What is the End-to-End Accounts Payable Process?

Every accounts payable (AP) process consists of five steps –invoice capture, invoice approval, payment authorization, payment execution, and analytics and optimization. Unfortunately, many organizations do not have an efficient AP process in place, which can result in late or missed payments, mismanaged cash flow, and weakened supplier relationships.

An efficient AP process helps businesses make accurate, timely payments while maintaining visibility and control over cash flow. In this blog, we review the end-to-end process of accounts payable and discuss how an automated AP process can streamline invoice-to-pay operations.

Key Takeaways

• The end-to-end accounts payable process covers the complete invoice lifecycle, from invoice capture through payment authorization and execution.
• Manual AP processes can create challenges such as time-consuming tasks, payment fraud risks, duplicate payments, strained supplier relationships, and limited visibility and control.
• Evaluating internal controls, payment methods, approval policies, and AP visibility can help finance teams identify opportunities to improve the overall process.
• AP automation can reduce manual work, streamline invoice and payment workflows, and give finance teams greater visibility and control throughout the end-to-end AP process.

What are the 5 steps of the end-to-end accounts payable process?

Every accounts payable process can be broken down into five primary steps: invoice capture, invoice approval, payment authorization, payment execution, and analytics and optimization. 

Below we examine each of these five steps, describing the challenges posed by manual invoice management and the benefits realized by implementing automation.

Step 1: Invoice capture

The end-to-end accounts payable process begins when an invoice is received from a supplier. The invoice may arrive via email, mail, fax, or through a website portal. Once the invoice is received, it is then coded into the accounting system through a process called invoice capture. Invoice capture is the process of collecting data from an invoice and entering it into an ERP system. From there, it may be matched against the purchase order (PO) and pushed directly to payment — if it falls within acceptable thresholds. For non-PO invoices, the record is created when the AP department receives the invoice.

Traditionally invoice capture is a manual process, which leaves room for error and can also slow down the entire AP process — particularly if there are issues matching invoices with purchase orders. But if companies utilize an AP automation solution, invoice header and line-level details are automatically captured and invoices are automatically routed for approval based on predefined business rules. Details such as line items, amounts, and coding are instead automatically extracted using optical recognition technology, confirmed through a human review step, and then posted back to the ERP. These systems can also identify and resolve issues with PO matching.

Step 2: Invoice approval

Next, the invoice must be matched against the PO. If it matches, it goes straight for payment. If it doesn’t, it goes through an exception handling workflow where discrepancies are resolved prior to payment authorization. Non-PO invoices follow a typical approval routing workflow. In this scenario, the invoice needs to make it to the individual or business unit that received the product or service. The role of that individual or unit is to verify receipt of the product or service and determine that a payment date can be set.

Routing the invoice to the proper individual often occurs via email. However, it may be unclear to the AP department who the proper person is to sign off on it, which means many invoices travel through multiple people before landing in front of the right set of eyes. This can cause significant delays.

Instead, by automating the invoice approval workflow, invoice approval requests make it to the right people much faster. Not only that, but automated reminders eliminate the need to chase down forgotten approvals. Simply send approval requests with the invoice attached as a reference to approvers who are predetermined based on vendor and invoice amounts or other routing logic based on existing policies.

Step 3: Payment authorization

After invoice approval, the next step is payment authorization. In most cases, businesses will categorize invoices based on their priority and payment deadline. Once that has been completed, a batch of invoices with priority status are sent along for payment authorization. But for this to happen, the invoice needs to make its way to the finance team and the individual responsible for authorizing payment. Again, when handled manually, this can mean an email or physical documentation gets passed around for a while before finding its way to the CFO or controller for review and authorization.

With AP automation, you can easily queue up a payment batch and then submit it to the right person for authorization and further streamline the process by enabling approval and payment scheduling based on current cash management policies. This can even be set up to work from any device, which is convenient if the authorizer is traveling or on vacation with limited email access. Moreover, built-in internal controls, such as segregation of duties and dual approvals above certain thresholds, help prevent fraud.

