Money Matters

What is the accounts payable process?

Learn how the accounts payable process works, from invoice capture and matching through the full cycle of making and recording payments.

Published September 30, 202613 min read Share

This article was originally published on February 6, 2025 and has been refreshed and re-published with new content on September 30, 2026.

When a supplier invoice arrives, payment shouldn’t be the first step. Your business needs to confirm what was ordered and received, check that the invoice is correct, get the right approval, and record the transaction properly. The accounts payable process is the workflow that connects all of those steps—from purchase records and invoice checks through to payment and reconciliation.

Get the process right and you have a clearer view of what your business owes, when payments are due, and whether your accounting records match what has actually happened.

Key takeaways

• Full-cycle accounts payable runs from purchase and invoice records through verification, approval, payment, posting, and reconciliation.
• Invoice processing is only one part of AP; the wider process also covers payment controls and accounting records.
• PO invoices can use 2-way or 3-way matching, while non-PO invoices need other documentation and approval controls.
• Automation can speed up routine AP work, but clear approval rules and exception handling are still essential.

Here’s what we’ll cover

What is the accounts payable process, and how does it work?

The Accounts Payable (AP) process is the workflow a business uses to verify what it owes suppliers, approve those amounts, make payments, and update its accounting records. A full AP cycle typically moves from purchase and invoice records through checking, approval, payment, posting, and reconciliation.

It’s distinct from the accounts payable balance itself; the liability sits on the balance sheet, while the AP process is the set of steps that gets an invoice there and then clears it.

Full cycle accounts payable describes the wider sequence from supporting purchase and invoice information through payment, recording, and reconciliation. The AP process also connects with the broader Procure-to-Pay (P2P) process, although purchasing activities such as requesting goods or creating purchase orders may be handled by procurement or another team rather than AP.

The exact accounts payable cycle varies by transaction, depending on how a business purchases goods and services, what documentation is available, and which approval controls it uses.

What is the difference between the accounts payable process and invoice processing?

Invoice processing is one part of the wider accounts payable process, focusing on receiving an invoice, capturing its information, checking and coding it, and getting it approved for payment.

These accounts payable invoice processing steps cover only part of the full cycle, which also connects invoice activity with purchasing records, payment authorization, accounting entries, and reconciliation.

Why does an effective accounts payable workflow matter?

A good accounts payable workflow makes it clear where every invoice is, who needs to act on it, and what must happen before money leaves the business. That helps finance teams avoid invoices getting lost or duplicated, approvals being delayed, and accounting records falling out of step with supplier balances.

Here’s how common AP problems connect with the outcomes a more organized workflow can support:

Process area	When the AP process breaks down	What a well-managed workflow supports
Invoice visibility	Invoices may be misplaced, duplicated, or left waiting for action.	Clear invoice status and ownership.
Accuracy	Manual entry or mismatched information can create errors.	Verification before approval and payment.
Approvals	Invoices may sit with the wrong person or lack clear authorization.	Defined approval routes and responsibilities.
Payment timing	Missed due dates or poorly timed payments can affect cash planning.	Payments scheduled according to approved terms.
Recordkeeping	Payments and liabilities may not agree with accounting records.	Timely recording and reconciliation.
Control	Unusual or unauthorized activity may be harder to identify.	Defined access, approval, and verification controls.

The goal isn’t simply to move invoices through the process as fast as possible. A strong AP workflow completes the necessary checks without avoidable delays, then schedules payment around approved supplier terms and the business’s financial needs.

What are the steps in the accounts payable process?

The accounts payable process flow moves from purchase and invoice information through verification, approval, payment, recording, and reconciliation. The exact accounts payable steps vary by business, and some purchasing activities may happen outside the AP team.

The following sequence shows how a full cycle accounts payable process can work:

1. Purchase request and purchase order creation

   The process often starts before an invoice exists. When a purchase is requested and approved, the business creates the records that AP may later need to verify the supplier’s bill.

   If the business uses purchase orders, the PO records details such as what was ordered, the agreed quantity, and the price. AP may not create the PO itself, but it can later use that information to check the supplier invoice.

2. Goods or services are received and the supplier sends and invoice

   The business receives the goods or services and, where its process requires it, records evidence of receipt. The supplier invoice may arrive before or after that point, depending on the transaction and billing arrangement.

   In the invoice, the supplier sets out what the business is being charged and when payment is due.

   Invoices may arrive by email, through a supplier portal, or through another electronic invoicing channel. Once received, the invoice should enter a controlled process rather than remain in an individual inbox or paper file.

3. The invoice is captured and coded

   AP then captures the information needed to track and process the invoice, including the supplier, invoice number, date, amount, due date, and payment terms.

