The Full Cycle of the Accounts Payable Process

Often referred to as part of the broader procure-to-pay (P2P) cycle, accounts payable (AP) covers every step from receiving a purchase request to issuing the final payment, ensuring suppliers are paid correctly and on time.

The AP process is more than just a back-office function. It directly affects cash flow, compliance, and supplier confidence. When managed well, it supports accurate financial reporting and healthy vendor relationships. When poorly managed, it can lead to payment delays, unnecessary costs, and avoidable disputes.

Let’s review how a typical accounts payable process works, explore its main components, and look at ways to strengthen it through automation. 

Key highlights:

• A structured accounts payable process improves payment accuracy, reduces compliance risks, and supports stronger supplier relationships.
• Automation significantly lowers cost per invoice, shortens processing times, and decreases exception rates compared to manual workflows.
• Clear AP procedures, combined with a payable process flow chart, give AP teams consistent guidance from invoice intake to payment.
• ExFlow delivers a complete, natively embedded solution for managing the end-to-end process of accounts payable directly within Dynamics 365

What Is the Accounts Payable Process? 

The accounts payable process is the organized workflow a business uses to receive, verify, and pay invoices from suppliers. It ensures that each payment is accurate, authorized, and recorded correctly in the company’s financial system. While the process can vary between organizations, it functions as a structured framework for managing obligations to vendors. 

An unstructured, ill-managed workflow can quickly cause issues that extend far beyond the AP department, including:

• Payment Delays that Strain Supplier Trust: Missed or late payments can cause frustration for vendors and may lead to stricter payment terms or higher prices in the future. Over time, this can limit your options and reduce the flexibility of your supply chain.
• Reduced Financial Visibility: Disorganized accounts payable records make it harder to track cash flow or plan budgets accurately. This lack of clarity can hinder budgeting and limit a business’s ability to respond quickly to changing market conditions.
• Increased Risk of Errors and Fraud Detection: Without a reliable workflow, invoices may be duplicated, paid for incorrect amounts, or approved without proper oversight. Gaps in the process also make it easier for fraudulent invoices to slip through unnoticed.
• Compliance and Audit Challenges: Missing documentation or an inconsistent process can create problems during audits or regulatory reviews. These issues can lead to fines, reputational damage, and the need for costly remedial work to fix gaps retroactively.

What Are the Benefits of Maintaining Strong Accounts Payable Procedures?

Strong and consistent accounts payable procedures create a foundation for financial accuracy, reliable supplier relationships, and better cash flow management. In 2024, the Institute of Financial Operations & Leadership (IOFL) found that 64% of AP professionals said outdated or poor processes cause the most stress in their roles, with 40% noting the negative effect on vendor relationships.

 A well-structured process helps avoid these pitfalls and deliver lasting benefits, such as:

Improved Accuracy in Payments

Clear procedures ensure invoices are verified before payment, reducing the chance of overpayments, duplicate payments, or paying for goods and services not received. Accuracy protects cash flow and preserves financial integrity while minimizing disputes with suppliers over billing discrepancies.

Better Supplier Relationships

Timely, accurate payments foster trust with vendors and signal reliability. A consistent accounts payable cycle builds goodwill, which can lead to more favorable terms or priority service. When payments are handled well, the process strengthens supplier relationships and reduces friction in day-to-day operations.

Stronger Compliance and Audit Readiness

A structured process ensures proper documentation, consistent approval steps, and clear records for each transaction. This supports adherence to tax regulations and contractual obligations while simplifying audits. Well-documented records reduce the time and stress required during compliance reviews.

Greater Financial Visibility

Maintaining accurate records allows AP managers to track outstanding liabilities, forecast cash flow, and align payment schedules with budgets. This visibility supports informed decision-making, from planning major purchases to responding quickly to unexpected changes in the business environment.

Key Components of an Effective Accounts Payable Framework

A strong accounts payable framework provides structure for handling every transaction from start to finish, with each component playing a specific role in maintaining accuracy, compliance, and financial control. 

Here are the core components:

Components of the AP Process	How the Components Work
Invoice Intake	Captures invoices in any format, verifies details, and logs them into the system for processing. Ensures all incoming documents are recorded promptly. Includes invoice data capture technology for greater efficiency.
Approval Routing	Directs invoices to the right people for review and sign-off. Uses predefined rules to ensure proper authorization before payment.
Secure Payment Workflow	Executes payments through safe, approved channels while protecting sensitive banking and vendor information from unauthorized access.
Clear Audit Trail	Maintains a complete, accessible record of every action taken, supporting compliance requirements and simplifying future audits or dispute resolution.

