A Comprehensive Accounts Payable Full Cycle Guide

If you manage accounts payable for multiple clients, you know how chaotic it can get. One client forgets to forward a vendor invoice until the last minute. Another has no standard approval process, so you’re stuck chasing sign-offs for days.

Meanwhile, deadlines pile up, increasing the chances of late fees, duplicate payments, and misclassified entries that can throw off your client’s books.

It’s no surprise that 41% of finance professionals say invoice approvals and payments take too long, and that the average AP organization needs 9.2 days to process a single invoice, according to the 2024 State of ePayables report by Ardent Partners.

That’s why a clear, standardized accounts payable cycle is so important. It brings structure to the chaos so every invoice is handled the same way, every time, no matter the client

In this guide, we’ll explain each step of the accounts payable (AP) full cycle, common challenges in the cycle, and show you how to improve the process using standardized workflows and automation.

It starts with vendor onboarding and, if required, purchase order creation. From there, the process moves through receiving and reviewing the invoice, getting the necessary approvals, recording the expense in your client’s accounting system, and making the payment. The final step is reconciliation, i.e, making sure the payment went through and is reflected accurately in the general ledger.

In other words, the AP full cycle is not only about cutting checks, but about building a consistent, repeatable process that ensures every bill is tracked, approved, paid, and closed out correctly.

Why the AP Cycle Matters

A consistent, well-managed AP cycle creates structure and control across all the moving parts of your clients’ financial operations. It is an essential part of the accounting cycle and here’s why it’s so important:

a. Impacts Cash Flow, Vendor Relationships, and Financial Accuracy

A reliable AP process helps your clients understand exactly how much they owe, when payments are due, and what cash they’ll need on hand. This level of visibility allows for better short- and long-term planning.

It also supports healthier vendor relationships as paying vendors on time builds trust, reduces the need for follow-ups, and can even lead to better pricing or terms.

From a financial accuracy standpoint, tracking invoices and payments correctly ensures that expenses are recorded in the right period and under the right accounts, keeping your clients’ financial reports clean and actionable.

b. Essential for Maintaining Audit Trails and Compliance

A complete AP cycle ensures every invoice, approval, and payment is documented. This creates a clear audit trail that shows when a bill was received, who approved it, when it was paid, and how it was recorded in the books.

Whether your clients are preparing for a formal audit or just need to answer a vendor inquiry, this documentation helps protect them from compliance issues and costly disputes.

c. Reduces Risk of Late Payments, Missed Invoices, or Duplicate Payments

Without a standardized AP process, it’s easy for things to slip through the cracks. Invoices may get lost in someone’s inbox, approvals might be delayed, or the same invoice could get paid twice.

A full-cycle AP process eliminates that risk by creating clear checkpoints at every stage: invoice receipt, approval, entry, payment, and reconciliation. This structure reduces errors, cuts down on cleanup, and builds trust with your clients, which helps you retain them long term.

The 7 Key Steps in the Accounts Payable Cycle

These seven steps make up the full AP cycle from initial vendor setup to reconciling final payments. Here’s what each step entails:

1. Vendor Onboarding & Setup

Before any purchases or payments happen, you need to onboard vendors properly. This means collecting all the required documentation such as W-9 forms, contracts, payment terms, and banking details for ACH transfers. You’ll also want to clarify billing procedures: where invoices should be sent, who approves them, and what information should be included.

Setting up each vendor in your client’s accounting system accurately from the start reduces errors later. It also helps standardize naming conventions, map vendors to the right General Ledger (GL) categories, and assign default payment terms, saving your team from constant re-checks.

2. Purchase Order (PO) Creation

Once your client approves a purchase, you create a PO outlining the quantity, price, delivery schedule, and conditional payment terms. Then have someone on the client’s side with budget authority to review and approve the PO.

This could be a department head, project manager, operations lead, or the business owner, depending on the size and structure of the client’s team. For larger purchases, approval might need to go through finance or a controller.

Having this step in place ensures that purchases are intentional and budgeted for. Later in the AP process, the PO becomes a key reference point when verifying invoices. If you’re using 3-way matching, the PO is compared against both the invoice and the goods or services received to ensure everything lines up before payment is issued.

3. Invoice Receipt

After the vendor delivers goods or services, they send an invoice to your client. Depending on how organized the client is, you may receive this via email, a shared folder, client portal, or even a forwarded PDF with no context.