   The invoice may also need General Ledger (GL) coding so the cost is assigned to the appropriate account, department, project, or other accounting category. Automation can speed up invoice data capture, but incomplete, unclear, or unexpected information still needs a defined route for review.

4. The invoice is verified and matched

   Before anyone approves the invoice for payment, AP needs to confirm that the bill agrees with the records supporting the purchase. That can mean checking details such as the supplier, quantities, prices, and evidence of what was ordered and received.

   A two-way match compares the invoice with the purchase order, while a three-way match also compares those records with evidence that the goods or services were received. Software can automate routine matching when records meet predefined rules and flag mismatches for review.

   For example, say your business orders 20 office chairs at $200 each. A 2-way match checks that the supplier’s $4,000 invoice agrees with the purchase order. A 3-way match adds another question: did the business actually receive all 20 chairs? If only 18 arrived, AP can hold the invoice for review rather than allowing the full amount to move straight to payment.

   Not every invoice has a purchase order behind it. Non-PO invoices therefore need another verification route, using the supporting information, coding, and approval controls available for that expense.

5. Exceptions are resolved, and the invoice is approved

   If the invoice doesn’t pass the required checks, it becomes an exception rather than moving straight to payment. Differences in the amount, quantity, supplier details, or supporting records may need to be investigated first.

   Once any exceptions are resolved, the invoice moves through the business’s approval process. Approval responsibilities may depend on factors such as the amount, department, or type of purchase.

   Workflow tools can send invoices to the correct approver and flag items awaiting action, helping finance teams spot where invoices are getting stuck rather than chasing approvals manually.

6. Payment is authorized and scheduled

   Once the invoice is approved, the business authorizes payment and schedules it according to the agreed supplier terms and its payment process. A well-run AP process doesn’t necessarily pay every approved invoice immediately; the aim is to pay the right amount, to the right supplier, at the appropriate time.

   The accounts payable payment process should also make sure the payment is associated with the correct supplier and invoice. Depending on the business and supplier arrangements, payment may be made electronically, by check, or through another approved method.

7. The payment and liability are recorded

   When payment is made, the accounting records need to reflect that the outstanding amount has been settled. The accounts payable balance is reduced, and the corresponding cash transaction is recorded.

   Accounting software can update payment records as transactions move through the system, reducing the need to re-enter the same information at multiple stages. Accurate posting matters because each accounts payable journal entry feeds into the general ledger and affects the financial information used for reporting and cash management.

   Periodic general ledger reconciliation then helps finance teams confirm that the balances used for financial reporting agree with the underlying accounting records.

8. Accounts payable records are reconciled

   Payment may settle the supplier invoice, but it doesn’t complete the accounting cycle if the records still contain unexplained differences. Reconciliation checks that the AP records agree with the supporting accounting information and helps identify anything that still needs investigation.

   Regular accounts payable reconciliation lets finance teams review outstanding liabilities, payment activity, and supplier balances against their records, closing the accounts payable cycle by confirming which balances remain outstanding.

How do PO and non-PO invoices move through the accounts payable workflow? 

PO and non-PO invoices both need to be verified and approved, but they don’t always follow the same route. The main difference is whether a purchase order exists to check the invoice against.

PO invoice	Non-PO invoice
Linked to a purchase order.	No purchase order is available for matching.
Can be checked against PO information and, where relevant, receipt records.	Verified using other supporting information, coding, and approval controls.
May use two-way or three-way matching.	Uses a verification process that doesn’t rely on PO matching.
Differences between available records can be identified as exceptions.	Review confirms that the expense has the required documentation and approval.

In practice, the right workflow depends on how the purchase was authorized and what evidence is available to show that the expense is valid, accurate, and ready for payment.

What controls support good accounts payable procedures? 

Accounts payable controls help businesses check that invoices are valid, properly approved, accurately recorded, and paid to the intended supplier. The appropriate controls depend on the size and structure of the business, but clear responsibilities and verification points are central to good accounts payable management best practices and can reduce avoidable errors and unauthorized activity.

Define approval responsibilities

Make it clear who can approve invoices and how much they are authorized to approve. That gives employees a defined route for getting spending signed off before payment rather than relying on informal or inconsistent decisions.

Control changes to supplier information

Supplier records contain information used to direct payments, so changes should follow a defined process. Access to create or edit supplier records should be limited to people who need that responsibility.

Changes to sensitive information, such as payment details, may also require separate verification before a payment is released.

Separate responsibilities where appropriate

Where practical, avoid giving one person control over every stage of creating, approving, and paying a transaction without another review point.

The exact division of responsibilities will depend on the size of the finance team. Smaller businesses may not be able to separate every task, but they can still build approval or review points into activities that require additional oversight.

Check unusual or changed payment information

An invoice that falls outside the normal pattern—for example, because the amount or payment details have changed—may warrant extra review before payment.

