The accounts payable process: six steps, with better controls

The six steps of the accounts payable process

1. Receive and log. Capture the supplier, invoice number, date, amount, currency and payment terms. Keep the source document linked to the record and check whether the invoice is already in the queue.
2. Match. Compare the invoice with the purchase order. For goods, add evidence of receipt where your policy requires a three-way match. A service invoice without a purchase order needs the appropriate evidence and approval route.
3. Code. Assign the ledger account, cost centre, entity and applicable tax treatment using the agreed rules. Escalate unfamiliar items instead of guessing.
4. Approve. Send the invoice to the authorised reviewer. Keep evidence of the decision, including any dispute or requested correction.
5. Pay. Prepare the payment schedule from approved invoices and due dates. The authorised person releases the payment through the agreed banking controls.
6. Record and reconcile. Apply the payment to the supplier balance and reconcile it with bank activity. Investigate failed payments, unapplied credits and differences.

A three-way match checks agreement between documents. It does not by itself prove that bank details are genuine or stop every duplicate. Supplier verification, duplicate checks and payment authorisation remain separate controls.

For a software-specific explanation, Oracle’s matching guidance distinguishes two-way checks of order and invoice quantities from three-way checks that also consider received quantities. Your workflow should define the tolerances and exception route used in your own system.

Where the process gets stuck

The routine invoice is rarely the whole workload. Missing purchase orders, partial deliveries, a disputed charge or an unavailable approver can leave an otherwise complete invoice waiting. If these items sit in individual inboxes, nobody has a reliable view of what can be paid.

Give each exception a reason, owner and next review date. The goal is to resolve it, not simply label it.

Keep controls attached to the work

Make the division of responsibility visible. The person preparing an invoice record should not gain unrestricted authority to change supplier bank details and release the payment. Define access according to the work each person performs.

Use a payment proposal that shows invoice references, due dates and outstanding credits. Review changes before release and retain the approval trail. At month-end, compare supplier statements with the ledger where available and investigate differences rather than carrying them forward without explanation.

For a wider purchasing process, connect AP with procure-to-pay support. That makes the link between the request, purchase order, receipt and invoice easier to maintain.

Should you automate, hire or outsource AP?

Automate work that follows clear rules: capturing standard fields, detecting likely duplicates or routing an invoice to the right reviewer. Test the output on actual invoice formats before relying on it. Exceptions still need someone who can ask the right person for an answer.

Hire internally when the work requires frequent on-site coordination or when there is enough varied finance work for a role. Consider accounts payable outsourcing when the preparation and follow-up workload is recurring and can be documented. Many teams combine software with managed support.

Invoice processing automation is a narrower starting point if capture and routing create most of the delay. It should connect to your existing approval and payment controls, not replace them.

Improve the process with a small set of measures

Track the age of unprocessed invoices, items awaiting approval, exceptions by reason and payments requiring correction. Separate a supplier issue from an internal delay so the team fixes the right cause.

Review a sample of completed invoices from receipt to reconciliation. Can you find the original document, coding, approval and payment reference? If the trail breaks, repair that handoff before increasing volume. An agreed process and a readable queue are a stronger foundation than adding another tool to an unclear workflow.