Accounts payable (AP) sits at the heart of a company’s financial operations. Having an effective AP process supports vendor relationships, protects cash flow, and helps teams manage budgets effectively.
Read on to explore what AP is, what’s involved in the accounts payable cycle, and how automation lets teams focus on the bigger picture.
What’s accounts payable?
AP is the money a business owes suppliers for already received goods and services. These purchases often have a set date by which buyers need to pay.
The AP cycle covers everything from the initial purchase order to recording the final payment. And it typically involves multiple teams and external stakeholders, ranging from department heads and finance staff to outside vendors.
Accounts payable vs. accounts receivable
Accounts payable tracks outstanding bills from vendors for products delivered or work that’s already been performed. Say a company orders office supplies and gets an invoice due in 30 days — that amount is recorded as accounts payable until the charge is settled.
Accounts receivable (AR) refers to money owed to the company, including invoices for services or products sold. If that same company sends a client an invoice for consulting services, the unpaid amount is recorded as accounts receivable until the client pays the bill.
Together, AP and AR represent an important aspect of a business’s cash flow, with money coming in through accounts receivable and going out through accounts payable.
Is accounts payable a liability?
Yes, a verified invoice is recorded as a liability until payment is issued, since it reflects unpaid obligations (typically due within 30 to 90 days). Managing this liability helps protect your cash flow.
By monitoring AP, you ensure you have sufficient funds to cover overhead and avoid costly short-term strain, such as relying on high-interest credit or delaying payment to suppliers.
A 4-step guide to the accounts payable process
A well-run AP cycle reinforces strong supplier relationships and provides greater clarity around outgoing cash. When the process breaks down, however, it can result in missed payments, late fees, and strained trust with suppliers.
Here’s a closer look at each phase in the AP cycle and where problems may surface.
Step 1: Invoice received and verified
The process begins when a company receives an invoice for goods or services. (This isn’t the same as a purchase order, which would be the initial request for goods or services.) Before moving forward, the finance team must review the invoice and match it to the original purchase order and delivery receipt.
Common issue: Without a unified process, invoices that arrive via email, snail mail, or different departments can be overlooked.
Step 2: Routed for approval
Once verified, the invoice is passed to the right person for sign-off. This could be a department head, budget owner, or project lead, depending on the team’s setup.
Common issue: Approval processes and responsibilities need to be crystal clear, otherwise invoices could sit unapproved for weeks.
Step 3: Invoice recorded
After approval, the invoice is entered into the company’s accounting system or enterprise resource planning (ERP) software. This formally records the liability so it appears during reconciliation and reporting periods.
Common issue: Manual data entry here is risky. Due dates, vendor codes, and invoice numbers may be entered incorrectly, leading to late payments that could damage a vendor relationship. Errors may also result in early payments, which can reduce the funds available for other business needs.
Step 4: Payment scheduled and processed
The final step is issuing payment via bank transfer, company card, or another method based on vendor preferences.
Payment timing depends on cash flow and vendor terms. Once sent, the transaction should be reconciled against internal records and marked as complete. For more details on how this step connects to purchasing workflows, see our explainer about the procurement process.
Common issue: Test out payment methods before using them with suppliers and vendors, as declined payments or time-consuming system errors can frustrate your partners.
Risks that come with manual accounts payable management
As the volume of transactions grows, problems can accumulate. Here are some common challenges of manually handling an accounts payable workflow:
- Slow approvals: A manual approval process takes a lot of unnecessary time, and it increases the chance of invoices getting lost in Slack messages or email inboxes.
- Errors from data entry: Manual data entry is always risky, often leading to typos, miscategorised expenses, or duplicate records.
- Limited visibility: Perfect cross-departmental financial visibility is hard to achieve. Relying on various teams to record purchases properly and get to invoices quickly is risky.
- Missed payments: Due dates can slip through the cracks and lead to late fees or strained vendor relationships.
- Poor audit readiness: Without digital logs or unified records, it’s difficult to track approvals.
Benefits of automating the accounts payable process
The best way to reduce these risks is via accounting automation. Here are the benefits of doing so:
- Faster processing: Invoices get verified and approved without delays.
- Fewer errors: Automated accounts payable invoice processing leads to cleaner records and smoother audits, since every step is logged and available for review at any time.
- Accurate visibility: Dashboards updated in real time show what’s pending, approved, and paid.
- Stronger controls: Built-in rules and reminders keep workflows effective and consistent.
How Moss can streamline and scale your AP workflow
Moss helps finance teams move faster with less overhead. By combining flexible accounts payable automation with centralised workflows, the platform turns the AP cycle from a patchwork of manual tasks into a reliable, scalable process.
Here are a couple ways Moss can streamline and scale your team’s AP workflow:
- Automation that adapts to your finance maturity: With features like invoice capture, approval flows, and ERP integration, Moss supports teams at every stage, whether they’re beginning to digitise AP or optimising an existing system.
- From invoice to ERP, all in one workflow: Moss handles the entire AP cycle in one connected platform. Teams can receive invoices, route them for approval, match documentation, sync records with accounting software, and issue payments — all without leaving the system.
Spend smarter with Moss
A well-managed accounts payable cycle improves vendor relationships, ensures smoother cash flow, and gives finance teams the clarity they need to plan with confidence. Understanding the full accounts payable process, from invoice to payment, helps teams avoid costly mistakes and maintain consistency as the business expands.
Take control of your AP workflow with Moss. By streamlining approvals, automating reconciliation, and centralising everything in one place, the platform helps finance teams work more efficiently to strengthen the company’s financial footing.
Learn how Moss simplifies accounts payable.
FAQ
The stages are:
Invoice receipt and verification
Approval
Recording in the accounting system
Payment processing
Automation reduces delays, eliminates manual errors, and gives teams real-time insight into spending. It also makes sure invoices are consistent and data is accurate.
Cycle time affects cash flow and supplier satisfaction. Shorter AP cycles help companies avoid late fees, take advantage of early payment discounts, and maintain better vendor relationships.
Procurement initiates the purchasing process, while AP functions regard making sure the related payments are accurate and timely. Matching documents across both functions is vital for clean records.
Frequent issues include slow approvals, lost invoices, duplicate payments, and a lack of transparency into what has been spent. Most of these issues stem from manual processes.
