Learn how to set invoice processing and verification, payment processing, maintaining records, and vendor management on autopilot, eliminate errors, and save hours of working time.
Table of Contents
What are the 4 Functions of Accounts Payable?
Accounts payable (AP) is a critical finance function in any business that deals with managing liabilities and processing outgoing payments. The four main functions of this department are:
- Invoice Processing and Verification: This entails receiving and processing invoices from suppliers or vendors. The AP department verifies each invoice to ensure that details such as purchase orders, amounts, terms, and authorization are correct before processing the payment.
- Payment Processing: After invoices are verified and approved, the accounts payable department is responsible for scheduling and making payments according to agreed-upon terms.
- Maintaining Financial Records and Controls: Accounts payable must keep accurate and up-to-date records of all transactions.
- Vendor and Supplier Relationship Management: Accounts payable plays a role by ensuring timely and accurate payments, which helps in negotiating better terms and maintaining a reliable supply chain.
Steps of Every Function of Accounts Payable
Now, let’s outline the steps included in every function—understanding them is crucial for building a proper business process that delivers maximum efficiency to the company, and eventually, automate it.
Invoice Processing and Verification
This process involves receiving and processing invoices from suppliers and vendors. The AP department verifies each invoice to ensure that details such as purchase orders, amounts, terms, and authorization are correct before processing the payment. This special term for this verification process is called “3-way invoice matching.”
However, the process doesn’t end when the AP department realizes there’s a mismatch between the documents. Invoice processing involves resolving any issues with the supplier through email communication.
Payment Processing
Payment processing as a business operation can involve several steps, but one of them is an absolute necessity—information exchange between a bookkeeping software (like QuickBooks) and the payment method. Payment methods can be different—checks, electronic transfers (wires), credit card payments. The main objective of the whole process is timely payments, yes. But also not less important is cash flow management without mistakes or delays—it helps to optimize available cash resources that other business functions (like marketing or sales) might need.
Maintaining records
This business operation includes maintaining detailed accounts of all invoices and payments for auditing purposes and financial analysis. This is exactly why you need data exchange between a bookkeeping system and payment gateways.
AP also helps ensure that financial controls and policies are adhered to within the organization, preventing fraud and errors in financial reporting. At some stage, AP might need to generate reports regarding outgoing payments, and this will also be a part of the function.
Vendor/Supplier Relationship Management
As explained above, having efficient relationships with business partners is crucial for securing better terms and conditions in the future. And what can contribute to a better relationship more than efficient communication?
Think of this: what kind of attitude would secure higher discounts from a vendor: when a company delays payments and never notifies the vendor when invoices are covered? Or the one that does it on time and sends out an email every time notifying a vendor, maybe thanking for having business together? Obviously, the second one.
The main challenge is that maintaining all 4 functions up and running smoothly demands a lot of time and effort. And as the business grows, so should the AP department.
This is especially tough for a seasonal business. For example, you’re a company that designs outdoor municipal playgrounds in Canada. Or let’s take something more mundane—a B&B. There’s definitely seasonality here. Outdoor play areas are unlikely to be installed and fixed during the winter season. The business goes slow, and you don’t need 20 AP professionals. But then the hot season comes, and suddenly you’re very busy buying glue, rubber rails, slides, and swings. Every single vendor has its own payment terms and conditions, and you need additional staff to handle all four functions properly.
A reasonable and more efficient way out is finance and accounting operations automation that would allow you to scale your operations up and down effortlessly.
Automation of the 4 Functions of Accounts Payable
There are several options you can use to make your accounts payable automated. Some features are available in main CRM systems (like Salesforce, HubSpot, Monday.com) — here you can specify an accounting email that would collect all emails from vendors and assign a task to a relevant employee to perform a matching. As soon as the matching is done, these CRMs allow you to send out an email automatically to the vendor. There’s still a connection with a bookkeeping service—but this is usually available for big CRMs, so you’ll have it covered.
The problem is still that the matching within the 3-way invoice matching has to be done manually. To do this automatically, you’d need an advanced IDP software that has image and text recognition functionality, and an ability to turn unstructured data into structured (tables) and route it to relevant channels [Read more about Intelligent document processing and trends in 2024].
You’re in luck if your company is using Google Workspace, as in this case, you’ll be able to leverage the full potential of Zenphi that allows you to use Intelligent Document Processing For Google Workspace and automate all 4 accounts payable functions end-to-end without using any third-party tools. Read further to access the tutorials.
We describe in detail how to automate 3-way invoice matching in the blog post here. You can read the post or watch this quick video tutorial that showcases the whole process.
Payment Processing Automation
To process payment you need to integrate your invoice processing software with your bookkeeping software. Zenphi has native integration with QuickBooks and allows building many more using API and webhooks. Book a call to learn if we can build an integration for free. Read here on how to build multiple workflows using Zenphi and QuickBooks.
Maintaining Records Automation
As Zenphi doesn’t store your data (check out our data security page), only the information about your workflows, the records will be maintained but all within your Google Drive or CRM system—depending on how you prefer to store your records.
You can easily build a workflow using Zenphi that will create a payment processing report on your Google Drive and email it to a relevant employee. Reports can be scheduled to be created on a recurring basis, or get generated triggered by a specific event (for example, a request from your Financial Director).
Another great addition to your automated workflow for Accounts Payable is adding a watermark to PDF documents automatically —many of our customers use this flow to match paid invoices with a specific PAID stamp and save them in a separate folder or email them to the vendors.
Watch the tutorial here.
Vendor/Supplier Relationship Management Automation
The last but not the least. Maintaining amazing relationships with your vendors is as easy as breathing when you use Zenphi. Sending out a notification email to a relevant party can become an integral part of your every workflow automation.
The process of including email notifications in the flows is explained in detail in the first tutorial—on the 3-way invoice matching. Also watch this tutorial on how to do Google sheets mail merge (automate emails to be sent out based on data stored in Google Sheets).
About The Author
Fernanda López Guerra, CS @Zenphi
Fernanda is an experienced Customer Success manager with over 9 years in Tech and B2B Saas. She has automated multiple operations for Zenphi customers in Education, Retail, Tech and other verticals.
