Complete guide to managing accounts payable process

Simplify and automate your accounts payable processes with a spend management platform that seamlessly integrates with your accounting software. 

Maintaining cash flow became one of the biggest obstacles for business owners. Having an unstable accounts payable process can create a bottleneck situation, forming a burdening backlog for your accounts team and disrupting the cash flow.

What are Accounts Payable?

Accounts payable refers to the entirety of your business’s expenses (except payroll!) For the duration of time wherein, the vendor sends you the invoice for the order which then gets approved and finally paid, you remain in a short-term debt known as accounts payable.

The true marker to ascertain your company’s financial wellbeing is its AP process. Whether you are a large corporation or a budding enterprise, a healthy and more importantly accurate balance of accounts payable reflects the cashflow status, credit rating, and your relationship with your suppliers.

accounts payable

What accounts payable looks like in a business?

Vendor payments

Your accounts payable majorly consists of payments due to your suppliers in exchange for goods or services you need to run your business. Over time, you form consistent vendor relationships that provide you the materials you need on credit that will be paid later at a pre-decided time, therefore becoming a component of your accounts payable.

B2B transfers

As a business owner, you might be working with a variety of entities - from independent contractors to other businesses. When you work with other business entities, the mode of payment then becomes a business-to-business or a B2B transfer. Since businesses thrive on a steady cash flow, accounts payable then becomes an essential part of all B2B transactions.

Multicurrency money transfers

With international vendors and businesses, you need to set up dedicated forex accounts to ensure timely and accurate payments, taking into consideration the exchange rate going at the present time. Since the forex fees of banks and other money transfer companies are significantly high, it is prudent to send out all your invoices collectively at once, rather than one at a time. Therefore, multicurrency money transfers become a notable part of your accounts payable process.

Office supplies

Office supplies are considered to be a part of your accounts payable process. Usually, your office supplies are ordered in bulk and supplied in a consistent manner. Therefore their payments are often scheduled to ensure smooth cash flow.

Cleaning services

If you avail of third-party cleaning services to tidy up your office, then that can be added to your accounts payable section. The cleaning company sends out regular invoices to you that can be scheduled to pay at a later date, leading to a duration of short-term debt and hence, accounts payable.

Looking to automate accounts payable for your business?

Terms every AP professional should know

Accounts Payable is an essential part of your financial statements and therefore you must stay up-to-date with all the necessary terms that you might come across when optimizing your accounts payable management.

Invoice management

Invoice management

Scan, capture invoice and automate processing for a seamless approval process. Validate invoices and reconcile faster. Also, vendors can send e-invoice in the form of an image or file. Effortlessly integrate invoices into the accounts payable system and go paperless. Compare and validate supplier’s invoice received against the purchase order issued and the receipt of goods delivered and goods delivery receipt. Automatically match invoices according to customized business requirements.

purchase order

Purchase order (PO)

A form of record generated from the buyer’s end that carries the proof of purchase transaction. Upon approval by vendor, it becomes a legally binding contract between the supplier and the buyer that lays out the specifications mentioned regarding quantity, pricing, discounts (if any), shipment address, billing address, any specific instructions, and T&C. They are the origin of the accounts payable flow that ensures easy reconciliation.

days of payment outstanding

Days of Payment Outstanding (DPO)

DPO is the average number of days that a business takes to pay the invoice in the accounts payable flow. It shows a company’s creditworthiness and overall money ethics. A higher DPO implies that a company struggles to meet the invoices on time and therefore has a poor cashflow. A lower DPO shows the company’s ability to pay off its credit on time with a steady cashflow.

ap workflow

AP Workflow

Collection and reconciliation of invoices, purchase orders, and receipts/approvals. Any invoice received must match with the purchasing order issued and proof of payment to be successfully recorded. AP automation allows faster and efficient reconciliation of invoices thus eliminating any financial bottlenecks and disrupts the cashflow in the business.



Cashflow is the injection and withdrawal of cash and receipts that keep the day-to-day operations running. Good cashflow is when the cash available in the closing balance of a specific time period is higher than the opening balance of that period. A good cashflow implies that your customers receive their goods or service on time and you process accounts payable on time.

profit and loss

Profit & Loss (P&L)

A financial statement that shows a condensed view of all your expenses and revenues for a given time period such as a financial year or a quarter. The P&L shows company’s financial position and helps to carefully audit to reduce costs wherever possible and increase profitability using varied tactics. When the AP process is smooth, the P&L is positive.

Accounts Payable vs Accounts Receivable


Accounts Receivable refers to the amount that the company is yet to receive from its customers/debtors. Whereas, the amount of money that the business is due to pay to its vendors/lenders is known as Accounts Payable.


When it comes to accounts receivable, you as a business are owed money by your buyer for selling goods and services on credit. On the other hand, in accounts payable, you as a company owe money to your lender from whom you have purchased goods and services on credit. 


In the case of accounts receivable, the responsibility towards paying the money lies with your debtors. On the contrary, the responsibility of paying the money to the lenders in case of accounts payable lies with you.


Accounts receivable are a source of money being injected into your company. Accounts payable results in a cash outflow from your business to your vendors.


Key components in accounts receivables are your debtors and bills receivable whereas in accounts payable, your main components are lenders and bills payable.

Asset or Liability

Accounts receivable are an asset to your business whereas accounts payable are a liability.

Accounts payable process flow

A smoother AP process results in faster reconciliation and a consistent cash flow in your organization. This is crucial to raise the overall credibility of your business whilst reducing your liabilities in the long run. Let’s see what the accounts payable process steps look like in any business.

