receiving invoices to making final payments, each step in the AP process plays a vital role in helping your business stay organized, avoid costly errors, and maintain transparency. Whether your organization is still using manual methods or transitioning to automation, understanding each workflow phase can help identify improvement opportunities.

Below are the seven essential steps in a standard accounts payable workflow process, each contributing to a more efficient and reliable financial operation.

1. Invoice Submission

The AP workflow begins when a vendor submits an invoice for goods or services provided. This can be done through traditional paper methods, email, or ideally, via electronic invoicing platforms. Moving toward digital submission not only speeds up the process but also reduces the risk of lost invoices, duplicate entries, and manual errors. 

Many modern systems now support automated intake methods, such as PDF invoice data capture or EDI (Electronic Data Interchange).

2. Data Capture and Coding

Once received, the invoice data must be captured and coded accurately. Key information, such as the vendor name, invoice number, total amount, due date, and purchase order number is extracted. In automated systems, this step is often handled by optical character recognition (OCR) or AI-powered data extraction tools, which reduce manual entry and ensure consistency. 

The invoice is also categorized based on expense type, department, or project code to aid in budgeting and AP reporting.

3. Three-Way Matching

This is a crucial quality control step that verifies the invoice against the corresponding purchase order (PO) and goods receipt or delivery confirmation. The three-way matching process ensures that the quantity, price, and terms listed on all three documents align.

If discrepancies are detected, such as incorrect pricing or missing deliveries, they can be flagged and resolved before moving forward. This step helps prevent overpayments, fraud, and unauthorized purchases.

4. Approval Routing

Once the invoice passes the matching stage, it’s routed to the appropriate approvers within the organization. Depending on the company’s policies, this may include department managers, project leads, finance controllers, or executives. 

Approval workflows can vary based on invoice amount, vendor, or project. Automation tools like ExFlow can streamline this process by assigning approvers based on pre-defined rules, setting reminders, and escalating overdue approvals to ensure timely processing.

5. Payment Authorization

After receiving approval, the invoice proceeds to the payment authorization stage. Here, the AP team reviews the invoice one final time to confirm details and schedules the payment based on terms agreed upon with the vendor. 

This may include choosing the payment method—such as ACH transfer, wire payment, or virtual card—and setting the payment date. Automation reduces bottlenecks at this stage by allowing for bulk payment approvals and secure sign-offs.

6. Payment Execution

This is the step where funds are actually transferred to the vendor. Most organizations now use electronic payments due to their speed, reliability, and security. Digital payment platforms integrate with accounting systems to ensure accuracy and automatically update the payment status. 

Some AP automation tools also support payment batching and fraud detection features to safeguard against unauthorized transactions.

7. Record Keeping and Audit Trails

The final step in the AP workflow is maintaining proper documentation of the entire process. This includes storing invoices, payment confirmations, approval logs, and audit trails. Good record-keeping is essential for internal audits, optimized financial reporting, and compliance with legal and regulatory requirements. 

Automated AP systems generate timestamped logs and searchable histories, making it easy to retrieve records for audits or analysis.

Best Practices for Managing AP Workflows in 2025

As AP workflows continue to evolve, staying updated with best practices is crucial for maintaining efficiency and accuracy.

1. Leverage Automation

Streamlining repetitive tasks by automating accounts payable workflows is key to improving your efficiency. Specialized software can handle data entry, three-way matching, and even payment processing, reducing the risk of errors and speeding up your entire process.

2. Implement Clear Approval Processes

To avoid bottlenecks, establish clear and consistent approval processes. Define who needs to approve what, and ensure that stakeholders are aware of their responsibilities.

3. Enhance Visibility

Use dashboards and reporting tools to gain visibility into your AP processes. This will help you track the status of invoices, identify bottlenecks, and ensure timely payments.

Benefits of an Automated AP Workflow

Automated accounts payable workflows are the cornerstone of modern AP management. It not only streamlines processes but also provides actionable insights and ensures compliance.

