Managing accounts payable can feel overwhelming, especially when deadlines pile up, cash flow gets tight and your team struggles to keep up with manual processes. For Australian accountants, bookkeepers and finance managers, these challenges are all too familiar, with rising workloads, talent shortages and the constant pressure to optimise efficiency. If you’re looking to streamline your accounts payable workflow, understand automation options, or explore outsourcing accounts payable solutions.
This guide breaks down everything you need to know about accounts payable for businesses. From basic definitions to best practices and the latest automation tools, we’ll help you take control of your payables and focus on what really matters growing your business.
Key Takeaway:
- Accounts payable is the amount a business owes to suppliers and vendors for goods or services received but not yet paid for, appearing as a current liability on the balance sheet.
- It is important to differentiate accounts payable from accounts receivable: accounts payable reflects what your business owes to others, while accounts receivable represents what others owe to your business.
- Effective management of accounts payable helps prevent late fees, strengthens vendor relationships and improves cash flow visibility by ensuring timely payment scheduling.
- Automating accounts payable processes streamlines invoice handling, reduces manual effort and ensures consistent, on-time payments to suppliers, supporting smoother business operations.
What Does Accounts Payable Mean?
Accounts payable refers to the money a business owes to its suppliers or vendors for goods or services received but not yet paid for. In simple terms, what is accounts payable? It is the record of all unpaid bills and invoices that a company must settle within a specific period, usually within one year.
Importance in Accounting and Business Operations
Accounts payable in accounting is classified as a current liability on the balance sheet, representing short-term financial obligations that must be paid. Effective management of accounts payable helps businesses avoid late fees, maintain strong supplier relationships and ensure accurate financial reporting. It also supports healthy cash flow by tracking what the business owes and when payments are due.
A well-managed accounts payable process includes receiving and approving invoices, scheduling payments and maintaining payment histories. In larger organizations, this may be handled by a dedicated accounts payable department, while small businesses often manage it through bookkeepers or automated systems. Proper handling of accounts payable is essential for compliance, business planning and maintaining a positive credit reputation.
Additionally, accounts payable should be distinguished from accounts receivable, while accounts payable is money the business owes, accounts receivable is money owed to the business by customers. Both are crucial for cash flow management and accurate financial statements.
Account Payable Examples
Account payable examples help illustrate how businesses manage their financial obligations. For instance, if a company buys office supplies on credit from a vendor, the amount owed is recorded as an account payable until it’s paid. Another example is when a restaurant orders ingredients from a supplier and receives a bill to be settled within 30 days, this bill is an account payable.
A manufacturing business might also have accounts payable for raw materials, utilities, or rent, all of which are liabilities until paid. These examples show how accounts payable turnover, how quickly a company pays its suppliers, impacts cash flow and vendor relationships.
Accounts Payable System and Workflow
An accounts payable system is a structured approach businesses use to manage and pay supplier invoices efficiently, ensuring accuracy, compliance and timely settlements. This system is essential for maintaining financial transparency and building strong vendor relationships.
Accounts Payable Workflow Process
The typical workflow for accounts payable in Australia follows these key steps:
- Procurement Order Construction: The business issues a procurement order (PO) detailing the goods or services, agreed prices, distribution terms and payment conditions, which both parties sign off on.
- Goods/Service Receipt: The supplier delivers the goods or services as specified in the PO.
- Challan Receipt and Verification: Upon delivery, the supplier issues a challan. The accounts payable team verifies that the challan matches the PO, checking for accuracy in volume, pricing and delivery conditions. Relevant delivery documents are collected for record-keeping.
- Challan Approval: The invoice is routed to the relevant manager or department for approval, ensuring the transaction is valid before payment processing.
- Payment Schedule: Payments are scheduled based on supplier terms and the company’s cash flow requirements. Early payment discounts (commonly 2% to 10% if paid within 10–15 days) are often used to incentivise prompt payment and save costs.
- Payment Process: Payments are executed using methods such as electronic fund transfers (EFT), BEC, checks, or credit cards. Payment details are documented and recorded in the accounting system.
- Records and Reconciliation: All accounts payable transactions are recorded internally and externally as required, ensuring accurate financial data and harmonious reporting.
- Reporting: Accounts payable data feeds into cash flow analysis and budgeting, ensuring all transactions and liabilities are correctly reflected in financial statements.