Your firm’s job is to gather all incoming invoices and store them securely in one central system ideally using document management features in your accounting software or workflow tool like Financial Cents. You’ll also want to check that each invoice includes required details: vendor name, invoice number, date, due date, line-item breakdowns, tax if applicable, and payment instructions.

4. Invoice Review & Approval

Next, the invoice needs to be reviewed and approved before it can be paid. This is where many delays happen, especially if your client doesn’t have a defined approval workflow.

At this stage, first confirm that the invoice is legitimate and hasn’t already been entered or paid. Then, if there’s a purchase order or delivery receipt, you match it against the invoice to ensure everything aligns. Also, check that the line items, quantities, and amounts are accurate and that the charges reflect what the client actually received.

After verifying the details, route the invoice to the appropriate person on the client’s team for approval, usually a department head, business owner, or designated approver.

If the invoice meets all the criteria and gets signed off, you move it to the next stage. But if something looks off or there’s missing documentation, you pause and follow up with the client or vendor to get the issue resolved before continuing.

5. Record the Invoice in the Accounting System

Once the client approves the invoice, record it in their accounting software. This step ensures the books stay clean and reporting stays accurate.

Categorize the invoice to the correct GL account and, if needed, allocate the expense to the right department, project, or location. Then, enter the due date and confirm the payment terms, ensuring they align with the terms agreed upon during vendor setup. Also, attach any supporting documents like the PO, delivery receipt, or approval confirmation for future reference or audit purposes.

If the invoice qualifies for an early payment discount, apply it now so your client doesn’t miss the opportunity. Getting all of this right keeps the AP aging report accurate and sets the invoice up for smooth payment processing.

6. Payment Processing

Once you record and schedule the invoice, start processing the payment. This step varies depending on the client’s preferred method. Some use ACH transfers, others prefer checks, credit cards, or payment platforms like Bill.com.

Before sending the payment, verify that the due date hasn’t passed and that any early payment discounts still apply. Confirm the payment amount is correct, the vendor details are accurate, and there are no outstanding approvals or payment holds.

After issuing the payment, update the invoice status in the accounting system to reflect that it’s been paid. If your client wants to notify the vendor, generate and send remittance advice or a confirmation email so they know the payment is on its way..

7. Reconciliation & Reporting

After processing the payment, the final step is reconciliation. Confirm that the payment went through successfully, apply it to the correct invoice, and make sure it appears accurately in the client’s bank feed and general ledger.

Then mark the invoice as paid in the accounting system and match the payment with the corresponding transaction in the bank feed. If you notice any discrepancies like duplicate entries, incorrect amounts, or timing issues, resolve them immediately to keep the records clean.

Update the client’s accounts payable aging report and any internal dashboards they rely on to monitor cash flow or liabilities. Finally, archive all supporting documentation, including proof of payment and approval records, so everything is audit-ready if needed.

If you need help with this step, download our AP reconciliation checklist template.

Common Challenges in the AP Cycle

Even with a solid process in place, managing accounts payable comes with its share of challenges, like the following:

Lost or Delayed Invoices

Invoices often go missing when clients forget to forward them or when vendors send them to the wrong email address. In some cases, invoices get buried in a cluttered inbox or passed between departments without a clear point of contact. If this happens, you can’t process payments promptly, which increases the risk of missed due dates and vendor frustration.

Manual Errors or Data Entry Mistakes

When your team enters invoice details by hand, there’s always a risk of making mistakes. These small errors can lead to incorrect financial reports, failed payments, or confusion during reconciliation. The more clients you serve, the higher the volume of invoices you handle, and the greater the risk of human error without checks in place.

Duplicate Payments

It’s easy to accidentally pay the same invoice twice, especially when vendors resend invoices or when different team members process the same bill without realizing it. Duplicate payments not only affect your client’s cash flow but also damage trust with vendors who may have to issue refunds or credits. Without a system to detect duplicates, these mistakes are hard to catch until it’s too late.

Late Fees Due to Approval Delays

Even when your team acts quickly, you can’t move forward until the client approves the invoice. If their internal approval process is unclear or if the designated approver is unresponsive, your team ends up chasing approvals and missing payment deadlines.

Poor Communication Between Departments

When different departments within a client’s organization don’t communicate, it slows everything down. Operations might approve a purchase, but finance doesn’t know about it. Or a manager might dispute a charge after the invoice is already scheduled for payment. Your team ends up acting as the go-between, which adds complexity and increases the risk of errors or conflicting instructions.

