How to set up segregation of duties in accounts payable

Think about what would happen if a single employee had full control over your company’s payments—entering invoices, approving them, and issuing payments. Fraud, financial misstatements, and compliance issues would be inevitable.

Without Segregation of duties (SoD), businesses are more vulnerable to financial mismanagement and regulatory issues.

Here’s why SoD in accounts payable is essential for maintaining security and efficiency.

What is segregation of duties in accounts payable?

In accounts payable, SoD ensures that no single individual has end-to-end control over financial transactions, such as invoice approval, payment processing, and reconciliation.

In short, SoD prevents conflicts of interest by distributing key tasks across different roles. This means that the person who enters an invoice should not be the same person who approves it or initiates payment. Likewise, the person who reconciles payments should not be the one who processes them.

Why is segregation of duties important in accounts payable?

The primary goal of SoD in AP is to create a system of checks and balances that strengthens financial integrity. Without segregation, companies expose themselves to risks such as:

Fraud prevention

One of the most significant reasons SoD is essential in AP is fraud prevention. According to the Association of Certified Fraud Examiners (ACFE) 2022 Report to the Nations, occupational fraud costs businesses $4.7 trillion globally, with billing schemes and check and payment tampering accounting for a large portion of financial fraud.

Businesses that lack SoD controls are far more susceptible to these risks.

Error reduction

Errors in AP, such as duplicate payments, incorrect amounts, or payments sent to the wrong vendors, can lead to financial losses and strained vendor relationships. When responsibilities are segregated:

• One person enters invoices, ensuring accuracy
• Another person approves them, verifying legitimacy
• A third person reconciles payments, catching any inconsistencies

This layered approach prevents errors from compounding and ensures issues are identified and corrected before they impact financial reporting.

Internal and external compliance

Regulatory bodies and auditors expect organizations to have internal controls that prevent financial mismanagement. SoD is a critical component of compliance with:

• Sarbanes-Oxley Act (SOX): Requires internal controls for financial reporting.
• General Data Protection Regulation (GDPR): Mandates secure processing of financial data.
• Payment Card Industry Data Security Standard (PCI DSS): Enforces strict control over payment processes.

Failing to implement SoD can lead to audit failures, fines, or reputational damage.

Strengthening internal controls

Weak AP controls can open the door to both internal fraud and external cyber threats. If one individual has complete control over vendor payments, they can manipulate records or be exploited through social engineering tactics. A segregated AP process ensures no single person has unrestricted access to financial transactions, making unauthorized changes or fraudulent activity harder to execute.

How to implement segregation of duties in accounts payable

Implementing SoD requires a structured approach to ensure proper role division without creating inefficiencies. Here’s a detailed breakdown of the key steps:

1. Identify critical AP processes and risks

Before implementing SoD, organizations need to assess which processes carry the highest risk of fraud or error. Some key AP processes include:

• Invoice receipt and data entry
• Invoice approval
• Payment processing
• Vendor management and verification
• Bank reconciliation
• Financial reporting and audits

Each of these areas must have clear ownership, ensuring that no single person handles multiple stages of payment processing.

2. Assign distinct roles and responsibilities

Once key risks are identified, responsibilities should be divided across different employees. A best-practice approach assigns roles as follows:

This structure ensures built-in accountability at each stage.

3. Enforce system-based controls

Manual segregation alone is not enough—companies should use automation and system-based controls to enforce SoD. AP software and ERP systems offer role-based access controls, ensuring that:

• Employees only have access to functions required for their role.
• Invoice approval requires multi-level authorization.
• Payments over a set threshold require dual approval from senior executives.

For example, Ramp’s AP automation system allows businesses to define clear user roles, restrict access to payment approvals, and flag suspicious transactions automatically.

4. Implement dual authorization for payments

Dual approval ensures that no single person can process payments without oversight. Best practices include:

• Threshold-based approval: Large payments require C-suite or finance leader approval.
• Vendor verification checks: Before approving payments, vendor details should be verified to prevent fraudulent payments to fake vendors.
• Payment review log: All payments should have a digital audit trail capturing who approved and executed transactions.

5. Conduct regular audits and reconciliation

Even with SoD in place, regular internal audits and reconciliations are necessary. This step involves:

• Monthly bank reconciliations to match payments against invoices
• Vendor audits to verify legitimacy
• Expense and invoice reviews to detect anomalies
• Surprise audits to catch potential fraudulent activity

Using AI-driven anomaly detection can further enhance the effectiveness of financial oversight.

