Accounts payable explained: Process, automation, and best practices

Key takeaways:

• Managing your accounts payable well keeps your finances stable.

• When you keep accurate records of all your outgoing payments, you get a clear picture of your company's financial health. These records show you spending patterns, surface inefficiencies, and keep you compliant.

• Modern fintech platforms like Airwallex can automate your accounts payable, which means fewer errors, better visibility, simpler approvals, and stronger supplier relationships.

If you're running a business, managing your finances is essential – and accounts payable is one of the biggest pieces you’ll need to manage.

For years, businesses have handled accounts payable manually: processing invoices, verifying payments, and keeping records by hand. But this traditional approach is slow and inefficient: on average, it takes nearly 14.6 days to process an invoice manually¹, and this ties up working capital and slows down cash flow. That's why more financial leaders are turning to automation to streamline their accounts payable.

What are accounts payable?

Accounts payable (AP) is the money you owe suppliers, vendors, or service providers for goods or services you've received but haven't paid for yet. On your balance sheet, these short-term debts show up as current liabilities – not longer-term obligations like mortgages.

Your accounts payable directly affects your working capital. These debts shape how you keep cash flowing, meet your financial commitments, and build trust with suppliers.

Managing your accounts payable doesn’t just mean paying bills as early as possible – it’s about timing your payments strategically. Pay too early, and you tie up cash that could be used to grow your business. Pay too late, and you risk late fees, damaged supplier relationships, or even interruptions to your supply chain. By paying on time, you maintain healthy cash flow, avoid unnecessary costs, and build trust with your suppliers.

Accurate payment records also give you real insight into your financial health. They show spending patterns, surface inefficiencies, and keep you compliant with tax rules. When you dig into these records, you can track expenses, watch your cash flow, and make smarter spending decisions.

The accounts payable process

You'll need to carefully manage each stage of the accounts payable process. Here's a step-by-step breakdown:

Step 1: Your company submits a purchase order (PO)

A PO is a list of the items or services you're purchasing, including the prices, any terms or conditions for the transaction, delivery dates, and the timeframe when the payment is due. It's a formal agreement that confirms the order is correct, and it needs your company's signature.

Step 2: The supplier fulfils the order

The supplier reviews the purchase order and accepts, modifies, or rejects it. If accepted, the supplier will fulfil the order.

Step 3: Your company creates a receiving report

Once the goods or services arrive, you'll put together a receiving report. This document confirms that what you received matches the purchase order. You'll break down item descriptions, quantities, and any issues you spot when the order arrives.

Step 4: Your company reviews and approves the supplier's invoice

Once the supplier delivers the goods or services, they send an invoice. Your finance team checks the invoice against the purchase order and the receiving report to ensure everything matches: item descriptions, quantities, prices, and GST (if applicable). 

If the invoice is correct, it gets approved for payment. If there are discrepancies, you request corrections from the supplier before proceeding.

Step 5: Your company records the invoice and schedules the payment

After approving the invoice, enter it into your accounting system to track short-term liabilities. Schedule the payment according to the due date using the method agreed with your supplier – common options in Singapore include GIRO, PayNow, FAST transfer, cheque, or corporate credit card.

Step 6: Your company pays the invoice and documents it

Make the payment according to the agreed terms, and then reconcile it in your accounting system so your records stay accurate and up to date. This ensures your accounts reflect the payment, keeps cash flow transparent, and maintains a clear audit trail for both internal tracking and GST compliance.

The challenges of accounts payable for a business

For years, managing accounts payable has meant doing everything manually. An accountant would often check each line item on a purchase order against the corresponding invoice by hand – a slow process that can cause mistakes, delay payments, and strain supplier relationships.

It’s also problematic when your different tools don’t communicate with each other. For example, your billing system might record an invoice, your payment system might track outgoing funds, and your accounting software might maintain the general ledger – but if these systems aren’t connected, it’s easy for errors or unauthorised payments to slip through unnoticed.

