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The complete AP workflow guide

The complete AP workflow guide

Accounts Payable workflows outline the structured steps a company employs to manage its bills and invoices, ensuring timely and accurate vendor payments.

This comprehensive process is important not only for financial accuracy but also for fostering strong vendor relationships and upholding a reputable company image—all starting from our accounts payable department.

Key Takeaways:

  • Efficiency and accuracy: A well-implemented AP workflow reduces delays and errors, ensuring smooth cash flow and strong vendor relations.
  • Identify bottlenecks: Recognizing and addressing bottlenecks in the AP process is essential for enhancing efficiency.
  • Embrace automation: Automation in accounts payable, starting from procurement, significantly improves efficiency and accuracy, freeing up staff for higher-value tasks.


Let's take a dive deep into the essentials of AP workflows, highlighting the transformative power of automation and AP solutions to eliminate bottlenecks and optimize your end-to-end payment processes. Discover how to revolutionize your accounts payable workflow for better efficiency and reliability.


What is a workflow in Accounts Payable?


A 'workflow' in accounts payable (AP) refers to the systematic process or set of procedures designed to manage and streamline the handling of invoices and payments to vendors and suppliers.

It encompasses all steps involved from the moment an invoice is received until the payment goes through invoice processing and recorded in the company's financial records. This AP staff workflow—increasingly eschewing paper invoices in favor of accounts payable automation—aims to ensure that all financial obligations to vendors are met efficiently, accurately, and on time, while also adhering to internal policies and external regulations.


The essential AP workflow guide


Understanding the accounts payable workflow is key to optimizing your procurement and payment processes. Contrary to common belief, accounts payable is not merely an administrative function or an accounting system—it's a strategic activity that impacts your business's cash flow, vendor relationships, and operational efficiency. The AP cycle includes a series of steps that must be methodically performed for accurate, timely payments.

PO Creation: The first step of the AP workflow

The journey often begins with the creation of a Purchase Order (PO). A PO is a legal document that outlines the types, quantities, and prices of products or services to be provided by a vendor. However, it's essential to understand that the AP process's challenges often start even before the PO. Problems can arise during the procurement phase, affecting everything downstream, including the AP workflow.

Vendor invoice: What comes after the PO

Once the vendor receives the PO and the goods or services are delivered, an invoice is generated. The vendor invoice lists the delivered products or services and serves as a request for payment. Invoices must be carefully checked for accuracy in terms of items listed, amounts, terms, and other critical information.

ERP data entry: The central repository

The next step is entering the invoice data into an Enterprise Resource Planning (ERP) system. This software acts as a central repository for various business processes, including accounts payable. A well-maintained ERP system ensures data integrity and allows for seamless workflow automation later in the process.

3-way matching: The crucial checkpoint

A vital stage in the AP workflow is the 3-way matching process, which involves verifying and comparing the PO, the delivery receipt, and the vendor invoice. This step ensures that the company only pays for items that were ordered and received. Any discrepancies must be resolved by your AP team before moving on to the next stage.

Invoice approval: The go-ahead signal

Once the 3-way match is successful, the invoice undergoes a multi-tier approval process. Different stakeholders, such as the AP department head, finance teams, and sometimes even top management, review and approve the invoice. Any delay or bottleneck here can slow down the entire AP process.

Payment authorization: Unlocking the funds

After invoice approval, the finance team authorizes payment. At this point, internal controls are reviewed to ensure that the payment aligns with company policies and fund availability. Payment authorization is the gatekeeping stage that secures the funds for the transaction.

Payment scheduling: The countdown begins

Payment scheduling follows authorization. This phase outlines when and how the vendor will be paid, whether it's immediate electronic payment, net 30, or another payment term. Payment scheduling ensures that payments align with the company's cash flow needs and meet the vendor's terms.

Transaction review: The final verification

Before the funds are transferred, a last review of the transaction takes place. This includes auditing for any discrepancies or potential fraudulent activities. It’s the final checkpoint for accuracy and compliance.

Payments: The finish line

Finally, the payment is executed, closing the accounts payable cycle for that particular transaction. Whether by bank transfer, check, or another method, timely and accurate payment is crucial for maintaining good vendor relationships and for financial reporting accuracy.

The AP workflow is far more than just "paying bills." It’s a multi-step process that begins long before a PO is generated and extends well beyond cutting a check. Understanding these intricate steps and their upstream connections can help you streamline the process, remove bottlenecks, and, ultimately, improve your company’s financial health.

What documents are required for the typical AP workflow?


‍Managing the flow of documents efficiently is the key to maintaining the financial health of a business. These documents ensure every transaction is verified, recorded, and processed accurately. Which documents are key in the AP workflow? Let's take a look.

Purchase Order (PO)

The PO is a formal document issued by a buyer to a vendor or supplier, indicating types, quantities, and agreed prices for products or services. POs serve as a legal offer to purchase, outlining the specifics of the transaction. They initiate the purchasing process and become a point of reference for verifying received goods and corresponding invoices.