6. Train employees on fraud prevention and SoD policies

AP teams must understand why SoD matters and how fraud occurs. Training should cover:

• Common fraud schemes like fake vendors and invoice tampering
• How to spot red flags such as duplicate invoices and sudden vendor changes
• How to report suspicious activity

Continuous education ensures employees remain vigilant.

Challenges of SoD in AP and how to mitigate them

While SoD strengthens fraud prevention and compliance, it also presents challenges that businesses need to navigate carefully.

1. Slower processes and operational inefficiencies

When multiple employees must sign off on AP transactions, the approval process can slow down. This is especially challenging for businesses handling high transaction volumes or urgent payments.

To reduce delays:

• Implement AP automation tools that route approvals instantly
• Use threshold-based approvals like auto-approvals for small payments and large payments requiring additional review
• Streamline workflows to reduce unnecessary steps

2. Increased staffing and training costs

Smaller companies may lack enough employees to separate duties effectively. Hiring additional staff or restructuring responsibilities adds costs.

To reduce costs:

• Use role-based access controls in software instead of manual segregation
• Leverage external AP review services for independent oversight
• Train employees to follow internal controls without expanding the workforce

3. Risk of collusion among employees

While SoD prevents individual fraud, collusion between employees remains a risk. Two or more employees may work together to bypass controls.

How to prevent collusion:

• Conduct surprise audits to identify unusual transaction patterns
• Use AI-powered fraud detection tools to flag anomalies
• Rotate job roles periodically to prevent long-term fraud schemes

Industry-specific considerations for segregation of duties

SoD is essential across industries, but implementation varies depending on regulatory requirements, transaction volume, and AP fraud risks. Below is a breakdown of how different industries approach SoD.

SoD needs across industries

In summary, here’s how these industries differ in SoD:

• Highly regulated industries (finance, healthcare, government) have stricter SoD requirements
• Retail and e-commerce rely more on automation to manage high transaction volumes
• Manufacturing and supply chain industries emphasize vendor verification and fraud detection
• Technology companies focus on subscription fraud and SaaS expense tracking

To implement SoD effectively, businesses should balance security with efficiency by adopting automation tools that streamline approval workflows, enforce system-based controls, and maintain real-time visibility into transactions.

How Ramp Bill Pay is the best way to simplify every step of accounts payable

Ramp Bill Pay is an accounts payable automation platform designed to address the core obstacles in AP. From seamless invoice ingestion and detailed line-item extraction to effortless payment scheduling and reconciliations, Ramp captures invoice information, directs approvals, and integrates with your ERP—helping you finalize your books with greater speed and fewer manual steps.

While traditional AP tools often struggle with cumbersome ERP connections, inconsistent purchase order validation, and fragmented workflows, Ramp Bill Pay automates the entire AP process with precision, flexibility, and transparency. It’s engineered for oversight and control from the first touchpoint to the last payment.

Ramp is recognized as one of the easiest AP softwares to use based on G2 reviews (as of June 5, 2025). With 2,000+ reviews and an average 4.8/5 star rating, finance teams across industries rely on Ramp to minimize repetitive tasks, prevent costly errors, and ensure their financial records remain accurate. Users have even called Ramp the best way to manage business finances for their AP and expense needs.

Common AP workflow pitfalls and how Ramp overcomes them

Most accounts payable processes encounter bottlenecks in these areas:

• Chasing down approvals that get lost in email threads
• Reconciling invoices that don’t match purchase orders
• Entering data manually into disconnected finance systems

Ramp Bill Pay streamlines these steps with comprehensive AP features:

• Automated two-way matching between purchase orders and invoices
• Recurring payment scheduling and detailed vendor tracking
• Real-time ERP synchronization with platforms like NetSuite, QuickBooks, and Xero
• Advanced GL coding suggestions powered by AI-driven invoice processing
• Centralized controls spanning procurement, AP, and expense management
• Customizable approval chains with smart routing and user roles
• Flexible support for ACH, card, checks, and international or domestic wire payments

Organizations from diverse sectors searching for top-tier AP solutions have embraced Ramp for its reliability and intuitive design. For example:

• Crossings Community Church processed bills 2x faster with Ramp Bill Pay
• Quora cut bill processing time from 5-8 minutes down to 1-2 minutes
• Mix Talent reduced AP processing time to only 15 minutes after switching from BILL

Why select Ramp Bill Pay?

Ramp Bill Pay sets the benchmark for what modern AP software should achieve. With advanced automation, robust integrations, and workflows that put finance teams in control, Ramp empowers organizations to move faster and operate with greater assurance. Ramp offers a free tier to start, with paid plans at $15 per user per month, and custom pricing available for enterprises.

Experience how AP can work smarter. Get started with Ramp Bill Pay.