# Accounts Payable Processing SOP — [Company name]

Template status: [Draft / In review / Approved] · Applies from: [date]

## Purpose

Take a supplier invoice from arrival to a scheduled payment, so that the company
pays the right supplier, the right amount, once, for something it actually
ordered and received, and so that the person who approves an invoice is never
the person who releases the money.

## Scope

Supplier invoices and credit notes arriving in [AP inbox] or [supplier portal],
from receipt to payment posting and filing, for entity [legal entity].

Out of scope: employee expenses ([Expenses SOP]), corporate card transactions,
intercompany recharges, and customer receipts ([Invoice Reconciliation SOP]).

## Owner

Accountable: [Accounts Payable Specialist].
Reviewing: [Financial Controller]. Budget approvals sit with the named budget
holder. Payment release sits with [Treasury / Payment Approver] — deliberately
a different person.

## Trigger

Event: an invoice arrives in [AP inbox] or is posted to [supplier portal].
Scheduled: the payment run executes [weekly on Wednesday]; invoices approved
after [Tuesday 17:00] fall into the following run.

## Inputs

| Input | System of record | Required |
| --- | --- | --- |
| Invoice document (PDF or portal record) | [AP inbox] / [portal] | Yes |
| Purchase order | [Procurement system] | Yes for PO-backed spend |
| Goods or service receipt confirmation | [Procurement system] / requester | Yes for goods |
| Supplier master record with verified bank details | [Accounting system] | Yes |
| Contract or rate card | [Contract store] | For recurring services |
| Tax / VAT treatment rules for the jurisdiction | [Tax guidance] | Yes |

## Prerequisites

- Supplier exists on the approved master with bank details verified out of band
  at onboarding, and the master is only editable by someone who cannot approve
  or release payments.
- A published approval matrix by amount band and cost centre (D3).
- Purchase orders are raised **before** the spend commitment for all categories
  where PO discipline applies. An invoice for an unraised PO is exception E1.
- Segregation of duties is real, not nominal. The GAO Green Book describes
  dividing key duties — authorising, processing and recording, and reviewing —
  among different people to reduce the risk of error and fraud; see
  [Standards for Internal Control in the Federal Government](https://www.gao.gov/products/gao-25-107721).

## Steps

1. **Capture and register the invoice.** Assign a unique AP reference on
   arrival, before any judgement about validity. An invoice that is rejected
   still has a record.
2. **Extract the header fields**: supplier name, supplier tax identifier,
   invoice number, invoice date, currency, net, tax, gross, payment terms, PO
   reference, bank details as printed.
3. **Run the duplicate check** on supplier plus invoice number, then on supplier
   plus amount plus date within [30] days. → Exception **E4**. Duplicates are
   most often the same invoice sent by email and by portal.
4. **Validate the supplier against the master.** → Decision **D1**. If bank
   details on the invoice differ from the master, stop: exception **E5**. Do not
   update the master from the invoice.
5. **Match the invoice.** → Decision **D2**. Two-way against the PO for
   services, three-way against PO and receipt for goods.
6. **Apply the tolerance rule** to price and quantity variances. Within
   tolerance, proceed and record the variance. Outside tolerance, route to the
   requester with the variance stated (→ **E2**), never to the supplier first.
7. **Check the tax treatment**: correct rate, valid supplier tax identifier,
   reverse charge or withholding where it applies, and that the invoice carries
   the details your jurisdiction requires to be a valid tax document.
8. **Code to the general ledger**: account, cost centre, and period. Period is
   the period the goods or service was received, not the date you happened to
   process it.
9. **Route for approval.** → Decision **D3**. The budget holder approves the
   commitment; approval is recorded in the system, never by forwarded email.
10. **Schedule the payment.** → Decision **D4**: terms, any early-settlement
    discount, and cash-position constraints. Do not pay early by default; do not
    pay late by drift.
11. **Release the payment.** → Approval **A2**, by a person who did not enter
    the invoice, did not approve it and cannot edit the supplier master.
12. **Post and file.** Post the payment, attach the invoice, PO, receipt,
    approvals and remittance to the AP reference, and close the item.

