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Accounts payable process: from invoice intake to payment
A useful accounts payable process makes it possible to see what is owed, who approved it and whether it has already been paid. Build the workflow around the invoice and its payment evidence.
This guide describes common bookkeeping practice, not a legal or regulatory requirement.
Last reviewed:
General information, not legal or tax advice.
Capture the invoice with its business purpose
The IRS lists invoices, account statements, canceled checks and other evidence among expense supporting documents. Records should establish the amount and business purpose. Save the original document, identify the vendor and describe what was purchased before the bill moves into approval.
Sources: IRS Publication 583 (12/2024), Starting a Business and Keeping Records
Approve the purchase before scheduling cash
As a practical control, have the person familiar with the purchase confirm delivery, coding and any disputed amount. Compare the invoice with existing bills and credits to spot duplicates. Separate approval from the payment task where your staffing permits, and keep a visible list of items awaiting an answer.
Record a payment that can be traced
IRS recordkeeping guidance recommends a check or another documented payment method, avoiding checks payable to cash. If a cash purchase has no receipt, record an adequate explanation when paying. Match the payment reference back to the approved bill and preserve the evidence that the supplier balance was settled.
Sources: IRS Publication 583 (12/2024), Starting a Business and Keeping Records
Review contractor totals during the year
For tax years beginning after 2025, IRS instructions raise the minimum threshold for certain reportable payments to $2,000. The instructions specify the December 2026 revision of Forms 1099-MISC and 1099-NEC for 2026 information filed in early 2027, and an aggregate electronic filing threshold of 10 information returns. Review payment categories with your CPA rather than applying a single rule to every vendor.
Sources: IRS Instructions for Forms 1099-MISC and 1099-NEC (12/2026)
Reconcile open bills at the reporting cutoff
Under accrual tax rules, liability and economic performance determine expense timing. The IRS example places supplies received and billed in December in that year even though payment follows in January. Keep unpaid invoices in the closing review so the cash schedule and expense records tell a consistent story.
Sources: IRS Publication 538 (01/2022), Accounting Periods and Methods
Sources: capture the invoice with its business purpose
Prepare vendor information returns
Get supplier balances ready for review
Tidwell helps organize bills, payment records and vendor totals for regular bookkeeping and your CPA’s year-end review.