AP workflows: A guide to effective AP workflow processes

You know managing your company’s accounts payable (AP) processes is more than just paying bills—it’s about maintaining cash flow, building strong vendor relationships, and supporting accurate and timely financial reporting. But are time-consuming, error-prone, and costly manual AP processes holding you back from achieving greater efficiency and scalability?

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Optimizing your AP workflows can help you reduce processing times, minimize costly errors, and free up valuable resources so your team can focus on strategic growth.

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In this guide, we’ll walk you through what makes an AP workflow effective and recommend resources to simplify and supercharge your processes—helping you stay in control while driving your business forward.

What is an accounts payable workflow?

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A well-designed AP workflow helps a company meet its financial obligations and maintain vendor relationships while keeping cash flow under control.

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For example, imagine Fuzzy Finds, Inc., a manufacturer of pet toys, receiving dozens of invoices each month from various vendors. Its AP workflow might begin with the finance team receiving an invoice via mail, email, or a vendor portal. An accounts payable clerk enters the information into the accounting system, cross-checks it with purchase orders and goods or services delivered, then sends it to the appropriate department for approval. 

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Once approved, the AP clerk schedules the payment based on the company’s payment terms. Finally, the accounting team reconciles all transactions at the end of the month. Employees must carefully track and document each step in the process to avoid missed payments, duplicate invoices, and other errors.

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Without an effective AP workflow, Fuzzy Finds, Inc. might have to deal with delayed approvals, lost invoices, data entry errors, and a lack of visibility into outstanding liabilities. These inefficiencies lead to strained vendor relationships, missed early payment discounts, and increased risk of fraud or compliance issues.

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A well-structured AP workflow improves operational efficiency, financial reporting accuracy, and cash flow. 

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Next, we’ll cover the crucial steps in an effective AP workflow and how automation can optimize your operations.

Steps in a typical accounts payable workflow

While the specifics may vary from organization to organization, a typical AP workflow includes:

• Invoice receipt: Receive an invoice via email, mail, or vendor portal.
• Data entry: Enter the information into the ERP or accounting software.
• Invoice verification:  Review the invoice details for accuracy and match it against purchase orders, contracts, and receiving reports. Resolve any discrepancies, if necessary.
• Approval routing: Send the invoice to the appropriate department or approver based on internal policies and spending limits.
• Payment processing: Once approved, schedule payment according to the agreed-upon terms.
• Record keeping: Record payment details in the accounting software or ERP.
• Reconciliation and reporting: The accounting team reconciles all balance sheet accounts, including accounts payable, as part of the monthly close and issues financial reports.

How to actually create an effective AP workflow

A well-structured AP workflow minimizes bottlenecks, supports internal controls, and helps maintain beneficial vendor relationships. But to build an effective workflow, you need to tackle the core challenges that often plague AP processes.

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Let’s dive into three main challenges businesses face in their AP workflows and how to overcome them.

Problem #1: Disorganization and lack of visibility

Many businesses lack visibility into their AP process because documents are scattered across paper and digital files in various locations. They might rely on manual workflows, and invoices arrive via different channels—mail, email, and vendor portals. As a result, invoices get misplaced, resulting in missed payments, late fees, and strained vendor relationships.

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This issue typically pops up at the invoice receipt or verification stage because invoices come in and get stored across different platforms without a standardized system.

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Here’s how to overcome visibility and organization challenges:

1. Centralize invoice collection: Capture and store all invoices in one place, whether they come in via email, scanned documents, or vendor portals.
2. Automate invoice tracking: Implement software that provides real-time status updates on invoice approvals, due dates, and payment schedules.
3. Establish clear approval workflows: Set up a structured approval process to keep invoices moving through the process efficiently and transparently.

Problem #2: Excessive paperwork, delays, and matching errors

Paper-based AP processes are prone to slow and error-prone. Inefficiencies increase the risk of missed discounts, duplicate payments, and other issues negatively affecting cash flow and vendor relationships.

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This challenge primarily occurs at the invoice verification or approval routing stage because the need to match invoices to supporting documents introduces delays and errors.

