Accounts payable is the process of receiving, approving, recording and paying the bills your business owes. Small businesses often pay bills as they arrive, from whoever opens the mail or email. A simple, consistent process prevents late fees, duplicate payments and payment fraud, and gives you an accurate picture of what you owe.

One inbox for bills

Ask vendors to send invoices to a single address used only for bills. That keeps invoices out of personal inboxes and creates one queue to process.

Enter bills when received, not when paid

Record each bill in the accounting system when it arrives, with its date, due date and expense category. That lets reports show what you owe, and lets accrual-based reports reflect costs in the right month.

Approval

Decide who approves which bills. A common rule: recurring bills under an agreed amount are approved automatically; anything new or larger needs the owner's approval. Approvals can be as simple as a comment in the bill-pay system.

Scheduled payment runs

Pay bills on a fixed schedule, such as weekly or twice monthly, instead of daily. Payment runs make it easier to plan cash, take early-payment discounts and spot errors.

Preventing duplicates

Duplicate payments are common when the same invoice arrives by email and mail, or when a vendor sends a reminder. Prevent them by:

  • Requiring an invoice number on every bill
  • Letting the system warn on duplicate vendor and invoice number combinations
  • Paying only from entered bills, never from statements or reminders

Payment fraud controls

Fraudsters impersonate vendors and ask for bank details to be changed. Verify any change of payment instructions by calling the vendor at a known phone number, not one in the email. Separate the person who enters bills from the person who approves payments where possible.

Vendor statements

Reconcile monthly statements from major suppliers to your payables. Statements reveal missing invoices, unapplied credits and payments the vendor did not receive.

1099 tracking

Collect a Form W-9 before the first payment and flag 1099-eligible vendors, so year-end information returns come straight from the system.

Reports to review

  • Accounts payable aging, weekly before payment runs
  • Upcoming bills for cash planning; see cash flow basics

Keep invoices and payment records for as long as they support your tax return; the IRS recordkeeping guidance explains why. Our bookkeeping services can run payables for you.

Controls that prevent costly errors

Small teams cannot always separate every duty, but a few controls go a long way:

  • Vendor master changes: confirm any change to a vendor's bank details by calling a known phone number, never by replying to the email that requested it
  • Approval limits: require a second approval above a dollar amount you choose
  • Duplicate checks: search by vendor and invoice number before entering a bill
  • Statement reconciliation: compare key vendors' monthly statements to your payables ledger

These steps address the most common losses in small businesses: paying the same invoice twice and paying a fraudster who impersonated a vendor.

Key terms

Definitions for terms used in this guide, from our small business glossary:

  • Accounts Payable: Accounts payable is the money your business owes suppliers and vendors for goods or services received but not yet paid for.
  • Debits and Credits: Debits and credits are the two sides of every bookkeeping entry; each account type increases on one side and decreases on the other.