Goods Received Note (GRN)

Upon the arrival of goods or completion of services, the buyer issues a Goods Received Note. This document acknowledges the receipt of the order. It details the quantity and condition of the goods or services received, serving as a check against what was ordered (PO) and what will be billed (vendor invoice). The GRN is crucial for ensuring that the order has been fulfilled correctly before payment is processed.

Vendor Invoice

A Vendor Invoice is a request for payment issued by the supplier or vendor after the goods or services have been delivered or completed, based on the terms of the PO. It includes details such as vendor information, a list of goods or services provided, prices, total amount due, and payment terms. The invoice is the document that triggers the payment process in the AP workflow.

Additional documents may be involved, depending on the complexity and needs of a business, including:

  • Contract agreements: Legal documents outlining the terms and conditions of the business relationship, prices, and payment terms.
  • Credit memos: Issued by a vendor to the buyer, indicating that a certain amount has been credited to the buyer’s account, often due to returned goods or an overpayment.
  • Payment records: Documents that provide proof of payment from the buyer to the vendor, such as bank statements or transaction receipts.

Understanding and efficiently managing the essential documents in the AP workflow is key to a streamlined accounts payable process. Leveraging AP automation solutions like Zip can transform this process, offering full AP visibility, automated invoice processing, dynamic workflows, and robust ERP integration.

Learn more about how Zip automates AP workflows.


Common challenges in Accounts Payable workflows


Accounts payable workflows, even when well-defined, often run into snags that can delay payment cycles, disrupt supplier relationships, and create additional costs for the organization. Identifying these challenges is the first step toward optimizing your AP process. Below, we delve into some of the most common challenges and bottlenecks that businesses frequently encounter.

Excessive manual processes: The labor-intensive bottleneck

In many organizations, the accounts payable process is heavily manual, requiring staff to enter data, match invoices, and process payments by hand. This not only takes up valuable time but also increases the likelihood of human error. Key issues include:

  • Inefficient data entry or data capture that could lead to errors in invoice amounts or vendor details.
  • Difficulty in tracking invoices, leading to misplaced or lost documents.
  • Elevated costs due to labor-intensive tasks like manual data entry.

Time delays in payment and processing: A domino effect

Time delays can occur at various stages, from approval loops to the actual payment execution. Such delays can have a ripple effect, causing:

  • Strained relationships with suppliers due to late payments.
  • Penalties for missing payment deadlines.
  • Cash flow issues as it becomes difficult to predict outgoing expenses.

Matching errors: The invisible glitch

The 3-way matching process—where purchase orders, delivery receipts, and vendor invoices are matched—can often be a source of errors. Common problems include:

  • Mismatched quantities or prices leading to incorrect payments.
  • Delays in resolving these discrepancies, further stalling the AP process.
  • The risk of fraudulent activities if the matching process is not rigorously monitored.

Lack of visibility: The blind spots

A lack of standardized intake processes often results in poor visibility into POs and invoices. This means:

  • It's difficult to track the status of various payments.
  • Unpredictable cash flow due to invisible or 'surprise' expenditures.
  • Greater difficulty in complying with regulatory requirements.

Lack of controls and shadow purchases: The rogue spenders

Without adequate controls in place, unauthorized or 'shadow' purchases can occur, where employees make purchases without going through the approved procurement process. This can lead to:

  • Unplanned or unnecessary spending or duplicate payments that affect the budget.
  • Difficulty in tracking such expenditures, making them almost invisible until they show up as problems.
  • Potential legal issues if unauthorized purchases violate company or industry regulations.

Understanding these common challenges and bottlenecks is essential for any organization aiming to streamline its accounts payable workflows. Addressing these issues often requires a multi-faceted approach that might include better software tools, stricter controls, and process re-engineering to make the system more efficient and less prone to error.


Improve your AP workflow with Zip’s Intake-to-Pay process


Emphasizing the importance of an efficient accounts payable (AP) workflow is crucial for any business aiming to thrive in the modern market. An optimized AP process ensures transactions are completed accurately and promptly, fostering strong vendor relationships and maintaining financial health.

The push toward automation is not just a trend; it's an essential part of surviving in today's fast-paced business world. Especially when it comes to accounts payable workflows, the need for efficiency, accuracy, and visibility is paramount. 

Zip introduces a comprehensive solution designed to automate and streamline the entire intake-to-pay process. By integrating intake processes, workflow automation, approvals, and seamless ERP integration, Zip not only simplifies accounts payable activities but also optimizes the preceding intake-to-procure stages. This holistic approach ensures a smoother, more efficient path from procurement to payment.

Where Zip Shines

  • Automated Workflow and Approvals: Zip's platform enables businesses to automate their entire AP process, from intake through to payment, with customizable approval workflows that ensure compliance and efficiency.
  • Seamless ERP Integration: By integrating directly with your existing ERP systems, Zip ensures data consistency and streamlines operations, making the management of financial data effortless.
  • Advanced Analytics for Spend Management: With real-time analytics and reporting, Zip provides valuable insights into your spending patterns, helping you to make informed decisions and optimize your financial strategies.

Discover the transformative power of AP automation with Zip and see how it can elevate your business operations. 

Request a demo today and together let’s explore the value Zip can bring to your organization.

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