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Top 25 Accounts Payable Best Practices

When you hear the term “audit”, it tends to have a negative connotation. The fact of the matter is, an accounts payable audit is a process that can have very positive business-changing results, especially when best practices are included in the result package. Not only might you find a great deal of money “lost” in unrefined operational processes, but a good auditor will then arm you with an education that can far exceed the immediate financial gains.

When an accounts payable audit is completed, the types of overpayments that are identified in each category should be explained, and recommendations for how to prevent them going forward provided. In order help Controllers and CFOs better manage procure-to-pay processes, they must have insight into their own organization, as well as the latest accounts payable advice from the experts.

Narrowing the list of best practices is not an easy task, as it needs to cover everything from invoice handing to payment processing, and fraud to regulatory issues. In our experience, however, attending to these 25 critical items will make a significant impact on operational efficiency, and provide a clear audit trail.

  1. Get a W-9 From Every Vendor Before the First Invoice is Paid
  2. Limit Who Can Add New Vendors or Access the Master Vendor File, and Review Changes Annually
  3. Pay From Original Invoices
  4. Enter Invoices Individually and With Standardized Field Requirements
  5. Pay Invoices as Billed
  6. Standardize Invoice Number Creation and Entry
  7. Have a Process for Invoice Validation
  8. Centralize Processes
  9. Clearly Define Roles for Accountability, Authorization and Approval
  10. Never Have One Person Handling Payment Initiation, Payment Processing and Check Signing
  11. Standardize Invoice Handling: Establish a Single Delivery Point for Invoices and Provide Every New Vendor with Clear Instructions for Invoice Submission
  12. Have a System for Keeping Track of Vendor Discounts
  13. Automate Manual Processes as Much as Possible
  14. Routinely Check for Duplicate Payments
  15. Use Workflow Automation to Monitor Performance and Identify Issues
  16. Utilize Management to Oversee all Payment Processes
  17. Track Disputes and Resolutions
  18. Train, Cross-train, Educate and Rotate AP Staff
  19. Pay Electronically Whenever Possible Using a Dedicated PC for Online Banking Only (Turned Off When Not In Use)
  20. Consider Outsourcing Check Printing to Your Bank
  21. Utilize ACH Positive Pay, Blocks and Authorizations to Protect Against Unauthorized Transactions
  22. Limit Rushing Checks and Returning Checks
  23. Have a Follow-up Process for Uncashed Checks
  24. Reconcile Bank Accounts Daily
  25. Make an Accounts Payable Audit a Regular Part of Your Business Routine

When accounts payable issues are either unnoticed or ignored, it can lead to a downward spiral both with finances and vendor relations. Following best practices can help businesses avoid duplicate payments, identify fraud, take advantage of early payment discounts, and preserve relationships with employees as well as vendors. You can also expect a decrease in regulatory issues.

It is important to recognize that following these best practices does not make an organization immune to errors or even fraud. It will, however, help you maximize potential revenue and resolve any issues that arise more quickly. Having strong internal controls, appropriately segregated duties and state-of-the-art automation could be the best investment you ever make!


Mary Schaeffer
Title: Publisher & Editorial Director
Company: AP Now
(Publisher & Editorial Director, AP Now) |

Great list. Unfortunately, the advice to only pay from an original invoice no longer offers the protection it did in the past. With pdf emailed invoices, the same invoice can be printed multiple times and the result is multiple copies of an invoice, each of which looks like an original. That's just one reason all the other advice in this piece is so important to follow.

Julie Gilmore
Title: Auditor
Company: Broniec Associates
(Auditor, Broniec Associates) |

You are right. There is always that possibility. The safest way is to never pay from a fax or an email. If you have to, specific and reinforced procedures must be in place.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

I agree with Mary - we don't accept snail mail/hard copy invoices in our system anymore (unless you are over 80 and a customer). All items are emailed to our AP department at a specific email address where they are coded and placed for electronic approval. By maintaining controls about entering items and reviewing our detailed aging before issuing payments we catch any duplicates before they get posted or paid. If we waited for the mail to get here we would be 100% accruals and spending a lot of time estimating and then explaining variances. We have also cut down on suppliers mailing invoices late (3 or more weeks) and using a date from a prior month. I know when I have received your invoice just by using the date stamp and I store this so I have a record in case there are issues in the future.

Julie Gilmore
Title: Auditor
Company: Broniec Associates
(Auditor, Broniec Associates) |

You are both correct. The key is a controlled and monitored process. But, you would be surprised by how many companies still use snail mail.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

I like the list, but have a question.

Question: what is your definition of "Limit Rushing Checks and Returning Checks"

Mary Schaeffer
Title: Publisher & Editorial Director
Company: AP Now
(Publisher & Editorial Director, AP Now) |

Sara is 100% correct - this is the wave of the future.
What's more, many vendors are refusing to mail invoices due to the expense.
They are insisting on email or fax - and to be perfectly fair, I can't say I blame them.
Every organization needs to develop processes to deal with email and faxed invoices.