Understanding the Accounts Payable Step-by-Step Process 

A clear accounts payable process helps teams manage supplier payments with consistency and accuracy. Yet, IOFL reports that 60% of AP professionals still manually enter invoices into ERP systems. This shows how much potential there is to improve efficiency with structured, automated workflows.

Getting this process right is crucial because it directly impacts: 

• Supplier relationships, 
• Cash flow visibility 
• Compliance with internal and external regulations 

A weak or inconsistent workflow can lead to late payments, duplicate invoices, strained vendor trust, and even financial penalties. On the other hand, a well-structured process creates transparency, improves audit readiness, and positions AP as a strategic partner to the broader business rather than a back-office function.

Let’s break down the seven steps in the accounts payable workflow:

1. Creating Purchase Orders

The process begins with a purchase order (PO), which formalizes what the company intends to buy. This document ensures there is clarity on quantities, pricing, and approval before committing funds.

Here’s how to do it:

• Define purchase requirements
• Obtain internal approval for the PO
• Share the PO with the supplier

2. Receiving Vendor Invoices

Once goods or services are delivered, the supplier sends an invoice for payment. This stage ensures that all invoices are promptly received and recorded for processing.

Here’s how to do it:

• Receive invoices by email, post, or electronic submission
• Date-stamp and log invoices upon arrival
• Store invoices securely for processing

3. Verifying Invoices

Verification ensures that the invoice matches the purchase order and delivery records. This step helps prevent overpayments, duplicate payments, or paying for goods not received.

Here’s how to do it:

• Match invoice details to PO and receiving reports
• Verify quantities, prices, and terms
• Flag discrepancies for resolution

4. Approving Invoices

Approval confirms that the invoice is valid and ready for payment. It ensures that all required documentation is in place and that the expense is within budget.

Here’s how to do it: 

• Route invoices to appropriate approvers
• Review supporting documentation
• Confirm budget availability and compliance

5. Processing Payments

After approval, payment details are prepared in line with the company’s policies and schedules. This step sets the stage for timely and accurate payment execution.

Here’s how to do it:

• Determine payment method and date
• Prepare the payment batch
• Verify payment details for accuracy

6. Making Payments

This is when the funds are actually released to the supplier. It is critical to ensure payment is made using secure channels and recorded accurately.

Here’s how to do it:

• Execute payment via bank transfer, cheque, or card
• Notify suppliers of payment
• Record confirmation details

7. Recording Transactions

The final step updates financial records to reflect the payment. Accurate documentation supports reporting, auditing, and overall financial transparency.

Here’s how to do it:

• Update ERP or accounting software
• File payment documentation
• Reconcile accounts at month-end

What Are the Main Challenges in the Accounts Payable Cycle?

Even a well-structured accounts payable cycle can face obstacles that slow processing, reduce accuracy, and subsequently undermine supplier trust. Common challenges include:

• Manual Data Entry: When invoice information is entered by hand, it not only consumes more time but also increases the likelihood of typing errors. In busy AP teams, these errors can multiply quickly and cause costly rework.
• Invoice Matching Errors: Mismatches between invoices, purchase orders, and delivery receipts can stall payments and require multiple departments to get involved. These delays often frustrate suppliers and disrupt internal workflows.
• Late or Missed Payments: Payment delays harm supplier trust and can result in financial penalties or forfeited early payment discounts. Over time, repeated delays may damage your reputation and supplier relationships.
• Lack of Visibility Into Approvals: Without clear insight into where an invoice sits in the approval chain, AP staff waste time chasing updates. This slows payment cycles and increases the risk of missing deadlines.
• Duplicate or Fraudulent Invoices: Weak controls can lead to paying the same invoice twice or processing fake invoices. These errors not only waste money but also increase exposure to fraud. 

How to Improve Accounts Payable Process Workflows with Automation

Implementing accounts payable process automation streamlines invoice intake, approval routing, and payment execution while providing better visibility across the entire accounts payable and receivable cycle. This creates faster, more accurate financial operations that support informed decision-making.

According to Allied Market Research, the global AP automation market was valued at $5.4 billion in 2023 and is projected to reach $17.1 billion by 2032, reflecting growing demand for efficiency, compliance, and improved data quality in finance functions. 

This underscores the importance of choosing the right accounts payable automation software to help manage higher volumes without losing accuracy, while giving leadership better insight into financial health.

Manual Workflows vs Accounts Payable Process Automation

According to a 2025 report by Ardent Partners, best-in-class organizations using automation achieve dramatically better performance across key AP benchmarks compared to teams relying on time-consuming manual processes. 

