11 accounts payable best practices your AP team should know

Manual AP processing is becoming an outdated operation that's costing your company money and time. When your team handles invoices by hand, including inputting data from paper documents, manually routing approvals through email, and cutting physical checks, you're burning through resources that could be better spent elsewhere.

AP automation tackles the entire workflow. Optical character recognition (OCR) technology digitizes paper invoices and extracts data like vendor names, invoice numbers, and amounts. Automated invoice processing then routes invoices to the right approvers automatically, while two-way matching compares invoices to purchase orders before any payment is sent.

The benefits only start with cost savings. Automated invoice processing gives you real-time visibility into your payables, which means you can see which invoices are stuck on someone's desk or when payments will go out. And electronic records also create clear audit trails that make compliance reviews much simpler.

Keep in mind that automation doesn't eliminate the need for people in your AP department. Instead, it frees your staff from repetitive data entry so they can focus on reviewing exceptions, analyzing spending patterns, and negotiating better terms with vendors. The result is a more strategic AP function that adds real value to your business.

Without a clear, consistent workflow, your AP processing can become chaotic. Invoices can disappear and payments get sent haphazardly. A successful AP operation starts with a standardized, well-documented procedure that maps exactly how invoices move through your organization.

Your workflow documentation should cover the complete invoice lifecycle, including receipt and logging, purchase order matching, managerial approval, and payment scheduling. Each of these steps needs clear ownership, covering who's responsible, what they need to verify, and how long they have to complete their task. When an invoice arrives via email or mail, it should be clear what happens next.

A documented accounts payable process serves as your training manual and quality control mechanism. New team members can read the procedures and immediately understand how invoices flow through your company while auditors can review your controls without lengthy explanations. Most importantly, you eliminate a dependency on individual contributors that creates bottlenecks when key employees are unavailable.

Standardization also means establishing firm payment schedules and approval timelines. For instance, you could send payments every Tuesday and Friday, and all invoices must receive approval within three business days of receipt. These rules eliminate guesswork and last-minute scrambling.

There are immediate benefits to transparency. For starters, anyone can check where an invoice stands in the approval chain rather than playing phone tag to track down its status. Additionally, errors become easier to catch because every invoice follows the same verification steps. And when you're ready to add invoice automation software, you'll have clearly defined procedures to map into your software.

Your accounts payable can be a target for fraud, both inside and outside your organization. Check tampering and billing schemes are among common AP fraud types, with some companies losing hundreds of thousands of dollars to sophisticated scams. Strong internal controls in accounting are your financial firewall against fraud and errors.

Segregation of duties in accounting is an important aspect of AP security since the person who enters or approves invoices shouldn’t be the same person who signs checks or sends payments. One employee might verify an invoice against a purchase order, but a different manager must authorize the payment. This is particularly important with significant payments, which should receive extra attention through multi-level approvals. A dual authorization makes it nearly impossible for fraudulent invoices to slip through, since a second reviewer must examine all the details independently.

Two-way matching serves as another important method to verify invoices and payments. Before approving any payment, the invoice needs to be matched to the purchase order. This confirms you're only paying for goods or services that were actually ordered and received. When these documents don't align, investigate the discrepancy before any payment goes out.

Access controls and user permissions add another layer of protection. Your accounts payable software should allow only authorized staff to create or approve payments, with role-based restrictions that prevent unauthorized changes. An AP clerk might input invoices, but only managers can approve payments above certain dollar amounts.

As an invoice is processed through a workflow, maintain detailed audit trails to create accountability at every step. Your AP method should track who approved what and when, creating transparency that helps trace any issues back to their source. This documentation is especially important during internal reviews or external audits.

Paper-based invoice processing kills productivity and costs your finance team time and money. With traditional invoice processing, invoices arrive in the mail, are sorted manually, and then your AP transcribes information into a digital platform to start processing. This antiquated approach creates bottlenecks, introduces errors, and wastes your AP team’s time.

Transitioning to paper invoice processing invoicing changes your entire AP workflow. For starters, an automated invoice processing platform can receive invoices directly from vendors. For the paper invoices that still arrive, OCR invoice processing technology scans and digitizes them automatically, reading key fields like vendor names, invoice numbers, and amounts without manual typing.

With the right software solution, going paperless also creates better visibility into your AP process once an invoice is received. You can see outstanding invoices and their current status, whether they're awaiting approval, scheduled for payment, or already processed. This effectively digitizes your invoices and other AP documentation, which offers countless advantages over physical file cabinets. Electronic invoices are searchable by vendor, date, or amount within seconds, compared to sorting through folders of physical documents.

The approval process accelerates dramatically with digital invoices. Managers can review and approve payments with a simple click, even while working remotely. As a result, invoice processing becomes streamlined and trackable.

