Accounts Payable Process:
Definition, Steps, Best Practices in AP
Last Updated: December 31, 2025
Explore the Accounts Payable process for 2025–2026: key steps, controls, and best practices to reduce invoice data entry work, improve invoice capture and invoice data capture quality, and accelerate approvals without sacrificing compliance.
The accounts payable (AP) process is the operating system of cash going out. It governs how supplier invoices are received, validated, approved, posted, and paid - and it directly impacts working capital, audit readiness, and supplier relationships.
In 2025–2026, AP teams are under pressure to do more with fewer manual touchpoints. The biggest cost drivers are no longer just staffing - they are exceptions, approval delays, rework from invoice data entry errors, and weak visibility into what is “stuck.” That is why modern Accounts Payable strategies focus on invoice capture, invoice data capture, and invoice automation to reduce touches per invoice while strengthening controls.
In this comprehensive guide, we’ll explore the accounts payable process, breaking down:
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Accounts Payable (AP) is the function responsible for paying suppliers accurately and on time. The accounts payable process includes invoice intake, invoice capture and invoice data capture, validation (policy, tax, and matching), approvals, posting to the ledger, payment execution, and reconciliation.
In practical terms, “invoice accounts payable” is about control and visibility: ensuring the right invoice is paid once, for the right amount, to the right supplier, under the right terms - with an audit trail you can defend.
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Here’s a step-by-step overview of a typical accounts payable process. In 2025–2026, the goal is not just “faster AP” - it’s a more controlled, measurable workflow where invoice capture, invoice data capture, and invoice automation reduce exceptions and protect cash.
A purchase order (PO) is generated when goods or services are needed. It captures item details, quantity, pricing, and terms - and it becomes the control point that later supports matching and invoice accounts payable accuracy.
The receiving team verifies delivery (or service completion) against the PO and records proof of receipt. Clean receiving data reduces downstream disputes and prevents avoidable exceptions during matching.
The supplier submits an invoice. In modern Accounts Payable, invoices may arrive by email, portal, EDI, or e-invoicing networks - and standardizing intake is the first step toward reliable invoice capture.
The AP team matches the PO, receiving documentation, and supplier invoice to confirm quantity, price, and terms. Automation can resolve “happy path” matches quickly while routing exceptions to the right owner.
Invoices are routed for approval based on policy, spend category, budget, and delegated authority. Clear routing and reminders reduce delays and prevent invoices from aging unnoticed.
Invoice data entry (or automated posting) records the liability in the AP ledger and general ledger. The best teams minimize manual invoice data entry by using invoice data capture with validation against vendor master data, tax rules, and duplicate checks.
Payments are scheduled based on the supplier’s payment terms (e.g., net 30 days). Early payment discounts or late fees are considered in scheduling. Payments are made through checks, electronic funds transfers (EFT), ACH payment transfers, or other payment methods. Payment details are documented, and the accounts payable ledger is updated accordingly.
Reconciliation aligns the accounts payable ledger with the general ledger and payment confirmations. Prompt reconciliation prevents duplicate payments, improves close confidence, and tightens internal controls.
All documents (POs, invoices, receipts, approvals, and payment confirmations) are stored securely for audit and compliance. In 2025–2026, audit readiness means searchable documentation, consistent retention rules, and a complete approval trail - not shared folders and email threads.
AP reporting provides insight into liabilities, cash needs, and performance (cycle time, exception rate, and on-time payment). Aging reports help identify overdue payments and manage supplier relationships. Strong internal controls (segregation of duties, approval thresholds, audit logs, and exception handling) reduce fraud risk and support compliance.
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The accounts payable process is critical for financial health and supplier relationships, but small breaks in intake, approval, and invoice data entry can create big downstream costs. Below are common Accounts Payable challenges that continue to show up in 2025–2026:
Manual invoice data entry increases error risk (incorrect amounts, duplicate entries, miskeyed tax, and wrong supplier mapping). These mistakes create rework, payment disputes, and avoidable write-offs - and they often surface during close.
Slow approval processes, lost invoices, and bottlenecks can delay invoice processing. Delayed payments may result in late fees, damaged supplier relationships, and missed early payment discounts. Complex or unclear approval hierarchies can slow down the invoice approval process.
Matching breaks down when POs, receipts, and invoices don’t align or when data is missing. Without reliable invoice capture and invoice data capture, exceptions multiply and staff spend time hunting for context instead of resolving root causes.
Inconsistent AP processes across departments or locations, with varying procedures and documentation. This accounts payable process inefficiency makes it challenging to maintain control and oversight, leading to inefficiencies and compliance issues.
Weak controls can lead to duplicate payments, vendor impersonation, and fraudulent invoices. Modern Accounts Payable requires segregation of duties, strong vendor master governance, and automated checks (duplicates, bank changes, and unusual patterns).