ExFlow, a leading accounts payable workflow software natively built into Dynamics 365 Finance & Operations and Business Central, exemplifies the power of automation. By being fully embedded within your ERP system, the solution provides:

Real-Time Data Synchronization

One of the most significant advantages of using a fully embedded AP automation tool like ExFlow is real-time data synchronization. Unlike external solutions that require frequent imports, exports, or custom integrations, ExFlow works natively within Microsoft Dynamics 365. This means all invoice data, approvals, payments, and updates are instantly reflected across your ERP system. 

Finance teams gain immediate visibility into: 

• Payment statuses
• Outstanding invoices
• Approval bottlenecks

Real-time syncing helps reduce the risk of duplicate payments or missed deadlines and improves coordination across departments. It also enables more accurate cash flow and budget planning, since financial data is always up to date. 

Whether you’re managing a high volume of vendor invoices or juggling multiple workflows across business units, having synchronized data ensures everyone operates from a single source of truth, increasing confidence and control in your accounts payable process.

Advanced Reporting

Advanced reporting capabilities turn your AP process into a valuable source of insight. ExFlow’s built-in reporting tools offer real-time dashboards and customizable analytics, allowing finance leaders to track performance metrics such as: 

• Invoice cycle times
• Approval delays
• Discount capture rates
• Payment trends. 

This visibility empowers teams to optimize payment strategies and make informed decisions based on historical data. Whether you’re preparing for a financial review or fine-tuning your workflows, the ability to drill into invoice statuses, vendor performance, and department-level activity provides clarity and accountability across the organization. 

Because ExFlow is embedded directly into Microsoft Dynamics 365, reports are generated using live data from the ERP system, ensuring accuracy and eliminating the need for manual data consolidation. With better reporting, businesses can not only improve operational efficiency but also build stronger, data-backed relationships with vendors, auditors, and internal stakeholders.

Robust Audit Trails

Strong audit trails are essential for financial integrity, compliance, and peace of mind. ExFlow ensures every action within the AP workflow is automatically documented and traceable—from invoice creation and approvals to payment execution. Each step is logged with a timestamp, user ID, and details of any changes made, creating a comprehensive audit history that’s always accessible within Dynamics 365. 

This level of transparency: 

• Simplifies internal and external audits
• Supports regulatory compliance and minimizes the risk of fraud or unauthorized transactions 

Unlike manual systems, where documentation can go missing or be inconsistent, ExFlow’s digital audit trail captures everything in one secure, searchable location. 

Whether you need to investigate a discrepancy, validate a financial control, or respond to an auditor’s request, having a robust audit trail built into your ERP system saves time, builds trust, and strengthens governance across your accounts payable function. This level of inclusion reduces the need for manual data entry, minimizes errors and duplicate payments, and enhances the overall efficiency of your AP process. 

According to the 2024 Ardent Partners report, organizations that lead in AP performance have reduced their invoice processing costs by nearly 80% compared to others, thanks to the extensive use of AP automation software, leading to more efficient workflows.

Simplify AP Workflow Automation with ExFlow

Effectively managing accounts payable workflow processes has become a critical part of running a well-functioning finance operation. Accuracy, efficiency, and strong financial oversight all depend on getting this process right. Practices like three-way matching, timely invoice approvals, and detailed audit trails are essential, but they can be difficult to maintain without the right support.

ExFlow helps bridge that gap by giving teams the tools they need to stay consistent, compliant, and in control.

Our solution is purpose-built for Microsoft Dynamics 365 Finance & Operations and Business Central, helping you go beyond basic compliance to truly optimize your AP operations. By embedding directly into your ERP, ExFlow simplifies complex workflows, eliminates redundant manual tasks, and gives you full visibility and control over every invoice from start to finish.

With ExFlow, your organization is better equipped to meet and exceed industry best practices through:

• Automated invoice capture and three-way matching, reducing manual errors and ensuring only verified invoices are processed
• Built-in approval workflows, with customizable rules that support compliance and prevent delays
  Real-time dashboards and performance tracking, allowing you to monitor KPIs like invoice cycle time or missed discounts
• Comprehensive audit trails, providing full documentation of every action for audit readiness and internal control
  

By aligning your AP operations with best-in-class standards through ExFlow, you not only reduce risk and operational cost but also set your team up for scalable, strategic growth.

Book a demo today and see how ExFlow’s automation solution can help streamline your accounts payable workflow.