Read summarized version with
The day I really understood the accounts payable process, nobody was at their desk.
The person who ran our AP was out for a week. Nothing dramatic, it was planned and on the calendar. The whole thing stalled anyway. Invoices piled up because nobody else knew the invoice processing steps or had ever seen them written down: which ones needed a PO, where to code the marketing spend, or who had to sign off above five grand. The process existed. It just lived entirely in one person’s head.
That’s the quiet risk with accounts payable. It runs fine right up until the one person who knows it isn’t there, and then you find out it was never actually written down.
I’m Yuval, founder and CEO of Glitter AI. I’m not an accountant. But I’ve watched plenty of finance and operations teams try to keep AP from becoming a single point of failure, and the pattern barely changes: the work is repeatable (this is really an accounts payable workflow and invoice management problem), the knowledge isn’t shared. Let me walk you through the full accounts payable process, step by step, the way it actually runs in QuickBooks or Sage, and how teams get it out of one person’s head.
Teach your co-workers or customers how to get stuff done – in seconds.
What is the accounts payable process?
The accounts payable process is the end-to-end cycle your team follows to take a vendor obligation from “we owe this” to “it’s paid, recorded, and reconciled.” It’s broader than just managing invoices end to end. It starts before an invoice ever arrives, with vendor setup, and it doesn’t end until the payment clears and the books balance.
Most teams run six core stages: invoice receipt, coding, three-way match, approval, payment, and reconciliation. Around those sits the supporting work, like onboarding vendors and closing the books at month-end.
Done well, the AP process protects cash, prevents duplicate and fraudulent payments, keeps vendors happy, and hands you clean numbers at close. Done badly, you get late fees, strained supplier relationships, and an audit you’d rather not think about. According to Ardent Partners, the average organization takes 9.2 days to process a single invoice and spends $9.40 to do it - while best-in-class AP teams do it in 3.1 days at $2.78. The gap between the two is almost never talent. It’s whether the process is documented and consistent. If you’ve ever written an accounts payable SOP, this cycle is what it describes.
The accounts payable process flow, step by step
Here’s the full flow. Most AP teams already do all of this, even the ones who’ll tell you they don’t have a “process.”
Step 0: Vendor setup (before the cycle starts)
The cycle technically starts before any invoice shows up. When you onboard a new supplier, you collect their legal name, remittance details, W-9, and payment terms, and you create them in QuickBooks or Sage.
Teams skip or rush this constantly, and it’s where a surprising amount of payment fraud sneaks in. According to the FBI’s Internet Crime Complaint Center, business email compromise targeting AP vendor banking changes accounted for over $3 billion in losses in 2025 alone. A fake “updated banking details” email lands, someone edits the vendor record without checking it, and money goes to the wrong account. Treat vendor setup and any change to vendor banking as a controlled step, with a verification call back to a number you already trust. It belongs in your documented process, not in tribal memory.
Step 1: Invoice receipt
The invoice arrives. Email is the most common channel, but you’ll also get PDFs through vendor portals, EDI feeds, and the occasional paper invoice someone has to scan.
The goal here is boring and important: get every invoice into one place. The week my AP person was out, invoices sat in a personal inbox where nobody could see them. A single intake point, a dedicated AP email address or a portal that feeds straight into QuickBooks or Sage, kills that whole class of problem.
Step 2: Invoice coding
Now the invoice gets coded: assigned to the right general ledger account, department, class, or project so it lands in the correct bucket in your financials.
This is the step that leans hardest on context only the AP person has. Is this software subscription an operating expense, or does it get allocated across teams? Which project does this contractor invoice belong to? Get coding wrong and your P&L is wrong, which means every decision made off that P&L is a little wrong too. Coding rules are exactly the thing to write down with examples, because “you just know after a while” is not a process.
Step 3: Three-way match
This is the control at the center of accounts payable. You compare the invoice against the purchase order and the goods receipt. The PO says what you agreed to buy, the receipt says what actually showed up, and the invoice says what you’re being billed. When all three agree on quantity and price, that’s a three-way match, and the invoice is cleared to move forward.
When they don’t agree, you’ve caught something before it cost you money: a price that crept up, a partial shipment billed in full, a duplicate. For PO-backed spend, matching isn’t optional. For things like utilities or subscriptions where there’s no PO, teams fall back to a two-way match or a direct approval rule. That exception should be a written rule too, not a judgment call someone makes alone.
Teach your co-workers or customers how to get stuff done – in seconds.
Step 4: Approval
A matched, coded invoice still needs a human to authorize payment. Most teams run approvals on thresholds: under a certain amount the AP lead can release it, above that it routes to a manager, above that to finance leadership.
The two failure modes here are opposites, and both are common. Either approvals are so loose that things get paid nobody really signed off on, or they’re so tied to one approver that everything jams the second that person is on a plane. A documented approval matrix, who approves what at which dollar amount and who their backup is, fixes both, and a clear invoice approval workflow is what keeps it from jamming. If I could only write down one piece of the AP process, this would be it.
Step 5: Payment
The approved invoice gets paid: ACH, check, virtual card, or wire, on the schedule and terms you agreed to. In QuickBooks or Sage this is usually a scheduled payment run rather than paying things one at a time, which is more controlled and easier to reconcile.
Two things matter here. Timing, so you capture early-payment discounts and don’t trip late fees, and segregation of duties, so the person who enters a vendor isn’t also the person who releases payment to it. That separation is a basic fraud control, and auditors will ask about it specifically.
Step 6: Reconciliation
Once payment clears, the AP process closes the loop. You match the payment to the bank statement, confirm the liability cleared off your books, and make sure the AP subledger ties to the general ledger. At month-end this rolls up into close, alongside accruals for invoices you’ve received but not yet paid.