Setting up vendor details

First and foremost, we set up our vendor details to fully know the value and status of our outstanding payments yet to be made to the company. Setting up vendor details can include any contract made with the vendor describing the terms and conditions of the credit cycle and credit amount, along with the frequency of goods and services received. This step is crucial as keeps both parties in the loop and the information is transparent for all.

vendor details

Receive invoice and update records

When the invoice is received, the accounts team first validates the invoice with the purchasing order to ascertain that the invoice amount matches the one mentioned in the purchasing order. Additionally, if any discount or special concession is offered by the supplier at the time of purchasing, it is important to make sure that it is promptly applied in the invoice. Once the match is confirmed, the invoice is updated in the records by the accounts team to be paid at the end of the credit cycle.

receiving invoices

Invoice approval and payment

When the credit cycle ends and the payment goes through, the accounts team goes through another reconciliation process, wherein the purchasing order, invoice approval, and payment receipt are all reconciled to ensure that the amount owed is the amount paid and there are no discrepancies in the process. A successful reconciliation means that the goods and services received are paid for to the correct account.

invoice approval and payment

Repeating the process every week/month

A good AP process flow is one that occurs every week or month instead of every quarter or financial year. One wrong invoice recorded can lead to your entire accounts payable being out of balance which can further jeopardize the reputation of your company. Therefore it’s necessary to catch these errors sooner rather than later.

ap process

Automate your accounts payable process with Volopay

What are the challenges faced by organizations with accounts payable?

Manual data entry

Entering data manually significantly increases the time it takes to record an invoice, approve and pay it. Additionally, doing it all manually can make the entire AP process error-prone. This can create a domino effect in your invoice calculations, payments, official records, and so on. To rectify these errors, you’ll have to find them in your spreadsheets, which is like finding a needle in a haystack. That’s the time your accounts team could have utilized doing something more important.

Extreme paperwork

The entire AP process involves reams and reams of paper. From issuing purchasing orders to receiving invoices, approvals, and getting payment receipts, the amount of paperwork required to carry out one vendor’s process is too high. With so much paperwork, it is very easy to lose track of particulars and filing. One wrong record can set your financial statement back by a lot.

Problems in vendor management

An irregular AP process impacts the cash flow of your and the vendor's business leading to a decrease in the vendor’s account receivable and cash inflow. Jeopardizing their business can sour your reputation and your relationship, and can cost you essential goods and services you need to run your business. Vendors can even report your payment defaults to credit scoring companies which can plummet your business credit score.

Time-consuming and lengthy approval process

With so much paperwork and manual data entry, the entire accounts payable process becomes a long-winded approval process that can actually hinder your business’s smooth cashflow. When the approval process is long, payment is delayed which can lead to dissatisfaction on the vendor’s part. This can further put your business credit score at risk.

Difficulty with cash flow management

A lengthy, error-prone and manual AP process flow can create an obstacle in the cash flow management of your organization. It is important to remember that delaying payment to your accounts payable can increase the number of days of payment outstanding (DPO). When the cashflow becomes restricted, your accounts payable aka short-term liabilities become long-term and can harm your business in the long run.

Duplicate payment and payment errors

When the accounts payable process flow is backlogged, it can build intense pressure on your accounts team to clear payments as fast as possible. Hasty procedures lead to forgotten transactions or even double payments. If overlooked, these faulty payments can snowball into significant and in many cases, irreversible damage to your company’s cash flow, reputation, and creditworthiness.

How AP automation helps your business?

Boosts vendor relationship

AP automation with invoice management ensures that your vendors can easily submit invoices and get paid on time. Allow vendors to send digital invoices and auto-categorize them. With AP automation vendors get paid on time and nurture their association with your business which could mean extra discounts and timely delivery for you.

Simplify audit complexity

With reliable accounts payable software, eliminate complex documentation. Link all the necessary documents such as PO, invoices, and receipts on one single transaction. Auditing is simplified as everything is available under one searchable transaction. Allow efficient expense reporting.

Better expense management

Simplify and digitize AP automation process for your accounts team to utilize their time doing more work such as analyzing and building cost-effective strategies, thereby improving the expense management system of the company overall.

Prevent invoice duplication

Automatically link your invoices to the respective vendors and avoid invoice duplication. Decrease the risk of double payments and secure your financial statements by instantly identifying anomalies and notifying the accounts team.

Timely payment

AP software now comes with automated payment notifications that will prompt you to pay your vendors on time. This means no delayed or forgotten payments. When vendors are paid on time, proper cash flow in the business is maintained.

Approval workflow

No more chasing authorities to analyze and approve invoices. Easily reconcile and gain approval at the click of the button. The software notifies the approvers to approve invoices on the go, making the process fully automated and hassle-free.

How can Volopay help in accounts payable management?

Volopay is an advanced expense management platform that helps you manage all your vendors and process invoices automatically, all from a single dashboard, without ever missing any receipt. With Volopay's accounts payable software, you can create payments and add or remove vendors from your list at any given time.

Volopay comes with easy online money transfers. With just a few clicks, you can send all your payments to your vendors on time, every time. Tracking your outstanding payments has never been easier, with our transparent, real-time tracking dashboard for all your vendors.

You can create multi-level approval for the fastest invoice approval. With Volopay's accounts payable automation by your side, you can experience the seamless integration of invoice management with automated accounting of your choice so that you can export all your payments into accounting software with just a few clicks.

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