Accounts Payable Procedures and Processing
Efficient accounts payable processing in Australia relies on clear procedures, automation and integration with accounting software. This streamlines the workflow for accounts payable, reduces manual work and ensures compliance, accuracy and timely payments. Strong controls, segregation of duties and regular monitoring are best practices that help prevent errors and fraud. Outsourcing accounts payable tasks can further enhance efficiency, allowing in-house teams to focus on core business activities.
Ready to tighten controls, capture early‑pay discounts and speed up three‑way matching? Explore our accounts payable processes to standardise PO‑to‑pay, automate reconciliations and strengthen supplier relationships across Australia.
Key Functions and Responsibilities
Accounts payable functions involve recording, verifying and settling outstanding invoices, managing vendor relationships and supporting accurate financial reporting. The core accounts payable responsibilities include processing payments, maintaining records and ensuring compliance with policies and regulations.
Accounts Payable Job Tasks and Duties
- Process and verify vendor invoices, matching them to purchase orders and delivery documents.
- Schedule and execute payments via electronic transfers, checks, or credit cards.
- Maintain accurate records of all transactions, approvals and payment confirmations.
- Reconcile accounts payable with the general ledger and bank statements.
- Respond to vendor inquiries and resolve payment issues promptly.
- Manage petty cash and employee reimbursements.
- Prepare tax documentation and ensure payments meet legal requirements.
- Generate financial reports for budgeting and cash flow analysis.
Accounts Payable Duties List
A comprehensive accounts payable duties list covers:
- Invoice processing and payment scheduling.
- Expense tracking and reporting.
- Vendor management and dispute resolution.
- Compliance with internal controls and regulatory requirements.
- Month-end closing and audit support.
- Reconciliation of accounts and cash flow monitoring.
These accounts payable duties and responsibilities ensure efficient vendor management, accurate financial reporting and strong operational control.
Accounts Payable vs Accounts Receivable
The difference between accounts payable and accounts receivable is that accounts payable is money a business owes to suppliers or vendors, while accounts receivable is money owed to the business by customers. Accounts payable is recorded as a liability on the balance sheet, whereas accounts receivable is recorded as an asset.
Accounts payable vs accounts receivable impacts cash flow: accounts payable controls outgoing payments and affects vendor relationships, while accounts receivable drives incoming cash and supports revenue collection. Both roles are essential for maintaining a healthy financial balance and smooth business operations.
Outsourcing Accounts Payable
Outsourcing accounts payable means hiring a third-party provider to manage some or all of your accounts payable tasks. This option offers several benefits, including cost savings, improved efficiency, access to specialised expertise and scalability as your business grows.
Benefits and Challenge
- Benefits: Outsourcing accounts payable reduces manual workload, lowers processing costs, improves invoice accuracy and ensures timely payments. It also helps maintain compliance with financial regulations and strengthens vendor relationships through professional management.
- Challenges: Outsourcing may reduce direct control over daily operations and can slow down response times for exceptions or urgent changes. Reporting visibility may also be limited compared to in-house management.
When Outsourcing Makes Sense
Accounts payable outsourcing is ideal if:
- Your team struggles with high invoice volumes, delayed payments, or compliance risks.
- You want to free up internal staff for strategic tasks.
- You need rapid adaptation during business growth, mergers, or periods of staff fluctuation.
- You lack an in-house finance or accounts payable team.
Outsourcing Options
Outsourcing options include delegating tasks like invoice processing, vendor management, payment approvals and compliance to experienced providers. These services can be tailored to your business size and needs, offering flexibility and efficiency.
Accounts payable automation, also known as automated accounts payable processing, refers to using technology to streamline and manage invoice and payment workflows without manual intervention. What is accounts payable automation? It’s the use of software to capture, validate, approve and pay invoices, reducing errors and speeding up the entire process.
Strategies for Optimising Your Accounts Payable
1. Have an Automated System for AP Procedure
Keeping an automated and advanced system to monitor, review and arrange all the bills and invoices the business owes is one of the critical components of managing your accounts payable.
2. Talk to Your Suppliers
Keeping in touch with your suppliers is essential for managing accounts payable. It will help you gain clear insights into your accounts payable.