Step 4: Payment execution

After the individual or unit who received services approves the invoice, and the finance department authorizes payment, that payment can actually be made. Depending on the AP department’s processes and the vendor’s preference, payment may be sent via check, ACH, virtual card, or another method.

Manual handling of payment execution often leads to missed due dates–particularly if this process involves paper checks or follows manual handling of the capture, approval, and authorization steps as well. This can lead to unhappy vendors, extra work if the vendors call with follow-up questions, and can cause the company to lose out on the early-pay discounts many vendors offer.

In contrast, automation makes instant payment execution possible. Authorized payments are sent out immediately or on a scheduled date, and two-way sync closes invoices in the ERP system. MineralTree’s AP automation solution even pays each supplier using their preferred payment method and continuously optimizes your payment mix by leveraging faster, cost-effective ePayments, enrolling new and existing suppliers, and managing day-to-day supplier inquiries.

Step 5: Analytics and optimization

This fifth and final step involves taking a closer look at internal processes to understand what’s working and what isn’t and weighing vendor relationship management with the organization’s own fiscal priorities. Ultimately, you’re looking for ways to streamline the end-to-end AP process, reduce costs, strengthen supplier relationships, and better manage your cash flow.

Manual handling of the four steps described above increases the chance of errors, slows down processes, and limits visibility and control. The right AP automation technology solution, however, not only minimizes those issues but makes it possible to harness the data generated by digitizing your AP process to instantly analyze performance, without manual manipulation. This, in turn, allows organizations to make data-driven decisions in alignment with strategic business objectives.

Automation allows organizations to replace manual, static reporting with AP reporting tools and real-time dashboards that visualize metrics and KPIs such as invoice aging, payment mix, and rebates––across operating units, locations, and suppliers. A leading AP automation solution will also make it easy to manage and monitor invoice processes and identify any invoices that need special attention.

What are the challenges in the AP process?

For many businesses, there are still big challenges in managing their AP workflow, including the following:

1. Wasted Time and Resources
2. Payment Fraud
3. Duplicate Payments
4. Strained Vendor Relationships
5. Limited Visibility and Control

Each of these challenges can slow down accounts payable, increase costs, and make it more difficult for finance teams to maintain visibility and control.

Wasted time and resources

Manual accounts payable processes can require significant employee time and resources. Processing a paper check includes both hard and soft costs, making the price per payment much higher. And not only that, but the process typically involves collating back-up documents, laser printing, signing checks, and stuffing envelopes.

An automated end-to-end process can help teams scale their efforts. In fact, 61% of surveyed companies noted that they can process more invoices with the same-size team after switching to an automated process.

Payment fraud

Manual accounts payable processes can create opportunities for payment fraud, particularly when organizations rely on paper checks or lack consistent payment controls. Paper checks expose sensitive bank account and routing information and can be intercepted, altered, or duplicated. According to MineralTree’s 9th Annual State of AP Report, 42% of businesses reported an increase in business email compromise (BEC) over the previous 12 months.

Finance teams can help reduce payment fraud risk by implementing stronger internal controls throughout the end-to-end accounts payable process. Automated approval workflows, segregation of duties, and secure electronic payment methods can provide greater control and visibility before payments are authorized and executed.

Duplicate payments

When invoices are received in different formats or when there are different offices processing invoices, it can be easy to pay invoices twice. These duplicate payments can cause bottlenecks in the AP process, while hurting strategic partnerships with vendors.

A standardized, automated AP process can help prevent duplicate payments by improving invoice visibility and identifying potential duplicates before payments are approved and executed.

Strained vendor relationships

An inefficient accounts payable process can strain vendor relationships when payments are late, inaccurate, or difficult to track. The latest State of AP Report found that 59% of vendors identified late customer payments as their top pain point in the payment process.

Issues such as overdue payments and limited payment visibility can create additional work for suppliers and AP teams and may impact the delivery of goods and services. An efficient accounts payable process can help maintain these vital relationships through consistent, on-time payments.