Here’s how automated processes impact costs, speed, accuracy, and staff resource requirements:

Factor	Manual AP	Automated AP (Best-in-Class)
Cost per Invoice	$12.88 per invoice on average, with higher labor and overhead costs	$2.78 per invoice, reflecting an 80% reduction in processing costs
Processing Time	17.4 days on average to process a single invoice	3.1 days, enabling faster payments and improving cash flow management
Exception Rate	22% of invoices were flagged for errors, missing data, or mismatches	9% exception rate, representing a 59% improvement in accuracy
Human Intervention	Limited automation results in fewer “touchless” invoices, with most requiring manual handling	49.2% of invoices processed straight-through with no human touch
Resource Waste	AP staff spend up to 26.9% of their time responding to supplier inquiries	Best-in-class teams reduce this to 13.4%, freeing time for higher-value work

How to Select the Best Automated Accounts Payable Processing Software

Choosing the right accounts payable automation software starts with knowing what your business truly needs. A thoughtful selection today can save you costly rework tomorrow and help AP evolve into a value-driving function across your organization.

Consider the following criteria when comparing solutions to ensure they fit your processes and long-term goals:

Integration with Existing Systems

Look for software that is natively embedded within your ERP or accounting platform. When systems integrate properly, you reduce manual data entry, eliminate duplication of records, and ensure a single source of truth for financial information. This also supports real-time updates between AP and procurement, treasury, and reporting functions. 

Ideally, a purpose-built or natively embedded solution is best, as it minimizes IT overhead and ensures smoother implementation and adoption across the business.

Scalability and Flexibility

Select a solution that can grow with your business and adapt to changes in invoice volume, approval structures, and reporting requirements. A flexible platform should handle both current needs and future expansions, whether that means supporting multiple entities, currencies, or compliance frameworks. 

Scalability ensures longevity and protects your investment, reducing the risk of needing to switch systems in just a few years. By choosing software that adjusts to complexity rather than constraining it, you future-proof your AP process.

User Experience and Accessibility

Choose tools with a clean interface and easy navigation so users can adapt quickly. If the software is overly complex, adoption rates will drop and efficiency gains will be lost. Prioritize features like role-based access controls to protect sensitive financial data, as well as mobile compatibility for on-the-go invoice approvals. Comprehensive training resources, tutorials, and support materials also help staff become confident with the system faster, which reduces resistance and encourages long-term engagement with the tool.

Reporting and Analytics

Advanced reporting capabilities allow you to track KPIs, monitor bottlenecks, and forecast cash flow with greater accuracy. A strong solution should offer customizable dashboards that cater to both executives who need high-level visibility and AP managers who require granular operational data. This ensures that decision-makers at every level can work from accurate, real-time information. 

When paired with predictive analytics, reporting tools can highlight potential risks before they become issues, ultimately improving financial control and business agility.

Security and Compliance

Ensure the software supports data encryption, audit trails, and adherence to industry regulations such as SOX, GDPR, or local tax laws. Strong security is essential not just for protecting sensitive vendor and payment information but also for maintaining trust with suppliers and stakeholders. Compliance features also make audits far less stressful by ensuring all transaction records are complete, traceable, and transparent. 

By choosing a solution with robust security and compliance baked in, businesses minimize legal and reputational risk while strengthening governance practices.

Best Practices for Accounts Payable Processing 

Following a set of well-defined best practices helps ensure your AP team works efficiently, reduces costly errors, and maintains strong supplier relationships. These seven steps create a stable foundation for any accounts payable process to operate effectively.

1. Establish Clear Invoice Policies

Document and communicate consistent rules for invoice submission, payment terms, and required supporting documentation. Share these guidelines with vendors and internal teams to reduce disputes, minimize processing delays, and improve compliance across your organization. Clear policies also help standardize data entry and approval procedures. Here’s how your organization can establish clear policies for invoicing:

• Create a written AP policy document covering invoice submission deadlines, formats, and required documentation
• Standardize payment terms (e.g., Net 30) and communicate them in all contracts and purchase orders
• Train internal stakeholders on how to submit and approve invoices according to policy
• Distribute policies to vendors so expectations are clear from the outset
• Review and update policies annually to reflect regulatory or process changes

2. Automate Routine Tasks

Implement technology to handle repetitive activities such as data capture, invoice approval routing, and payment scheduling. This reduces human error, speeds up processing, and frees AP staff to focus on more strategic work. Start with high-volume tasks for maximum impact. Here are some steps you can take to make the automation journey a smooth one:

• Implement OCR (optical character recognition) tools or ERP-native automation to capture invoice data
• Set up automated approval workflows that route invoices based on department, amount, or type
• Enable scheduled payment runs to ensure timely supplier payments without manual intervention
• Use alerts or notifications to flag exceptions, reducing time spent hunting for errors
• Start with high-volume processes—such as invoice entry or three-way matching—for the biggest efficiency gains

