The accounts payable (AP) process is a structured workflow that moves a supplier invoice from receipt to payment while ensuring its accuracy, proper authorisation and timely settlement.
By verifying invoice details, matching supporting documents, obtaining approvals and recording liabilities, businesses can reduce payment errors, strengthen financial controls, maintain compliance and build reliable supplier relationships.
What are the common steps in the accounts payable process?
Most businesses follow a sequence of activities to ensure supplier invoices are valid, approved and paid on time. Skipping or rushing any step can lead to duplicate payments, incorrect accounting entries or disputes with suppliers.
Receive the supplier invoice
The accounts payable process begins when a supplier submits an invoice for goods or services delivered. Depending on the business, invoices may be received through email, an e-invoicing platform, a supplier portal or as a printed document. The invoice is then registered in the accounts payable system so it can be tracked throughout the approval and payment process.
Verify the invoice details
After the invoice is received, the business verifies that all information is complete and accurate before processing it for payment. This review helps identify errors before they affect accounting records or payment schedules.
The verification typically includes checking:
- Supplier details
- Invoice number and date
- GSTIN and tax amounts
- Product or service descriptions
- Quantities supplied
- Unit prices
- Total invoice value
- Payment terms
For example, if an invoice shows 120 cartons delivered but the purchase records indicate only 100 cartons were ordered, the discrepancy should be investigated before the invoice moves to the next stage.
Match the invoice with supporting documents
The business matches the invoice with supporting procurement documents to confirm that payment is being made only for goods or services that were ordered and received. This process is commonly known as invoice matching.
Depending on the procurement process, businesses may use:
- Two-way matching, where the invoice is compared with the purchase order.
- Three-way matching, where the invoice is matched against both the purchase order and the goods receipt or delivery record.
For example, suppose a company issues a purchase order for 500 units of a product. The warehouse confirms that all 500 units have been received, and the supplier invoice also reflects the same quantity and agreed price. Since all three documents are consistent, the invoice can proceed for approval.
If the invoice quantity, pricing or tax amount differs from the supporting documents, the discrepancy should be resolved before payment is authorised.
Resolve discrepancies
Any differences identified during verification or invoice matching should be resolved before payment is approved. Addressing discrepancies early helps prevent incorrect accounting entries, supplier disputes and payment delays.
Some of the most common issues include:
- Incorrect quantities
- Pricing differences
- Duplicate invoices
- Incorrect GST calculations
- Missing purchase order references
- Damaged or partially delivered goods
The finance team usually works with the purchasing department, the warehouse or the supplier to resolve these issues. Once the necessary corrections are made, the invoice can continue through the approval workflow.
Obtain invoice approval
The verified invoice is submitted for approval to confirm that the purchase is valid, the goods or services have been received, and payment should be released.
Approval workflows differ between organisations depending on internal policies. For example:
- Routine purchases may require approval from a department manager.
- High-value invoices may need additional approval from senior management or finance.
- Capital expenditure may require approvals from multiple stakeholders before payment is processed.
A structured approval process also creates an audit trail by documenting who reviewed and authorised each invoice.
Record the invoice in the accounting system
Once approved, the invoice is recorded in the accounting system as an outstanding payable, updating the supplier ledger and recognising the business's liability until payment is made.
The accounting entry typically captures:
- Supplier details
- Invoice amount
- Applicable taxes
- Expense or inventory allocation
- Payment due date
- Outstanding balance
Recording the invoice makes the liability available for payment scheduling, ageing analysis and accounts payable reporting.
Schedule the payment
The business schedules payment according to the agreed payment terms and available cash flow to ensure invoices are paid on time without affecting liquidity.
When scheduling payments, businesses typically consider:
- Invoice due date
- Credit period agreed with the supplier
- Early payment discounts, if offered
- Cash flow availability
- Payment priorities for critical suppliers
For example, if Supplier A offers a 2% discount for payment within 10 days, while Supplier B has a standard 30-day credit period with no discount, paying Supplier A first may reduce procurement costs.
A payment schedule helps businesses plan outgoing cash while ensuring invoices are settled on time.
Make the payment
On the scheduled payment date, the business pays the supplier using the agreed payment method and records the transaction against the corresponding invoice.
Depending on the supplier and company policy, payments may be made through:
- Bank transfer
- NEFT, RTGS or IMPS
- UPI
- Cheque
- Other electronic payment methods
Once payment is made, the supplier's outstanding balance should be updated and the payable should be cleared from the accounting records. Supporting documents, such as payment confirmations, bank references or transaction IDs, should also be retained for reconciliation and audit purposes.
Reconcile and close the transaction
The final step is to reconcile the payment with the supplier invoice and close the payable, confirming that the transaction was completed accurately.
This involves confirming that:
- The payment has been successfully processed.
- The correct invoice has been settled.
- The supplier's outstanding balance has been updated.
- The accounting records accurately reflect the payment.
Businesses also reconcile supplier statements periodically to identify unpaid invoices, duplicate payments or differences between their records and the supplier's books. Regular reconciliation helps identify missing invoices, duplicate payments and unmatched transactions before they affect financial reporting or supplier relationships.
What are the best practices for managing the accounts payable process?
Businesses can manage the accounts payable process more effectively by following standardised procedures, monitoring payments regularly and maintaining accurate financial records as invoice volumes increase.
The following practices can help improve accounts payable management:
- Standardise invoice verification and approval procedures.
- Use two-way or three-way matching where applicable.
- Define approval limits based on invoice value or department.
- Monitor invoice due dates and payment schedules.
- Reconcile supplier statements regularly.
- Review ageing reports to prioritise outstanding payables.
- Maintain complete supporting documents for every purchase transaction.
These practices improve consistency and reduce the likelihood of duplicate payments, missed invoices and delayed approvals.
Conclusion
An effective accounts payable process depends on more than following a sequence of steps. Consistent invoice verification, timely approvals, accurate recordkeeping and regular reconciliation help businesses reduce payment errors, strengthen financial controls and maintain reliable supplier relationships as transaction volumes grow.
Accounting software such as TallyPrime supports these activities by helping businesses manage invoice recording, supplier balances, payment tracking and financial records from a single system, making accounts payable more efficient, accurate and easier to control.
