The AP Workflow: Steps and Solutions for Microsoft Dynamics GP

For AP teams, the word ‘workflow’ is often aspirational. We wish the work would flow but it often stumbles, sputters out, or wanders off never to be seen again.

A good workflow results in your vendors getting paid accurately, on-time, and in the appropriate payment method – with the least amount of effort for AP staff and approvers.

Whether your company handles approval workflows by shuffling paper back and forth or in more digital ways, efficient workflows are critical to the success of your AP department.

Types of AP Workflows

How you structure your AP workflows is determined by your industry, company size, level of control needed, staffing, and the technology you have in place.

Your company’s AP process falls into one of three categories –

1. Manual – This type of process means AP staff enter invoices and other data manually, deal with paper documents, and depend on being in the same physical location for approvals. Automation is very limited or non-existent. Manual workflows work best for small businesses that do not have a significant amount of vendor transactions.
2. Semi-automated – In a semi-automated workflow, software or third-party providers are used to accomplish some of the tasks related to processing invoices and generating payments. Other tasks may still require paper
3. Fully-automated – This workflow leverages technology to automate all AP tasks, from receiving invoices to sending payments. These tasks may be accomplished in a platform outside your accounting/Enterprise Resource Planning (ERP) system. There are also AP automation platforms that partially or fully integrate with your business’s accounting system.

Where are you now? Where do you aspire to be?

What are the Steps of a Typical AP Workflow?

A workflow is nothing more than a sequence of tasks or events that occur in a logical order, and have some dependency on each other.

The accounts payable workflow can be broadly outlined in this way:

1. Invoice Capture – This is the beginning of the AP lifecycle. Invoices must be received by AP and entered into the ERP or accounting system. Invoices come in all shapes and sizes these days – you may still receive paper invoices in the mail that need to be scanned and manually entered. Or if you have transitioned to a semi or fully automated process, perhaps you receive digitized documents via email or within a vendor portal.
2. Invoice Approval – Next you’ve got to get the right people or systems to approve the invoice. You may have a two- or three-way matching process to ensure the invoice content matches Purchase Orders (PO) and/or Receiving documents. If your company does not use POs, a purchasing manager or department head will typically review and approve. This can be done manually or digitally.
3. Payment Preparation – Once invoices are approved, AP staff can go on to prepare payment batches or organize the proper timing for payments based on due dates, early pay discounts, and payment type.
4. Payment Approval – Many companies have a dual approval process, meaning that approvals are needed for both invoice acceptance and payment release. We recommend this as best practice. Some smaller companies proceed with payment on invoice approval alone, but payment authorization can provide extra protection against fraud and cash flow errors.
5. Payment Generation – During this step, AP staff send payments out to vendors in the agreed upon payment type. AP departments may generate payments in-house via check, EFT/ACH, credit card, wire, or another electronic method. This can be very time-consuming because it requires multiple ways of managing payments in the accounting system, and staff may have to enter payments twice – for example, a vendor is paid by credit card in their portal, and then the payment is recorded again in your ERP. Payment outsourcing can be a way to save time and effort.
6. Vendor Onboarding & Management – When entering new vendors into your ERP system, or making important changes to their contact or banking records, it is critical to have an approval process in place. It can be all too easy for fake vendors to be added, or real vendors amended so that payments are routed to incorrect banking accounts.