3. Verify Invoices for Errors and Duplicates
Regularly checking for errors, duplicate invoices and duplicate payments to vendors is crucial, whether you automate your AP process with software or do it manually.
4. Get Outsourcing Accounts Payable Services
Get in touch with the prominent accounts payable outsourcing service providers in Australia. So that you can get excellent performance payable service for your company, whether you are in Brisbane, Sydney, Adelaide, or another region of Australia.
Over the years, Australian small businesses have been using accounting outsourcing services from Outbooks. Because of their expertise with cloud-based accounting softwares like Xero, QuickBooks, Zoho Books and many others, our experts make the accounting process simple for all parties.
Popular Accounts Payable Automation Solutions and Software
Common accounts payable automation solutions include:
- Coupa
- Airwallex
- Expensify
- Lightyear
- SAP Concur
- Tipalti
- HighRadius
- Nanonets
- Vic.ai
- Stampli
- Sage Intacct
These platforms offer features like AI-powered invoice matching, automated approvals, fraud detection and seamless ERP integration, making them leading accounts payable automation companies.
Role of AI and Cloud-Based Solutions
AI accounts payable tools use machine learning to automate data extraction, flag exceptions and predict coding, improving accuracy and efficiency. Cloud-based accounts payable solutions provide remote access, real-time collaboration and easy scalability, ensuring finance teams can manage payments from anywhere. These solutions also enhance security, compliance and integration with existing accounting systems, making them ideal for modern businesses.
Software for accounts payable now goes beyond basic automation, AI and cloud technology are transforming how businesses handle invoices, approvals and payments, making accounts payable automation a smart choice for efficiency and growth.
Best Practices and KPIs for Accounts Payable
Effective management of accounts payable ensures smooth operations, strong vendor relationships and optimal cash flow. Adopting best practices accounts payable leads to accuracy, compliance and cost savings.
Best Practices Accounts Payable
- Simplify and standardise workflows for efficiency.
- Automate invoice processing and approvals to reduce errors and delays.
- Limit access and establish internal controls to prevent fraud.
- Digitise records and go paperless for better visibility.
- Regularly review vendor terms and payment schedules.
- Batch process invoices and set clear deadlines.
- Reconcile accounts frequently and maintain audit trails.
- Organise vendor data with a supplier portal for easy access.
- Track disputes and resolutions systematically.
KPIs for Accounts Payable
Key KPIs to monitor include:
- Days Payable Outstanding (DPO): Average time taken to pay suppliers.
- Cost per invoice: Processing cost for each invoice.
- Invoice processing time: Average time from receipt to payment.
- Invoice exception rate: Percentage of invoices needing manual intervention.
- Payment error rate: Percentage of inaccurate payments.
- Early discount capture rate: Percentage of invoices paid early to capture discounts.
- Invoices processed per employee: Staff efficiency metric.
- Late payment rate: Percentage of payments made after due date.
- AP turnover ratio: How quickly the company pays off suppliers.
Advantages of Accounts Payable
- Improved cash flow control and forecasting.
- Reduced errors and fraud risks.
- Stronger vendor relationships.
- Compliance with regulations and audit readiness.
- Cost savings through automation and early payment discounts.
Monitoring these KPIs and adopting best practices accounts payable ensures efficient management, clear visibility and long-term financial health.
Conslusion
Managing accounts payable is essential for maintaining financial health, optimising cash flow and building strong supplier relationships. Whether you’re handling invoices manually or leveraging automation, adopting best practices and monitoring key KPIs will help your business operate more efficiently. For Australian accountants and finance managers, outsourcing accounts payable can be a game-changer, freeing up valuable time and resources while ensuring accuracy and compliance.
Outbooks provides accounting outsourcing services in Australia and supports businesses with end-to-end bookkeeping services for those managing inventories across multiple locations and currencies. We also offer specialised accounting services in Brisbane and across Australia, making it easy to outsource accounts payable services regardless of your location.
If you’re ready to streamline your accounts payable workflow, improve cash flow and focus on growing your business, consider partnering with Outbooks for reliable, scalable and secure accounting solutions.
Contact Outbooks Australia at info@outbooks.com.au or call 0451 320 102 for expert help today.
Parul is a dedicated writer and expert in the accounting industry, known for her insightful and well-researched content. Her writing covers a wide range of topics. She is committed to producing content that not only informs but also empowers readers to make informed decisions.