Accounts Payable
Accounts payable (AP) represents the outstanding amounts a business owes to its vendors and suppliers for goods and services received on credit. AP is a current liability on the balance sheet and a core component of working capital management. The AP process — invoice receipt, coding, approval, payment execution, and reconciliation — is one of the most automation-ready finance workflows, with modern platforms using OCR, AI matching, and workflow automation to eliminate manual data entry and reduce payment cycle times from weeks to days.
Key Details
- The AP lifecycle: receive invoice, validate against PO/receipt (two-way or three-way matching), code to GL accounts, route for approval, execute payment, reconcile
- Three-way matching compares the purchase order, goods receipt, and invoice to prevent paying for undelivered or incorrect goods
- AP aging reports categorize outstanding payables by due date (current, 30, 60, 90+ days) to manage cash flow and vendor relationships
- Early payment discounts (e.g., 2/10 net 30) represent a significant cost savings opportunity — automation enables consistent capture of discount terms
- Duplicate invoice detection prevents one of the most common AP errors: paying the same invoice twice due to re-submission or format differences
- AP reconciliation verifies that the AP subledger balance matches the GL control account and that all payments clear the bank as expected
- Days Payable Outstanding (DPO) measures how long a company takes to pay suppliers — optimizing DPO improves working capital without damaging vendor relationships