Companies that switch to electronic invoices can reduce their processing time from weeks to days because digital workflows eliminate the physical delays that slow down paper-based operations. While the transition requires upfront effort to change vendor habits and an investment in software, the long-term productivity gains make it worthwhile.

Invoices need to be prioritized, but without a strategy, your AP team risks paying less important bills while critical payments sit unapproved, creating vendor relationship problems and missed discount opportunities. Developing a thoughtful approach to invoice tracking allows your business to strategically manage payment schedules and cash flow.

Start with due date sorting. Keep track of when each invoice is due and organize your payment queue accordingly. Late payments can trigger penalties and damage supplier relationships, so staying current should be your first goal. AP automation software can flag upcoming due dates so payments aren’t forgotten.

Smart timing involves more than meeting deadlines. To prioritize cash flow, the best practice is to pay as close to the due date as possible while still remaining punctual since this maximizes your use of available cash for other business needs. That said, invoices offering early payment discounts deserve special priority.

Categorize invoices depending on strategic importance to your operations. Critical suppliers like utilities, payroll services, or key manufacturers should receive priority treatment since these vendors can disrupt your business if payments are delayed. Meanwhile, invoices from one-time or non-critical vendors might safely wait a few extra days if cash flow is tight.

Use accounts payable aging reports to maintain visibility over your payment pipeline. These reports, similar to accounts receivable aging reports, list all open invoices organized by how long they've been outstanding. Regular review of these reports helps you spot invoices that are approaching their due dates or have been sitting too long without resolution.

Effective cash flow management depends on a structured approach to payment timing. When your AP team knows what must be paid immediately versus what can wait, your finance department can forecast cash needs accurately and avoid surprises. During tight cash periods, your prioritization framework helps identify which payments could potentially be delayed with minimal impact while protecting relationships with your most important suppliers.

The payment terms printed on invoices aren't always firm. Many finance teams accept "Net 30" terms without question, missing opportunities to improve their cash position through better agreements. Proactive negotiation with suppliers can extend payment windows and strengthen your overall financial flexibility.

Start by evaluating your current vendor relationships and payment history. If you've been a reliable customer who pays consistently and orders regularly, you have negotiating power. Suppliers value predictable, trustworthy partners and will often accommodate reasonable requests for improved terms.

When negotiating contracts with vendors, consider asking for extended payment terms, such as Net 45 or Net 60 terms if the term is currently Net 30. Some vendors might not offer significant extensions but could waive late fees or provide grace periods for important customers. While longer payment terms can be beneficial, be sure to take advantage of early payment discounts as they’re some of the easiest money your AP department can capture. Many suppliers don't advertise available discounts, so ask directly whether any early payment incentives exist.

Document any new agreements in writing to ensure both you and the vendor understand the terms and expectations. Although email confirmations work, updating formal contracts or purchase agreements provides the clearest protection for both parties.

Your success with other AP best practices can strengthen your negotiating position. When you have organized processes, pay reliably, and communicate professionally, suppliers view you as a preferred customer worth accommodating. This creates a positive cycle where good vendor management leads to better terms, which improves your cash flow and operational efficiency.

Your payment method directly impacts your AP processing costs and security. While companies still rely on paper checks, modernizing your payment approach can cut processing expenses while adding valuable security protections and audit capabilities.

Paper checks are one of the most expensive payment options available. Each check requires printing, signing, mailing, and manual reconciliation, creating costs that include materials, postage, and substantial staff time. The traditional check-cutting process also creates bottlenecks when signers are unavailable.

Electronic payment methods change this equation. ACH transfers move money directly between bank accounts at a fraction of the cost of paper checks. Most accounting automation software can generate ACH payments in batches once you've collected vendor banking information. These transfers typically clear faster than mailed checks and create digital records that simplify reconciliation and audit processes.

For certain suppliers or one-time payments, virtual credit cards for business offer several advantages. First each payment uses a unique card number, reducing fraud risk since vendors can't reuse the payment information. Secondly, spend controls can be embedded within each card to ensure the card is used for its specific purposes. And lastly, ghost cards can also allow you to earn rewards on vendor payments.

Wire transfers serve specific needs for international payments or time-sensitive transactions. Depending on your bill payment solution or business banking account, wire payments can be more expensive per transaction than ACH, but they process same-day and work across international boundaries where ACH doesn't reach. They're not practical for routine domestic payments but fill important gaps in your payment toolkit.

B2B payment automation platforms combine multiple payment methods into streamlined workflows. These services often integrate with your accounting software to automatically mark invoices as paid and provide tracking confirmations. Some platforms can also handle the vendor onboarding process, collecting banking information and payment preferences to optimize each transaction.

Electronic payments have many security advantages, including creating digital audit trails that show when payments were initiated, processed, and received. There's no risk of check tampering, mail theft, or forgery. Many electronic payment methods also include fraud monitoring and verification features that paper checks can't match.