Technology can flag activity that falls outside defined rules, but the business still needs a process for deciding what requires investigation and who reviews it.

Keep records that support review and reconciliation

Invoices, approvals, payment records, and supporting purchase information should be kept in a way that allows finance teams to trace what happened.

That audit trail makes reconciliation easier and helps teams answer questions about a supplier balance or payment without piecing the history back together from emails, spreadsheets, and separate documents.

Which accounts payable metrics can help you monitor the process?

Accounts payable metrics like invoice processing cycle time, exception rate, first-time error-free payment rate, cost per invoice, and Days Payable Outstanding (DPO) can help finance teams identify processing problems.

The most useful measures depend on the organization’s workflow, so external benchmarks should be treated as reference points rather than universal targets.

Metric	What it can show
Invoice processing cycle time	How long invoices take to move from receipt through the required checks and approvals.
Exception rate	How often invoices require additional investigation rather than following the normal workflow.
First-time error-free payment rate	How consistently payments are processed correctly without later correction.
Cost per invoice	The resources required to process invoices across the AP function.
Days payable outstanding (DPO)	How long, on average, the business takes to pay suppliers.

No single metric tells the full story. A very short processing time doesn’t help if errors increase, and a higher or lower DPO isn’t automatically better for every business.

The real value comes from looking at the measures together. A rising exception rate alongside longer cycle times, for example, could point to problems with invoice information, purchase-order matching, or approval routing. Cost per invoice can then help the finance team understand the operational impact of those bottlenecks.

Used this way, AP metrics do more than report performance after the fact: they help show where the process needs attention and how payment timing fits with cash planning and supplier terms.

How can automation support the accounts payable process?

Accounts payable automation can reduce manual work in parts of the process by capturing invoice data, applying defined matching rules, routing invoices for approval, and updating records.

For example, accounts payable automation software can collect invoice information so employees don’t need to re-enter every field manually. Matching rules can compare invoice information with available purchasing records, while workflow tools can send invoices to the appropriate people for review. The biggest benefit is not simply moving every invoice faster. Automation can move routine invoices through predefined checks while surfacing exceptions—such as missing purchase orders, mismatched amounts, or stalled approvals—for the finance team to investigate.

Automation can also show where invoices are in the process and which need attention, reducing reliance on manual tracking as invoice volumes grow.

Frequently asked questions about the accounts payable process

Who is responsible for accounts payable in a small business?

Responsibility for accounts payable depends on the size and structure of the business. A bookkeeper, accountant, finance employee, or business owner may handle AP in a smaller company, while larger organizations may have a dedicated accounts payable team.

What matters is that responsibility for entering, reviewing, approving, and paying invoices is clear.

How do you record accounts payable transactions?

Recording accounts payable involves recognizing the amount owed when an invoice is entered and then reducing that liability when payment is made. The accounts used on the other side of those entries depend on what the business purchased and how its chart of accounts is structured.

What is an accounts payable aging report?

An accounts payable aging report groups unpaid supplier balances by how long invoices have been outstanding. It helps finance teams see which payments are approaching or past their due dates and plan upcoming cash requirements.

What documents are used in the accounts payable process?

Common accounts payable documents include supplier invoices, purchase orders, receiving records, approval records, and payment information. Which documents are needed depends on the transaction and the controls your business uses.

For example, a PO invoice may be checked against a purchase order and receipt record, while a non-PO invoice needs other supporting information and approval to confirm that the expense is valid.

What happens if an invoice doesn’t match the purchase order?

If an invoice doesn’t match the purchase order or receiving information, it should be treated as an exception and reviewed before payment. AP may need to check quantities or prices, confirm what was received, or contact the supplier or person who made the purchase before the invoice can move forward.

This prevents a mismatch from becoming a payment error and creates a clear record of how the exception was resolved.

What does full-cycle accounts payable mean?

Full-cycle accounts payable is the complete process for managing a supplier liability from supporting purchase and invoice information through verification, approval, payment, recording, and reconciliation. Invoice processing is one part of that wider cycle rather than the whole process.

How long should the accounts payable process take?

No single processing time is right for every business. The time required depends on factors such as invoice complexity, approval requirements, matching rules, and whether an exception needs investigation.

The better goal isn’t an arbitrary number of days, but a process that completes the necessary checks without avoidable delays and keeps payment timing aligned with approved supplier terms.

Ready to improve your accounts payable workflow?

A strong accounts payable process gives your finance team something more valuable than faster invoice processing: control over what the business owes, what is ready to pay, and what still needs investigation. As invoice volumes grow, clear workflows and automation can help maintain that control without adding the same amount of manual work.

Sage accounts payable solutions support invoice handling, approval workflows, and vendor payments while connecting AP activity with wider financial management. Explore Sage Intacct accounts payable software to see how Sage can support your finance team.

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