What's the first thing that comes to mind when you think of accounts payable? Probably someone in a back office approving invoices and cutting checks. While that captures the basics, effective accounts payable best practices involve much more than simply paying bills.
Companies using manual AP processes spend an average of $15 processing each invoice, while highly automated systems can reduce that cost to around $2.81. Even more concerning, over 70% of small and medium businesses have been negatively impacted by late payments in just the past year.
Depending on how you handle AP, these tasks can either streamline your operations or consume half your team's day. Too often, it's the latter. Slow invoice processing doesn't just waste time—it damages vendor relationships, racks up unnecessary fees, and creates cash flow blind spots that can hurt your bottom line.
The good news? Implementing proven accounts payable best practices doesn't require a complete overhaul of your systems. In this guide, we'll walk through 10 essential practices that will help you:
- Reduce invoice processing time by up to 80%
- Eliminate duplicate payments and late fees
- Improve vendor relationships and negotiating power
- Gain real-time visibility into your cash flow
- Free up your team to focus on strategic work instead of manual data entry
Ready to turn your AP from a time drain into a competitive advantage? Let's dive in.
1. Implement paperless accounts payable processes
First things first: ditch the pile of paper invoices that show up on AP’s desk every month. As relevant information gets manually transferred over to accounts payable systems, paper processes leave a lot of room for mistakes. Plus, there’s a huge risk that paper vendor invoices can go missing, disrupting your AP processes entirely.
The rest of the account payables best practices get so much easier once you switch your processes over to a digital AP management platform.
2. Centralize vendor data management
Payment details, purchase order numbers, tax ID numbers—there’s a lot of data that goes into invoice validation. Having that data scattered across multiple platforms, spreadsheets, and ERP systems creates chaotic, slow AP processes.
By housing vendor data in a single, centralized platform, you provide your AP team with reliable, easy-to-access data that helps them speed up invoice validation and disburse payments in a timely fashion. It’s even better if your tool automatically records those transactions in your larger bookkeeping software.
3. Streamline your invoice approval workflow
Your finance team doesn’t just fulfill any vendor invoice that comes their way. There are specific processes to follow to ensure the invoice is real, your business has actually received the products or services listed, and you’re sending payment to the right account. Only certain people can get those approvals.
The faster you get through those approvals, the faster you can pay your vendor and keep them happy. Look into AP automation tools that allow you to streamline invoice identification and processing via timeline limits and permission controls to check off this best practice.
4. Automate invoice tracking and status updates
One of the most tedious (and often forgotten) steps of accounts payable management is providing relevant parties with a status update. But even just knowing that their invoice has moved to the next step of fulfillment can keep your vendors confident in on-time payment.
You’ll want to explore cutting-edge tools that automatically alert your users of pending approvals and status updates so the invoices move through the process efficiently.
5. Establish fraud detection controls
There’s no limit to the tricks cyber criminals will try. That includes sending fake invoices in the hopes you’ll be too bogged down with manual work and lack strong data to notice it’s not legit.
Managing your accounts payable digitally and having the data and permission controls to carefully, but efficiently, review vendor invoices can help you quickly detect fraud and prevent risky payments.
6. Avoid duplicate payments with automation
A vendor sends an invoice to their department contact. They also CC your business’s AP team. The contact adds the invoice to the AP spreadsheet. Before you know it, the vendor receives payment twice, and you’re caught in the awkward situation of letting them keep the funds or…what…ask for them back?
AP automation and validation tools automatically detect duplicate invoices, so you only pay a vendor exactly what they’re owed, once.
7. Limit vendor disputes and delays
Sometimes, you find that the amounts or services a vendor invoices you for don’t line up with what you received. Manual AP management processes don’t give the ability to efficiently dispute that.
It’s better to leverage AP tech solutions and dedicate support that can easily validate invoices with other systems, so you don’t have to deal with the run-around as you manage disputes.
8. Track accounts payable KPIs for process optimization
Your accounts payable plays a significant role in your overall financial operations. So why wouldn’t you measure performance like you would another area?
Ensure you have efficient AP processes by adding a few metrics to your financial KPI dashboard like:
- Days payable outstanding (DPO)
- Number of on-time paid invoices
- Cost per invoice
- Error rate
- Per vendor spend
9. Negotiate better payment terms with vendors
Sure, invoices typically require payment within 30, 60, or 90 days. But it's always worth checking to see if you can renegotiate those terms.
Especially if you have a good relationship with a vendor, discuss the possibility of extending payment windows or receiving early payment discounts if you shorten the window. Even a slight change in payment schedule can improve your cash flow.
10. Adopt advanced accounts payable automation technology
Pretty much every accounts payable best practice can be achieved by using strong AP management software.
When searching for a solution, look for one that allows for invoice automation, provides timely alerts, and automatically reconciles all AP transactions with your bookkeeping and accounting software. It's even better if you find one that also offers human support to supplement the technology capabilities.
Put These Accounts Payable Best Practices to Work
Implementing these accounts payable best practices isn't just about fixing inefficiencies—it's about transforming AP from a cost center into a strategic advantage. When you combine paperless processes, centralized vendor management, automated workflows, and fraud prevention controls, you're not just saving time and money. You're building a financial operation that scales with your business and strengthens vendor relationships.
What You Stand to Gain
Companies that follow these best practices typically see dramatic improvements within the first six months:
- Processing costs drop by 60-80% as manual tasks become automated
- Payment accuracy increases with duplicate payment prevention and three-way matching
- Vendor relationships improve through faster, more reliable payments
- Cash flow visibility gives you better control over working capital
- Team productivity soars as staff focus on analysis instead of data entry
More importantly, you'll have the financial insights needed to negotiate better terms, take advantage of early payment discounts, and make data-driven decisions about your spending.
Your Next Steps
Don't try to implement everything at once. Start with the practices that will give you the biggest immediate impact:
- Week 1-2: Audit your current AP process and identify your biggest pain points
- Month 1: Begin digitizing invoices from your top 10 vendors
- Month 2: Set up automated approval workflows for routine payments
- Month 3: Implement duplicate payment prevention and vendor data centralization
The key is to build momentum with quick wins, then gradually expand your automation and controls.
Ready to Transform Your AP Operations?
Your accounts payable doesn't have to be a source of stress, late fees, and vendor complaints. With the right approach, it becomes a competitive advantage.
Hiline's approach to financial operations is designed specifically for small businesses ready to implement these accounts payable best practices. We combine cutting-edge automation technology with expert financial guidance to ensure your AP transformation delivers real results.
Don't let outdated AP processes hold your business back. Schedule a consultation with our team to discover how we can help you implement these best practices and transform your accounts payable into a strategic asset.
Start your AP transformation today. Your future self (and your vendors) will thank you.
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