Review your current payment mix to identify improvement opportunities. If you're still writing numerous checks monthly, set goals to transition willing vendors to electronic methods. Start with your largest, most frequent suppliers where the cost savings will be most significant. The combination of lower processing costs, improved security, and faster vendor payments makes payment method optimization one of the most straightforward ways to improve your AP operation's efficiency.

When you treat vendors as partners rather than just invoice senders, you'll unlock better terms, smoother issue resolution, and priority treatment during supply shocks. This partnership approach starts with maintaining accurate vendor data and communicating proactively about payments.

To start, be sure you have accurate vendor master data. Your records should include each supplier's legal business name, current mailing address, payment remittance details, tax identification numbers, and primary contact information. Outdated information causes payments to not be received, creates tax reporting errors, and frustrates vendors who don't receive their money on schedule.

Once you have accurate data, implement a routine process for verifying and updating vendor information. You can perform annual vendor data reviews, contacting suppliers to confirm their banking details, addresses, and contact preferences. Some organizations use vendor portals where suppliers can log in to update their own information, reducing the administrative burden on your AP team while keeping data current.

Communication can also help allow your relationships to become partnerships rather than purely transactional. When invoice discrepancies arise, reach out to vendors immediately rather than silently holding payments. Suppliers often appreciate transparency and advance notice about any delays or issues. If you can't pay an invoice on the agreed terms due to cash flow constraints or disputed charges, let the vendor know as soon as possible and explain your timeline for a resolution.

Perhaps most important, payment consistency builds your reputation as a preferred customer. Vendors notice which companies consistently pay on time versus those that are frequently late. When you need special accommodations like extended terms during tight cash periods, suppliers are much more likely to help customers with strong payment track records.

Other vendor management best practices include simple courtesies that go a long way. Thank suppliers for their service in your communications or consider paying key vendors a few days early to demonstrate your appreciation for the relationship. Strong relationships become particularly valuable during negotiations or when seeking better terms. A long-term supplier who values your business might proactively extend payment terms without being asked or prioritize your orders during busy periods or supply shocks.

Regular reconciliation allows your AP process to become a proactive financial control. Without consistent reviews, errors compound, duplicate payments slip through unnoticed, and your financial statements lose accuracy. Establishing routine reconciliation schedules catches problems while they're still small and manageable.

Monthly accounts payable reconciliation should become a standard practice during your closing process. This involves matching your internal payment records against external documentation. You'll compare invoices, purchase orders, vendor statements, and bank payments to verify that every transaction aligns correctly and to ensure nothing is missing, duplicated, or incorrectly recorded. This verification process confirms that your recorded payables match actual obligations and that payments are properly tracked across all your accounting records.

Be sure to look for duplicate payment detection during these reviews. Duplicate payments represent money simply given away due to processing errors, vendor invoice copies, or coordination failures between departments. AP software can flag potential duplicates automatically by matching invoice numbers, amounts, and vendor information.

Along with looking for duplicate payments, examine discrepancies and investigate them immediately rather than deferring them to later. Common reconciliation differences include unrecorded payments made outside your normal workflow, vendor credits not applied to accounts, or invoices paid but not marked as complete in your tracking method.

As a part of this process, use aging reports to monitor your payment pipeline systematically. These reports organize all outstanding invoices by how long they've been in your workflow, highlighting items approaching due dates or sitting unusually long without resolution. Regular aging report reviews help you spot invoices stuck in approval workflows, identify vendors with recurring billing issues, and prioritize upcoming payment runs.

For high-volume AP departments, weekly or daily reconciliation checks can be worthwhile. While monthly reviews catch most problems, frequent reconciliation makes issues easier to trace and resolve since the transactions are still fresh in everyone's memory. Internal audits can be part of this process, which can identify procedural drift where staff gradually deviate from documented processes. With the right AP automation software, these processes can be automated.

Digital audit trails simplify these reconciliation tasks considerably. Electronic payment records, automated approval workflows, and integrated accounting processes create clear documentation of who did what and when. This transparency makes reconciliation faster and more accurate while providing the documentation needed for external audits or regulatory reviews.

Without clear accounts payable metrics, you won’t know how efficiently your team operates and where improvements are needed. The right performance indicators allow your AP function to become a data-driven operation that contributes to your company's financial health.

Cost per invoice serves as your primary efficiency benchmark since this metric captures the total cost of processing each invoice, including labor, software, and overhead expenses. Tracking this metric, along with invoice processing time, over time shows the direct impact of process improvements and automation investments on your bottom line. Invoice processing time measures how many days elapse from receiving an invoice to completing payment.

On-time payment rate tracks what percentage of invoices you pay by their due dates. This metric correlates with vendor satisfaction and your company's reputation as a reliable customer, and also helps you evaluate if your current processes work.