Managing cash flow adds another challenge. You need enough funds to cover short-term bills without affecting other financial commitments. For businesses dealing with international suppliers, fluctuating exchange rates can create unexpected costs and make planning even harder.

The differences between accounts payable vs. accounts receivable

Both accounts payable and accounts receivable involve credit and spend management, but they work in opposite ways:

Understanding the accounts payable team

Your accounts payable team manages your company's outstanding short-term debts to vendors and suppliers. They make sure invoices get properly verified, approved, and paid.

These are the main responsibilities of an accounts payable team:

• Receiving and checking invoices: The team reviews supplier invoices against the original purchase order to confirm everything's accurate.

• Assigning expense codes and sending for approval: After reviewing invoices, the team assigns unique expense codes to each one, then sends them to your finance department or other decision-makers for approval.

• Scheduling payments: Once someone approves the invoices, the team schedules payments for the due date.

• Maintaining documentation: The team uploads, reviews, and maintains records in your accounting system – vendor info, payment terms, and completed invoice payments.

• Reconciling statements: The team compares your payment and transaction records with vendor statements to make sure they match. If there are any discrepancies, these are investigated.

Although the tasks for your accounts payable team are straightforward, manual workflows and disconnected systems make the entire process messy. In fact, 88% of finance leaders report problems in their AP operations².

Your accounts payable team might use one system for uploading and tracking invoices and another for internal approvals. They may also need to log in to banking systems to make payments and then switch to accounting software to reconcile transactions. This constant switching between systems increases the risk of errors like misplaced decimal points or typos, leading to inaccurate financial records.

The good news? Accounts payable automation software can tackle these challenges for your team and improve your overall financial operations – all on one platform.

Automating accounts payable with software

Accounts payable software takes care of your AP process automatically and makes it simpler. It takes care of everything from receiving invoices to reconciling them. 

Benefits of accounts payable automation

Here's what accounts payable automation can do for you:

• Less human error: Automated systems take care of data entry and calculations, which cuts down on mistakes. This automation keeps your financial records accurate and consistent.

• Improved efficiency: Automation saves your AP team hours because it streamlines the entire process, from receiving invoices to making payments.

• Improved visibility: Real-time tracking and reporting give you a clear view of your bills, so you can forecast and budget more easily.

• Strengthened security and compliance: Strong security features like data encryption protect your data, make fraud harder, and keep you compliant with regulations.

• Simplified approvals: Customised approval workflows make sure the right departments review and approve invoices quickly, which cuts bottlenecks and speeds up your payment cycles.

• Stronger supplier relationships: When you consistently pay on time, you build trust and strengthen partnerships with suppliers.

Features to look for in an accounts payable software

If you're thinking about accounts payable software, here are the key features you'll want to look for:

• Integration with existing systems and tools: Make sure the software integrates easily with your current accounting software (like QuickBooks or Xero) and other business systems like your Enterprise Resource Planning (ERP) software.

• Automation capabilities: Strong automation features – like capturing and processing invoices with Optical Character Recognition (OCR) technology, payment processing, and reconciliation – improve your AP efficiency and accuracy.

• Customised approval workflows: The software should let you create custom approval workflows that match how you work.

• Multi-currency support: If you're working with international vendors now (or plan to), look for software that handles bill payments in multiple currencies.

• Tracking: You'll want real-time tracking of invoices, payments, and financial transactions. This tracking keeps you on top of your cash flow.

• Reports: Custom reports let you dig into spending patterns, spot trends, and forecast more effectively.

• Scalability: As you grow across borders, the software needs to handle more transactions and more complex AP processes. Additional features like built-in corporate cards and expense management tools give you better visibility into company spend.

• Security and compliance measures: Look for a software provider that's transparent about their security measures for protecting your financial info, and make sure they have features that keep you compliant with global and local regulations.

Accounts payable best practices

When you adopt a few key practices, you can turn accounts payable from basic bookkeeping into a strategic part of your financial operations. Here are five accounts payable best practices to keep in mind: 

1. Establish clear approval workflows

Define who is authorised to approve which purchases and payments. This separation of duties is essential for preventing fraud and making sure every payment is legitimate.