Reconciliation is where errors from every earlier step finally surface: a miscoded invoice, a duplicate that slipped through, a payment that never cleared. Catching them here is fine. Catching them in an audit is not. This stage connects directly to the rest of your accounting SOP. On the other side of the ledger, it mirrors how cash application closes out receivables.
Where the accounts payable process actually breaks
After watching a lot of teams run this, the failures are almost never in the steps themselves. People understand how to match an invoice. The failures hide in the handoffs and the undocumented judgment.
- The bus-factor problem. One person knows the coding rules, the approval exceptions, and which vendors are “special.” When they’re out, the process doesn’t slow down. It stops.
- Coding drift. Without written rules and examples, two people code the same kind of invoice two different ways, and your financials slowly stop meaning what you think they mean.
- Approval ambiguity. Nobody can say with confidence who approves a $12,000 invoice when the usual approver is unavailable, so it either waits or gets rubber-stamped.
- Fraud through the side door. Vendor banking changes and new-vendor setup are the soft spots. They’re rarely documented as controlled steps, which is exactly why they get exploited.
Ardent Partners data shows that on average, AP teams flag 22% of invoices as exceptions - that’s nearly one in four invoices hitting a snag before it can be paid. Best-in-class teams get that number down to 9% by having clear, written rules at every step. Every one of these breakdowns is a documentation problem wearing a process costume. The fix isn’t a bigger ERP. It’s making the knowledge in one person’s head visible to the team.
Record it once instead of explaining it forever
Here’s the part I care about, because it’s the reason I built Glitter AI.
The standard advice is “document your AP process.” Good advice, and almost universally ignored, because writing it up means screenshotting every QuickBooks and Sage screen, annotating it, and keeping that document current as the software changes. AP teams are busy closing the month. The doc never gets written, or it gets written once and goes stale within a quarter.
So flip it. Instead of writing the process, record yourself doing it. Next time you run a payment batch, code a tricky invoice, or do a three-way match in your ERP, Glitter captures every click and screen as you go and turns it into a clean, step-by-step guide automatically. You did the work once anyway. Now it’s also the training material.
That’s the gap between the AP process living in someone’s head and living in a guide anyone on the team can follow. When the person who runs AP is out for a week, nothing stops, because the steps are recorded, not remembered. If you want the structured version to build from, our accounts payable SOP guide lays out the full template.
Teach your co-workers or customers how to get stuff done – in seconds.
A practical way to start
You don’t need to document the whole cycle this week. Start where the risk is highest.
- Write down the approval matrix. Dollar thresholds, who approves, who’s the backup. One page. This is the highest-leverage thing you can document.
- Record one full payment run. Just hit record and do your next batch in QuickBooks or Sage normally. You now have a real walkthrough with the actual screens.
- Document the two control points. New vendor setup and vendor banking changes, with the verification step spelled out explicitly.
- Capture your coding rules with examples. Not a theory of accounting, just “this kind of invoice goes to this account, here’s a real one.”
Do those four and you’ve covered the parts of the accounts payable process that actually break. The rest you can fill in over the next couple of close cycles.
The goal was never a perfect binder nobody reads. It’s that the process survives a vacation, a sick day, and the day your AP person finally moves on to something new. Record it once, and it will.
Frequently Asked Questions
What is the accounts payable process?
The accounts payable process is the end-to-end cycle for handling money a business owes to vendors. It typically covers vendor setup, invoice receipt, coding, three-way match, approval, payment, and reconciliation, ending when the payment clears and the books are balanced.
What are the steps in the accounts payable process?
The core steps are invoice receipt, invoice coding, three-way match against the purchase order and goods receipt, approval based on dollar thresholds, payment, and reconciliation. Vendor setup happens before the cycle starts and month-end close wraps around it.
What is the difference between accounts payable and invoice processing?
Invoice processing is one part of the broader accounts payable process. Invoice processing focuses on receiving and clearing a single invoice, while the full AP process also includes vendor onboarding, coding, approval workflows, payment runs, and reconciliation against the general ledger.
What is a three-way match in accounts payable?
A three-way match compares the vendor invoice against the purchase order and the goods receipt. When the quantity and price agree across all three documents, the invoice is cleared for payment. It is the primary control that prevents overbilling and duplicate payments.
How does the accounts payable process work in QuickBooks or Sage?
In QuickBooks or Sage you enter or import the bill, code it to the right account and class, attach the PO for matching, route it for approval, then release it in a scheduled payment run. The system then helps you reconcile the payment against the bank statement and the AP subledger.
Why is the accounts payable process important?
A well-run AP process protects cash, prevents duplicate and fraudulent payments, captures early-payment discounts, keeps vendor relationships healthy, and produces clean numbers at month-end close. Poor AP processes lead to late fees, fraud exposure, and audit findings.
What are common accounts payable process problems?
The most common issues are knowledge living in one person's head, inconsistent invoice coding, unclear approval authority when the usual approver is out, and weak controls around new vendor setup and banking changes. Most of these are documentation gaps rather than software gaps.
How do you document an accounts payable process?
Start with the approval matrix, then record yourself running a real payment batch and a tricky coding example directly in your ERP. Tools like Glitter capture each screen and click as you work and turn it into a step-by-step guide, so the process is recorded rather than remembered.
What is segregation of duties in accounts payable?
Segregation of duties means the person who sets up or edits a vendor is not the same person who releases payment to that vendor. Separating these roles is a basic fraud control, and auditors specifically check for it in the AP process.
What is accounts payable reconciliation?
AP reconciliation confirms that payments cleared the bank, liabilities cleared off the books, and the accounts payable subledger ties to the general ledger. It is the final step of the AP process and where errors from earlier steps surface before close or audit.