Accounts payable KPIs should also include your invoice exception rate, which tracks the percentage of invoices that encounter problems during processing. High exception rates point to issues with vendor communication, purchase order accuracy, or receiving processes that create downstream AP bottlenecks.

Also, track your Days Payable Outstanding (DPO) to measure how long your company takes to pay suppliers on average. While finance teams often try to extend DPO to improve cash flow, pushing it too high can strain vendor relationships. The key is finding the sweet spot that optimizes working capital without damaging partnerships.

The best AP software generates these metrics automatically through dashboards and reports, allowing you to address issues in real-time. Visibility into processing volumes, approval bottlenecks, and payment status also helps managers make informed decisions quickly rather than waiting for month-end reports.

Set realistic targets for each metric based on your current performance and industry benchmarks. Focus on improvement trends rather than absolute numbers initially, especially since the improvements can compound. As a part of this process, regularly reviewing these metrics during team meetings keeps performance visible and accountable. When everyone understands how their work contributes to overall efficiency, they're more likely to embrace process improvements and automation initiatives.

The best automation and processes won’t have any impact if your team doesn't know how to use them effectively. Well-trained AP staff can catch errors that software misses, handle exceptions efficiently, and adapt quickly when procedures change. More importantly, cross-trained team members prevent single points of failure that can stall your AP operations.

Start with thorough training on your company's specific accounts payable procedures and any software tools your team uses. When you implement new automation or change existing workflows, invest in proper training rather than expecting staff to learn it themselves. Poorly trained employees often create workarounds that bypass your carefully designed controls and reintroduce the errors you're trying to eliminate.

Be sure to include fraud awareness training by educating your team on common AP fraud schemes like fake invoices, vendor impersonation, and phishing attempts. Teach them to recognize red flags such as urgent payment requests, unusual vendor details, or pressure to bypass normal approval processes. An informed team is your first line of defense against sophisticated fraud attempts.

While training employees, ensure each team member learns multiple roles beyond their primary responsibilities.Cross-training eliminates knowledge silos where only one person knows how to handle critical AP functions. For instance, if your invoice processor also understands payment runs and reconciliation, your department can continue operating smoothly during vacations, sick days, or turnover.

Document all of these procedures clearly so training becomes systematic rather than ad hoc. Create step-by-step guides, video tutorials, and quick reference documentation that new employees can use to get up to speed quickly. Good documentation also helps experienced staff handle unfamiliar situations correctly.

Implementing these accounts payable best practices allows your AP department to become a strategic financial advantage. From automation that can cut processing costs by 75% to standardized workflows that eliminate bottlenecks, each practice builds on the others to create a more efficient, controlled, and scalable operation. Adopting these strategies can reduce manual errors, improve cash flow visibility, and give your business significant cost savings.

Ultimately, this shift positions your finance team for sustainable growth. When your AP processes run smoothly, your team can focus on high-value activities like vendor negotiations, spend analysis, and strategic planning rather than chasing down missing invoices or fixing duplicate payments. These improvements compound over time, creating operational resilience that supports your business through periods of rapid growth or economic uncertainty.

Brex streamlines implementing these best practices with its unified spend management software and bill pay platform. Brex handles everything from invoice capture and approval routing to payment execution and reconciliation, eliminating the manual work that slows down traditional AP departments. Combined with Brex corporate cards that provide real-time spend visibility and purchase card payment options, you get complete control over every dollar your business spends.

As your business scales, Brex grows with you. Integrations with popular ERP and accounting platforms prevent data silos while maintaining the fully customizable, multi-level workflows that keep your AP department running efficiently. Real-time dashboards provide the performance metrics you need to track improvement, while integrated fraud protection and audit trails give you the security and compliance capabilities that growing businesses require.

Dots, a payouts startup, saw these benefits after switching to Brex from a fragmented bill payment process that led to late fees and other challenges. “In the early days, everything with invoices was infuriating,” Sahil Hasan, Dots CEO and co-founder, said. “There were so many bills coming from everywhere, and we were getting hit with a ton of late fees because it was so difficult to manage. Plus, nobody would give me an easy way to pay — they all wanted wires for some reason. Paying bills was one of the most annoying things for me as a founder.”

Brex helped Dots manage bill payments by automating the accounts payable process, from intake to payment. Now, more of Sahil’s time can be spent on building his business rather than trying to manage invoices.

“We use Brex to pay all of our bills, and the ability to forward a bill via email, hit approve, and move on is a game-changer. Plus, the OCR technology captures every detail to automate invoice processing,” Sahil said. “Brex bill pay helped eliminate the least fun part of my job, and we’re saving 20-30% because Brex’s automation put an end to all the late fees we were paying.”

Schedule a demo with Brex today to see how you can implement best practices into your accounts payable process.