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To reduce paperwork and matching errors:

1. Automate data capture: Use optical character recognition (OCR) to capture essential invoice details and eliminate manual entry
2. Standardize matching processes: A structured three-way matching process (invoice, purchase order, and receipt) ensures accuracy and reduces discrepancies.
3. Implement digital approvals: Move towards paperless approvals by incorporating digital workflows that power faster approvals and notifications.

Problem #3: Bottlenecks from incomplete or mismatched invoices

Invoice exceptions like missing information, incorrect amounts, or mismatched purchase orders are major bottlenecks in AP workflows. Handling these exceptions often requires manual follow-ups, which slow down payments and increase the workload for already busy team members.

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These issues typically arise during the invoice verification or reconciliation stage because people have to take time to resolve discrepancies between invoices and purchase orders before they can be approved.

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To streamline exception handling:

1. Establish exception procedures: Establish clear processes for handling discrepancies, such as flagging incomplete invoices for review and routing them to the appropriate team members.
2. Leverage AP automation tools: Modern software can flag discrepancies automatically and route exceptions to the right approvers with relevant context.
3. Prioritize vendor communication – Create a standardized process for communicating with vendors to resolve issues quickly and keep invoice processing on track.

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No two businesses are alike, and different companies may need different AP workflows to meet unique operational needs. For example, a small business may have one individual approve all invoices, while a larger organization may require multiple approvals for high value invoices. Some companies might have separate workflows for recurring invoices versus one-time vendor payments.

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Designing workflows tailored to your business's needs creates a flexible, efficient system without sacrificing control. Next, let’s dig into how automation can help you streamline your AP workflow.

Using automation for effective AP workflows: Ramp’s proven success stories

Automation can transform your AP workflow from a manual, error-prone process into a streamlined, highly efficient operation. Automation reduces processing times, improves accuracy and visibility, and allows your finance team to focus on higher-value work rather than being bogged down by paperwork and repetitive tasks.

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Despite the clear benefits, many finance leaders worry about making the leap to automation—especially incorporating AI-powered solutions. But businesses that adopt Ramp’s accounts payable software see remarkable improvements in efficiency, accuracy, and overall financial management. 

Adrift Hospitality streamlined AP workflows with Ramp

Adrift Hospitality, a family of boutique hotels, inns, restaurants, and a distillery located on the Oregon and Washington coasts, had trouble managing its AP processes across multiple properties. The company relied heavily on inefficient manual processes, which led to delayed approvals, scattered documentation, and limited visibility into spending.

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Adrift Hospitality needed a unified platform for tracking and processing invoices across all its properties. Enter Ramp.

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Ramp’s automated approval system routed invoices to the right stakeholders without manual intervention. This reduced approval times and minimized the risk of lost or delayed invoices, keeping operations running smoothly.

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Ramp’s automation tools also provided valuable insights into cash flow trends, helping Adrift Hospitality optimize its budgeting and financial decisions. The company improved operational efficiency, reduced processing times, and gained better control over its financial operations. 

Take control of your AP process with Ramp

Creating an effective AP workflow isn’t a luxury; it’s a necessity for businesses with complex financial operations or a desire to scale.

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Ramp AP automation software helps businesses simplify and optimize workflows with:

• Automated invoice processing: Ramp’s AI-powered OCR captures and codes complex invoices and line items accurately, reducing manual data entry and errors.
• Streamlined approval workflows: Build intelligent approval flows with multiple layers and routing rules to automate reviews and trigger alerts only for key changes.
• Integrated payment management: Handle all domestic and international vendor payments—via check, card, ACH, or wire—on a single platform with full visibility.
• Real-time ERP integration: Sync bills, vendor information, purchase orders, and more with ERPs to ensure accurate and up-to-date financial data.
• Simplified recurring tasks: Manage recurring bills, batch payments, and vendor onboarding automatically, with bulk editing to save time and reduce manual effort.

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Ready to take your AP processes to the next level? Learn more about Ramp AP software and experience a smarter way to manage your payables.