Tax, privacy, and industry requirements evolve continuously. Without standardized documentation and traceable approvals, audits become slow and disruptive - and non-compliance can lead to penalties.
Poor communication, inaccurate vendor data, and unresolved disputes strain relationships and can result in less favorable terms. Weak onboarding and supplier master changes can also introduce payment delays and fraud exposure.
READ MORE: Vendor Onboarding: How to Deal with Supplier Onboarding
Inadequate forecasting and timing of payments can disrupt cash flow. As a result, insufficient funds for operations or missed investment opportunities due to poor liquidity management.
When teams don’t use invoice automation, invoice capture, and invoice data capture, processing time stays high and errors compound. Manual, paper-based work also limits visibility, making it harder to forecast cash and manage workload.
Mismatches between orders, deliveries, and invoices due to errors or fraud require additional time and resources to resolve, delaying payments.
Poor tracking of payment terms may result in missed opportunities for early payment discounts or incurring late payment penalties. This increases costs and negatively affects supplier relationships.
Without integration between AP and ERP/finance systems, data ends up in silos. The result is redundant invoice data entry, inconsistent records, and slower resolution of exceptions.
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By proactively addressing these challenges, companies can improve Accounts Payable efficiency, reduce avoidable spend, and increase confidence in financial reporting - while freeing teams to focus on exceptions and supplier strategy.
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In 2025–2026, “AP automation” is less about moving faster and more about operating with fewer touches and stronger controls. The best programs combine invoice capture, invoice data capture, workflow automation, and integrations so Accounts Payable becomes predictable, measurable, and audit-ready.
Invoice capture and invoice data capture can extract key fields using optical character recognition (OCR) and AI, reducing manual invoice data entry. When capture is paired with validation (vendor master, duplicates, tax rules, and tolerances), error rates and rework drop significantly.
Automated routing sends invoices to the right approver based on policy, category, and thresholds. Alerts, escalation rules, and mobile approvals reduce cycle time and prevent invoices from aging in inboxes.
Automation can match POs, receipts, and invoices and quickly identify discrepancies. Instead of forcing AP to “hunt for context,” exceptions are flagged with clear reasons and routed to the right resolver (buyer, receiver, or supplier contact).
Automation maintains audit trails for capture, approvals, changes, and payments. Standardized workflows enforce policy consistently, which improves audit readiness and reduces compliance risk.
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Automation reduces time spent on repetitive work, which lowers operational effort per invoice and helps teams redeploy capacity to exception handling. Faster, more predictable processing also increases the likelihood of capturing early payment discounts.
When invoice status is visible end-to-end, finance leaders can forecast cash with more confidence. Real-time dashboards also help identify bottlenecks that distort accruals and create surprises at close.
Efficient processing helps suppliers get paid on time, improving trust and negotiating power. Portals and proactive status updates reduce “where’s my payment?” inquiries and keep AP focused on exceptions.
Automation enforces segregation of duties, flags suspicious patterns, and strengthens controls around supplier master changes. Role-based access, logging, and approvals help protect sensitive financial data.
Automation helps Accounts Payable scale for growth and seasonal spikes without a proportional increase in headcount. Rules and workflows can be adjusted as policies change and new compliance requirements emerge.
Automation tools can also integrate with ERP, procurement, and financial systems, ensuring consistency across the organization. As a result, integrated systems prevent duplicate entries and ensure all departments have access to the same information.
Automation provides analytics on spend, cycle time, exception drivers, and supplier performance. Better data supports budgeting decisions, supplier negotiations, and continuous process improvement.
Automation frees AP staff from repetitive work so they can focus on exceptions, vendor relationships, and controls. Reducing manual invoice data entry also lowers burnout and improves consistency across the team.
In short, invoice automation modernizes Accounts Payable by reducing touches, increasing control, and making performance measurable. When you pair invoice capture and invoice data capture with workflow and integrations, you build an AP function that is faster, safer, and easier to manage.
READ NEXT: AP Automation: Measuring ROI and Monitoring for Success
The accounts payable process is vital for maintaining supplier trust, protecting cash, and keeping financial records accurate. In 2025–2026, optimizing Accounts Payable is not optional - it is a requirement for audit readiness, predictable close, and resilient operations.
Most AP benchmarks show a consistent pattern: when teams reduce manual invoice data entry with invoice capture, invoice data capture, and invoice automation, cycle time and exception volume drop while audit readiness improves. The key is to implement automation with clear controls and measurable KPIs (cycle time, exception rate, and touchless rate).
Are you ready to modernize Accounts Payable? Start by mapping your current workflow, identifying where invoice data entry and exceptions consume the most time, and then prioritizing invoice capture, invoice data capture, and invoice automation that integrate cleanly with your ERP.
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