2. Maintain accurate vendor records

Keep a central, up-to-date list of all your suppliers, including their correct payment details, terms, and contact information. This prevents payment errors and delays.

3. Optimise payment timing

While paying on time is crucial for supplier relationships, paying too early can strain your cash flow. Schedule payments to hit due dates while balancing speed with smart cash management.

4. Reconcile accounts regularly

Don't wait for the end of the quarter. When you reconcile your AP ledger against vendor statements and your general ledger frequently, you can catch and fix discrepancies early.

5. Monitor key AP metrics

Keep an eye on metrics like Days Payable Outstanding (DPO), cost per invoice, and on-time payment rate. These numbers give you clear insight into your team's efficiency and financial health.

6. Prepare for global payments

If you work with international suppliers, use a platform that lets you pay in their local currency via local payment rails. This way, you avoid high SWIFT fees and reduce the hit from currency fluctuations.

Simplify accounts payable with Airwallex

Modern accounts payable management requires more than just tracking and processing invoices. You need automation, seamless integration, and the ability to make payments globally. Whether you’re paying vendors in multiple currencies or overseeing company spending across teams, the right platform can turn AP from a tedious, time-consuming task into a strategic advantage.

With Airwallex, you can streamline your accounts payable process with our Bill Pay software, and you'll also get a powerful tool for managing all aspects of your company spend. Our spend management platform brings together bill payments, multi-currency accounts, and Corporate Cards – giving you one clear view of your total global spend.

Here's how Airwallex can simplify your end-to-end accounts payable process:

• Automatically upload and process invoices from global vendors.

• Pay bills in multiple currencies from balances held in your multi-currency account, or convert funds at market-leading FX rates.

• Use local payment rails to avoid international transaction fees when paying suppliers in 120+ countries.

• Maintain full control with multi-layer approval workflows that align with your company's spend policies.

• Reconcile faster with our accounting integrations, like NetSuite, Xero, and QuickBooks.

• Consolidate your accounts payables with employee and company spend with our Corporate Cards in one platform.

Frequently asked questions (FAQs)

How do I know if my business needs AP automation?

If your team spends hours on manual data entry, deals with frequent late payment fees or invoice errors, or lacks visibility into upcoming liabilities, it's time for automation. As you scale internationally, automation becomes essential if you want to stay efficient without growing your headcount.

Can AP automation software integrate with my existing accounting system?

Yes, most modern AP platforms connect smoothly with popular accounting software like Xero, QuickBooks, and NetSuite, and they automate data flow between systems. This cuts out manual entry, which saves time and reduces errors.

What's the difference between accounts payable automation and spend management?

Accounts payable automation is all about processing and paying your supplier invoices. Spend management is broader: it covers all your company spending. A comprehensive spend management platform includes AP automation, but it also brings together corporate cards, expense management, and budget controls in one place – so you get complete visibility into what you're spending.

How long does it take to implement AP automation?

Modern, cloud-based solutions like Airwallex can be set up in days. You'll connect your accounting software, configure approval workflows, and invite your team. This is significantly faster than traditional enterprise systems, which can take months to implement.

How does AP automation improve compliance and audit trails?

With automation, you get a clear digital audit trail with time-stamped records for every action – from invoice receipt to final payment. Custom approval workflows and role-based access controls keep you compliant and make audit prep straightforward.

Sources:

1. https://www.highradius.com/finsider/ap-automation-2025-stats-for-cfos

2. https://www.pymnts.com/tracker_posts/cfos-turn-accounts-payable-into-the-next-growth-engine/

This publication does not constitute legal, tax, or professional advice from Airwallex, nor does it substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency. If you would like to request an update, feel free to contact us at [[email protected]]. Airwallex (Singapore) Pte. Ltd. (201626561Z) is licensed as a Major Payment Institution and regulated by the Monetary Authority of Singapore.