## Decisions

| ID | Decision | Criteria | Default |
| --- | --- | --- | --- |
| D1 | Supplier is valid | On the approved master, active, bank details match the master exactly | Hold, do not process |
| D2 | Match type | Goods with a PO → three-way. Services with a PO → two-way. Contracted recurring service → match to contract rate card. No PO → E1. | Three-way |
| D3 | Approval route | ≤ [amount A]: [Accounts Payable Specialist] alone. [A]–[B]: budget holder. [B]–[C]: budget holder + [Financial Controller]. > [C]: + [CFO] | Budget holder |
| D4 | Payment timing | Pay on terms. Take early-settlement discount only if the discount rate beats [threshold] and cash allows. | Pay on terms |
| D5 | Tolerance | Price variance ≤ [%] and ≤ [amount]; quantity variance ≤ [%] | Outside tolerance → E2 |
| D6 | Hold the payment | Open dispute, unresolved variance, supplier compliance flag, or duplicate suspicion | Release if none apply |

## Exceptions

- **E1 — Invoice with no purchase order.** Route to the requester to raise a
  retrospective PO with a stated reason, and log it. A rising count of E1 is a
  procurement problem, not an AP problem, and belongs in the monthly review.
- **E2 — Price or quantity variance beyond tolerance.** Return to the requester
  with the PO, the receipt and the invoice line side by side. AP does not
  negotiate the variance; the person who ordered does.
- **E3 — Credit note.** Match to the original invoice and offset within the same
  supplier account. Never net a credit note against an unrelated invoice to make
  a payment run balance.
- **E4 — Duplicate suspected.** Hold both, confirm against the supplier
  statement, and cancel the later registration with a reason. Retain the
  cancelled record.
- **E5 — Bank details differ from the supplier master, or a change is
  requested.** Treat every change request as suspected fraud until proven
  otherwise. Verify by calling a number already held on the supplier master, not
  a number on the invoice or in the email. Change requires approval **A3** and a
  second person. This is the single most exploited step in accounts payable.
- **E6 — Supplier not on the approved master.** Do not create the supplier to
  clear the invoice. Route to [Vendor Compliance Review SOP] and hold.
- **E7 — Invoice in a foreign currency.** Post at the rate defined in
  [FX policy] with the rate source recorded, and revalue at period end.
- **E8 — Statement shows an invoice you have never received.** Request a copy
  from the supplier; do not pay from a statement line.

## Approvals

| ID | What is approved | Who approves | Why it stays with a person |
| --- | --- | --- | --- |
| A1 | The spend commitment on the invoice | Budget holder per D3 | Someone must be accountable for the cost |
| A2 | Release of the payment run | [Treasury / Payment Approver], different from the enterer and the approver | Money irreversibly leaves the business |
| A3 | Change to supplier bank details | [Financial Controller] plus a second verifier, out-of-band verified | Payment redirection fraud happens here |
| A4 | Adding a new supplier to the master | [Financial Controller] after vendor review | Prevents the invoice itself from creating its own payee |
| A5 | Paying outside terms, early or late | [Financial Controller] | Cash and relationship impact |

## Output

- Approved, coded and posted invoices with a complete document set attached to
  the AP reference.
- A payment run released by an authorised second person, with a remittance sent
  to each supplier.
- An exceptions log by type, reviewed [monthly].
- An accruals list for goods received but not invoiced at period end.

## SLA / KPI

- Touchless rate: invoices matched and approved with no manual intervention.
  Target [x%], measured monthly.
- Invoices processed within [5] business days of receipt: target [95%].
- Duplicate payments per period: target zero.
- On-time payment rate against terms: target [98%].
- E1 count (no-PO invoices) trending down quarter on quarter.

## Audit record

For every invoice retain the invoice document, PO, receipt, coding, approvals
with approver and timestamp, payment reference and remittance. Supporting
documents for business expenses should show the payee, the amount paid, proof of
payment, the date incurred and a description of the item, and the same
requirements apply to electronic records; see the IRS guidance on
[what kind of records to keep](https://www.irs.gov/businesses/small-businesses-self-employed/what-kind-of-records-should-i-keep)
and
[recordkeeping](https://www.irs.gov/taxtopics/tc305). Confirm the retention
period and the tax-document requirements that apply to your entity with your
accountant.

> Simulated example data
>
> Invoice [SUP-88431] from [Aldergate Components Ltd], gross [EUR 12,480.00],
> PO [PO-20261-0412], goods receipt [GRN-9931]. D2 → three-way match. PO line
> price [EUR 12,300.00]; variance [180.00] is [1.46%], inside the D5 tolerance
> of [2%] and [250.00], so the invoice proceeds with the variance recorded.
> D3 → amount falls in band [B]–[C], approved by budget holder [Head of
> Production] and [Financial Controller]. Payment scheduled for run
> [2026-07-29] on [30]-day terms; released under A2 by [Treasury] who did not
> enter or approve the invoice.

## Revision log

| Version | Date | Author | Change |
| --- | --- | --- | --- |
| v1.0 | 2026-07-24 | [Your name] | initial draft |