Limited visibility and control

Disconnected AP processes can make it difficult for finance teams to maintain visibility into invoices and payments throughout the accounts payable process. Without a centralized view, teams may struggle to determine where an invoice is in the approval process or identify outstanding payments.

Greater visibility across the end-to-end AP process can help finance teams monitor invoice and payment status, identify bottlenecks, and make more informed business decisions.

Other considerations in the end-to-end AP process

Beyond the individual steps of the end-to-end accounts payable process, finance teams should consider how effectively the entire workflow operates. There are a number of other factors and considerations that can affect the efficiency of your AP process.

Is your company still using paper checks to make payments? This can cause manual errors and the potential for duplicate payments and even fraud. Are you implementing internal controls? These are essential, but of course, can make the process even more lengthy depending on the size of your company. How is the relationship you have with your suppliers? Having an inefficient AP process that results in late payments can tamper this relationship and potentially delay the shipment of supplies.

It’s important to be aware of the different factors that could be affecting your AP process and identify areas for improvement. If you’re dealing with any of the challenges associated with manual processes, implementing an AP automation platform that streamlines this process could be worthwhile.

Improving the accounts payable process with AP automation

To summarize, manual AP processes are expensive, time-consuming, prone to fraud, and potentially damaging to supplier relationships. In addition, inefficiencies and continued reliance on paper checks lead organizations to miss out on early-pay discounts, rebates, and other savings opportunities.

By automating the five steps of the AP process in an end-to-end solution, businesses can address the challenges presented at each step of the manual process.

For example, the risk of human error disappears when invoice data is automatically extracted during Invoice Capture and then synced with your ERP system, without any manual input. If your business uses purchase orders, an AP automation solution can even automate the matching process, using an algorithm to compare invoice line items against the PO and flag any exceptions.

MineralTree’s TotalAP solution automates your end-to-end AP process, from invoice capture to invoice payment, helping you gain efficiency at each step while supporting specific user needs from AP staff to the CFO.

TotalAP eliminates manual data entry by automatically capturing invoice details, streamlines invoice approval and payment authorization by routing invoices quickly to the right people, and continuously optimizes payments. AP analysis features also allow organizations to make better decisions faster.

The benefits of automating the accounts payable process include:

• Increased efficiency
• Simplified reconciliation
• Improved supplier relationships
• Fraud and risk mitigation
• Improved visibility and control
• Maximized cost savings

Automate the end-to-end AP process with MineralTree

MineralTree’s TotalAP solution automates your end-to-end AP process, from invoice capture to invoice payment, helping you gain efficiency at each step while supporting specific user needs from AP staff to the CFO.

TotalAP eliminates manual data entry by automatically capturing invoice details, streamlines invoice approval and payment authorization by routing invoices quickly to the right people, and continuously optimizes payments. AP analysis features also allow organizations to make better decisions faster.

Contact MineralTree to learn how AP automation can help your organization streamline the end-to-end accounts payable process.

End-to-end AP FAQs

What is the end-to-end process in accounting?

The end-to-end process in accounting involves these five steps, invoice capture, invoice approval, payment authorization, payment execution, and analytics and optimization.

How to explain the end-to-end process of accounts payable?

The end-to-end process of accounts payable can be described as the process of receiving and approving invoices. From there, the invoices are sent for authorization and payments are executed.

What does the AP process start and end with?

The AP process starts with receiving an invoice from a supplier and finishes when the invoice has been paid.

How long does the accounts payable process take?

The time required to process an invoice can vary based on approval requirements, invoice complexity, payment terms, and the level of automation involved. Manual routing, data entry, and exception handling can extend processing times, while automated workflows can help invoices move more efficiently.

Who is responsible for the accounts payable process?

The accounts payable team typically manages invoice processing and payments, but other stakeholders may participate throughout the process. Department managers may approve invoices and controllers or CFOs may review and authorize payments depending on an organization’s policies.