Best Practices for Managing the AP Cycle

Use 3-Way Matching (PO, Receipt, Invoice)

3-way matching helps you catch discrepancies before money leaves your client’s account. You compare the vendor’s invoice to the original purchase order and the delivery receipt. If all three match, the invoice is approved for payment. If they don’t, your team flags the issue and follows up with the client or vendor to resolve it. This extra layer of review protects against overpayments, fraudulent charges, and billing errors.

Set Clear Approval Workflows

When approval processes are vague or inconsistent, delays and errors follow. Establishing a clear approval workflow for each client ensures that every invoice goes to the right person at the right time. You define who approves what, in what order, and under what conditions. With this in place, your team avoids back-and-forth confusion and reduces the risk of missed payments caused by stalled approvals.

Standardize Vendor Onboarding

When different team members collect different pieces of information or skip steps entirely, you end up with incomplete vendor records, missing tax documents, and confusion during invoice processing.

Standardizing the onboarding process ensures your team collects and records the same information for every vendor, across every client. Instead of relying on memory or scattered communication, your firm works from a shared checklist that outlines exactly what needs to be gathered, verified, and entered into the accounting system.

You can create your own onboarding checklist tailored to your firm’s workflow, or use a pre-built template from Financial Cents to get started faster. Once in place, this checklist becomes a repeatable process your team can follow with every new vendor, saving time, improving accuracy, and helping your clients avoid payment delays or compliance issues down the line.

Schedule Regular Reconciliations

Reconciliation shouldn’t only happen at month-end. Depending on the client’s transaction volume, review open invoices, clear payments, and match them to bank transactions on a weekly or bi-weekly basis. This habit allows your team to catch and resolve issues early, like duplicate payments, unmatched transactions, or missing records, before they affect your client’s reports or cash flow projections.

Track KPIs

You can’t improve what you don’t measure. Tracking key metrics like average days to pay, error frequency, number of duplicate payments, or percentage of invoices processed on time gives your firm insight into how well the AP process is working. These numbers help you identify where things slow down and give you data to justify changes that improve efficiency and service quality.

Back up With Documentation for Audit Readiness

For every step in the AP cycle, you should maintain clear documentation. Store everything in one place, whether that’s your accounting software or a dedicated document management tool. When clients get audited or need to resolve a dispute, having a complete paper trail makes your firm look organized, competent, and trustworthy.

Use AP Automation

Manual processes become unsustainable as your client list grows. Automating parts of the AP cycle, like invoice data capture, approval routing, payment scheduling, and reminders, reduces errors and increases efficiency. With the right ap automation tools, you can process invoices faster, meet more deadlines, and give your clients real-time visibility into what’s happening with their payables.

Take Your AP Process to the Next Level with Workflow Automation

If your firm is still managing accounts payable manually, now’s the time to take a step back and evaluate what’s working and what’s slowing you down. Chasing invoices, tracking approvals across email threads, and cleaning up errors at month-end might have been manageable when your firm was smaller. But as your client list grows, it becomes more difficult.

That’s where workflow automation makes the difference. Automating parts of the accounts payable cycle—like assigning tasks, routing invoices for approval, setting due date reminders, or tracking payment status—saves time and reduces the chance of errors. It also gives your team better visibility into what’s happening across every client account, so nothing slips through the cracks.

Financial Cents makes this possible with features built specifically for accounting and bookkeeping firms:

Here are some of the ways our accounting workflow software helps you manage your AP workflow:

• Recurring tasks: Schedule AP tasks like payment runs or month-end close to automatically repeat on set dates. This saves your team from recreating the same workflows and ensures you never miss a deadline.
• Client reminders and document collection: Automatically send reminders by email or SMS to collect necessary documents. Clients get nudged until they respond, so you no longer waste time chasing them.
• Team updates: Notify team members automatically when it’s their turn to take action. This eliminates manual handoffs, keeps everyone aligned, and ensures work moves forward without delays.
• Automated work status updates: Update project statuses in real time as tasks progress. For example, switching to “Waiting on Client Info” automatically when a request goes out. This keeps both your team and clients informed without extra effort.
• Email updates: Set up automated, auto-triggered email templates that send updates to clients at key points like task completion, section milestone, or status changes in Financial Cents. These reduce manual outreach and ensure consistent client communication.

Start using Financial Cents to manage your accounting processes.