Your guide to accounts payable: Definition, process and examples

Without an automated accounts payable solution you get bogged down with manual processes and endless busy work just to produce month-ends. 

Often, this leaves you with no time to focus on stamping out overspending and maximising profitability.

Trying to manage cash flow across multiple cost centres can lose you hours. And this is made worse by the time-inefficient and error-prone nature of manual media invoices.

In this article, we’ll take a look at the role of accounts payable in the modern commerce landscape and explore a solution to these frustrating issues.

Recap: What is accounts payable? 

Accounts payable refers to the function that covers any money owed to suppliers or vendors. Once they have raised an invoice, the role of accounts payable is to receive, process, validate, record, and make the payment.

Accounts payable also manages the business’ cash flow, monitoring outgoing funds.  Outstanding payments are recorded as the balance of AP on the company’s balance sheet which shows what money they need to pay in total. Short-term liabilities or current liabilities refer to payments that the business expects to settle within a year. 

The accounts payable process

Let’s say an advertising agency submits an invoice for their services. As soon as this invoice is received, the payment process begins. 

As the accounts payable department, you’ll need to verify the validity of the invoice, code it to the general ledger and route for payment approval. 

Put simply: you need to check that the invoice is accurate, record it properly, confirm it matches the purchase order and receipt, and get the necessary approvals for payment.

Common issues and solutions in the accounts payable process

Manually making payments, inputting data, and detecting issues like incorrect, duplicate, or fraudulent invoices is time-consuming. And overall, a lack of suitable accounting automation can leave room for error. 

Here are some of the common issues you’ve probably seen before in the AP process alongside automated solutions that help you overcome them. 

Receiving the invoice

A common issue at this stage is difficulties in manually processing invoices which may come in multiple different formats (e.g. paper, email, EDI) or even incomplete. 

To overcome these challenges you need accounting software that automates processing and ensures invoices are all received in the same standardised format. 

For example, Juni developed AI-data OCR models that accurately capture and digitise paper invoices and automatically convert them for you. This means you can save time chasing people for correct or new invoice versions.  

Verifying the invoice

Even if invoices are submitted in a unified way, you still need to match the right invoice with the right payment.

Errors in manually verifying invoices are common, and incorrect details or mismatches with purchase orders or delivery receipts invariably lead to delays and vendor disputes.

If you’ve ever processed invoices for Google Ads, for example, you’ll understand the admin involved in managing this. 

Luckily, automated two or three-way matching solves this problem and massively speeds up the process. This term describes an algorithm that can accurately identify discrepancies by cross-referencing invoices with purchase orders. You’ll receive a report which allows you to instantly identify inconsistencies in costs.

Approving the invoice

Bottlenecks in the approval workflow are common due to inefficient processes and a lack of clear approval hierarchies. This can lead to huge delays in larger, more complex organisations.

Recording the invoice in the accounting system

Reducing manual data entry means accounts payable teams are freed up to focus on more strategic tasks like protecting assets and identifying overspending or growth opportunities.

However, automating invoice recording only works if your accounts payable solution seamlessly integrates with your current bookkeeping platform.

Look for an automated solution with a wide range of APIs and integrations already available. It should also have real-time data analytics and flow into live reports.

That means you can accurately validate data, ensuring variances on the balance sheet are flagged before the data is recorded.

Making and financing payments

Late payments are common and damage both vendor relationships and your business operations.

Nobody wants to deal with additional costs through late fees and lost discounts, so it’s critical to ensure timely payments through automation.

The solution you choose should also have robust duplicate payment detection systems to prevent overpayments and reduce financial losses.

Just as important as making payments is managing the relationship between them and the cash flow needs of your organisation. 

Paying off ad campaigns or suppliers can lead to cash always being tied up, creating a bottleneck for growth and reinvestment. 

If this is the case in your organisation, look into flexible accounts invoice financing solutions. Invoice financing means you don’t need to wait for customer payments and can immediately access the funds needed to cover your accounts payable.

For instance, with Juni’s flexible invoice credit, you get up to 120 days to settle, easing the strain on cash flow and opening up scaling opportunities.

How Juni streamlines the accounts payable process

Juni is an all-in-one solution that’s designed to free up your account team. Here’s how it makes accounts payable easier.

Automated tools 

Automated invoice processing saves you precious time by automatically scanning invoices and pre-filling pay details. Juni can also match your paid invoices to the corresponding transactions in seconds.

Seamless integrations with your current processes ensure data flows automatically from systems and clients into the software. Similarly, compatibility with your preferred bookkeeping tools ensures you can export data to platforms like Fortnox, DATEV and Exact Online. 

Easy payments  

Juni allows you to settle invoices in seconds, as well as schedule payments for upcoming invoices in a few clicks. You can also make fast payments from your Juni card and account to global suppliers with low-fee SEPA and SWIFT transfers.

Manage your spend by setting controls and limits for every card and getting notifications every time a payment leaves your account. 

Cash flow support

Juni facilitates real-time expense tracking to help you manage your cash flow. You’ll get daily reconciliations and increased visibility of performance indicators like processing time and outgoings.

You’ll also have access to industry-leading reporting and analytics capability. That means proactive rather than reactive problem-solving and fast visibility on what’s holding payments up. 

For instance, with Juni, you’ll be able to recognise a dip in cash flow on the horizon. You can then make a proactive decision to free up cash for necessities and limit non-critical spend.

You can also ease the pressure on your cash flow with flexible invoice credit and up to 120 days to repay.

Reducing stress with accounts payable automation 

As you scale your business, balancing outgoing costs against the need to maintain control over your cash flow becomes increasingly difficult.

Juni helps you avoid inefficiencies, stress, and errors with an all-in-one accounts payable solution. Your AP department can automate invoices and payments and oversee cash flow with spend management platforms and real-time reports.

FAQs about accounts payable

Is accounts payable debit or credit? 

Accounts Payable (AP) is typically recorded as a credit balance in the accounting records. It represents money owed by a business to its suppliers or creditors for goods or services purchased on credit.  Financial statements. 

What are some accounts payable examples? 

Accounts payable can cover any type of payment leaving company accounts. These include supplier invoices,  paying freelancers, managing advertising costs and more.