Accounts Payable

What Is Accounts Payable?

Accounts payable (AP) is the money a company owes to suppliers, vendors, and creditors for purchases made on credit. When you receive goods or services before paying for them, the amount owed is recorded as accounts payable—a current liability on the balance sheet.

Accounts payable represents:

• Invoices received but not yet paid
• Credit terms extended by suppliers
• A source of short-term financing
• A key working capital component

The Accounts Payable Process

1. Purchase Order

Process begins with a purchase requisition or order:

• Department requests goods/services
• Approval obtained based on authority limits
• PO sent to vendor

2. Receipt of Goods/Services

Goods arrive or services are rendered:

• Receiving department confirms delivery
• Quality inspection if applicable
• Receipt documented in the system

3. Invoice Receipt

Vendor sends an invoice:

• Invoice received (mail, email, portal)
• Data captured into AP system
• Invoice coded to GL accounts

4. Three-Way Match

Invoice validated against supporting documents:

• Purchase Order: Was this ordered?
• Receiving Report: Was it received?
• Invoice: Does it match quantity and price?

5. Approval

Invoice routed for approval:

• Appropriate manager reviews
• Exceptions investigated and resolved
• Payment authorized

6. Payment

Invoice paid according to terms:

• Payment scheduled based on due date
• Payment method selected (check, ACH, wire)
• Payment executed and recorded

7. Reconciliation

AP subledger reconciled to GL:

• Individual vendor balances verified
• Total AP agrees to control account
• Aging analyzed for issues

Key AP Metrics

Days Payable Outstanding (DPO) Average time to pay invoices:

DPO = (Average AP / COGS) × Days in Period

Higher DPO = longer to pay = better cash flow (but may strain vendor relationships)

AP Turnover How often AP is paid during a period:

AP Turnover = Total Purchases / Average AP

Invoice Processing Cost Total cost to process an invoice:

• Industry average: $10-15 per invoice manually
• Best practice: Under $3 with automation

Exception Rate Percentage of invoices requiring manual intervention:

• Target: Under 20%
• Poor performance: Over 40%

AP Automation Benefits

Time Savings

• Invoice data capture: 80% faster
• Three-way matching: Automatic
• Approval routing: Instant
• Payment scheduling: Automated

Cost Reduction

• Lower processing cost per invoice
• Early payment discounts captured
• Fewer late payment penalties
• Reduced staff time

Accuracy Improvement

• Fewer data entry errors
• Consistent matching rules
• Audit trail for every invoice
• Duplicate detection

Visibility

• Real-time AP balances
• Cash flow forecasting
• Vendor spend analysis
• Aging visibility

Common AP Challenges

Invoice volume: Processing hundreds or thousands of invoices monthly

Paper invoices: Manual data entry from paper or PDF invoices

Matching exceptions: PO, receipt, and invoice don’t agree

Approval delays: Invoices stuck waiting for approval

Duplicate payments: Paying the same invoice twice

Vendor inquiries: Responding to “where’s my payment?” calls

How Go Fig Helps with AP

Go Fig connects to your AP system to provide:

Consolidated visibility: See AP across all entities in one view

Cash flow forecasting: Project payments based on AP aging

Vendor analytics: Analyze spend by vendor, category, and time

Exception identification: Surface unusual patterns or duplicates

Reconciliation automation: Match AP subledger to GL automatically

Payment optimization: Identify early payment discount opportunities