3. Maintain Accurate Vendor Records

Ensure vendor information is kept current, including payment details, tax forms, and contact information. Outdated records can cause payment delays, increase error rates, and complicate compliance checks. Regularly review and update your vendor database to prevent avoidable issues. Here’s how:

• Collect all required vendor details during onboarding, including tax forms, banking info, and contacts
• Perform quarterly audits of the vendor master file to remove duplicates or outdated entries
• Use standardized naming conventions to avoid confusion between similar suppliers
• Require vendors to confirm or update their information annually
• Store all vendor documents in a centralized, secure repository accessible to AP staff

4. Enforce Approval Hierarchies

Define and follow a structured approval process for invoices. This ensures every payment is authorized by the appropriate person or department, reducing the risk of fraud or unauthorized spending. Approval hierarchies also make audits smoother and faster.

To set up a proper hierarchy for approvals, start by:

• Defining approval thresholds (e.g., invoices over $5,000 require director-level sign-off).
• Mapping approval workflows in your ERP or AP automation tool
• Ensuring backup approvers are designated to avoid bottlenecks during absences
• Regularly reviewing approval structures to ensure they align with organizational changes
• Documenting approvals electronically to create a verifiable audit trail

5. Perform Regular Reconciliations

Compare AP records against general ledger entries and bank statements on a regular schedule. This helps identify discrepancies early, ensures accurate financial reporting, and prevents minor errors from becoming costly problems over time.

Your reconciliation workflow should:

• Verify AP subledger balances against the general ledger at least monthly
• Match cleared payments against bank statements on a weekly or bi-weekly basis
• Investigate and resolve discrepancies immediately to prevent escalation
• Use automated reconciliation tools when available to streamline the process
• Document reconciliation findings for future audits and compliance checks

6. Monitor Key AP Metrics

Track performance indicators such as cost per invoice, average processing time, and exception rates. Monitoring these metrics helps identify bottlenecks, measure improvements, and maintain accountability within the AP team. You can do this by:

• Measuring cost per invoice to identify savings opportunities from automation
• Tracking average processing time from invoice receipt to payment
• Monitoring exception rates to flag recurring issues with vendors or workflows
• Reviewing on-time payment percentages to ensure strong supplier relationships
• Reporting results in dashboards that can be shared with finance leadership for accountability

7. Secure Sensitive Financial Data

Protect vendor banking details, invoices, and payment records using encryption, role-based access controls, and secure transmission methods. Strong security safeguards reduce the risk of data breaches and maintain supplier trust. Follow these steps to ensure your data stays secure:

• Encrypt all financial data in transit and at rest
• Implement role-based access controls so only authorized users see sensitive details
• Require multi-factor authentication for AP system access
• Storing vendor documents and banking information in a secure, centralized platform
• Conducting annual security training to ensure staff recognize risks like phishing attempts

Streamline the End-to-End Process of Accounts Payable with ExFlow

ExFlow is built to manage the process of accounts payable directly inside Microsoft Dynamics 365 F&O and Business Central, giving AP teams full visibility and control from invoice intake to payment. Unlike standalone tools, ours is natively embedded into your ERP, ensuring consistent data, streamlined workflows, and accurate reporting across the business.

Key features include:

• Advanced invoice capturing to eliminate repetitive manual entry
• Intelligent approval routing that adapts to organizational hierarchies
• Full audit trails for improved regulatory compliance and transparency
• Built-in reporting to track KPIs and support strategic decision-making
• Configurable workflows to fit your accounts payable workflow and company policies

Ready to automate your accounts payable process? Book a demo today and see how ExFlow AP can help.

Frequently Asked Questions

What Is the Difference Between Accounts Payable and Accounts Receivable?

The difference between accounts payable and receivable lies in the direction of the money flow. AP tracks what your business owes suppliers for goods or services, while accounts receivable tracks what customers owe you. Both are essential for understanding cash flow, but the accounts payable process focuses on outgoing payments and supplier obligations.

What Security Features Are Essential for End-to-End AP Automation Tools?

Security is critical in the end-to-end process of accounts payable, especially when automation is involved. Essential features include: 

• Role-based access controls, 
• Data encryption, 
• Secure payment gateways 
• Complete audit trail 

These measures protect sensitive financial data, ensure compliance with regulations, and maintain vendor trust.

How Can Businesses Simplify the Accounts Payable Process and Procedures?

To simplify the AP process, start by mapping your current flow chart to identify bottlenecks and unnecessary steps, then introduce automation for tasks like invoice data capture and approval routing to reduce manual workload. 

Ensure that your processes: 

• Maintain accurate vendor records 
• Monitor key metrics 
• Enforce clear approval hierarchies. 

Enterprises should also provide regular training so staff can fully utilize new tools and processes. Over time, these steps lead to greater efficiency, fewer errors, and a more transparent AP cycle.