Accounts payable policy template

1. Purpose and scope

This policy sets how [Company name] receives, checks, approves, pays and keeps vendor invoices, so that we pay only for what we ordered and received, pay on time, and can show how every payment was approved.

• Covers: all vendor invoices and payments to suppliers, contractors and service providers, for all [locations and entities].
• Does not cover: payroll, employee expense reimbursements ([see the expense policy]), customer refunds and intercompany transfers.
• Applies to: everyone who orders, receives, codes, approves or pays for goods and services.

2. Roles

3. Receiving invoices

• Vendors send invoices to one address: [ap@company.com] or [mailing address]. Invoices sent to individuals are forwarded to AP the same day.
• Paper invoices are scanned on the day they arrive. The scan is the working copy; [the paper is kept or destroyed per the retention section].
• AP records each invoice within [2 business days] of receipt, with the received date.
• An invoice must show: vendor name and address, invoice number, invoice date, description, quantity and price, tax, total, and the PO number when there is one.
• Invoices missing these details go back to the vendor. Statements and quotes are not invoices and are not paid.

4. Coding and matching

• Each invoice is coded to a GL account, a cost center or department, and [project or job] where it applies.
• PO invoices are matched to the PO and to proof of receipt (three-way match). A difference within [2% or $50, whichever is lower] may be paid; larger differences go to the PO owner.
• Non-PO invoices are coded by AP and confirmed by the budget owner when they approve.
• Sales tax is checked against the vendor's location and the [tax exemption certificates] on file.

5. Approval

• Invoices are approved in line with the [invoice approval matrix], which sets limits by amount and spend type, backups and escalation.
• Approval is given in [the approval system], never by a verbal OK. Each approval records the approver's name and the date.
• Nobody approves an invoice for their own purchase above [$1,000], their own reimbursement, or a vendor they have a personal interest in.
• Approvals waiting more than [6 business days] escalate as set out in the matrix.

6. Preventing duplicate payments

• Before an invoice is recorded, AP checks for the same vendor and invoice number, and for the same vendor, amount and date.
• Invoice numbers are compared without spaces, dashes, leading zeros or prefixes, so INV-00123 and 123 are treated as possible duplicates.
• Only original invoices are paid. Copies, statements and reminders are matched to the original, not entered again.
• Paid invoices are marked paid in [the AP system] with the payment date and reference.
• AP reviews a duplicate payment report every [month] and recovers anything paid twice.

7. Vendor setup, W-9s and changes

• New vendors are set up only by the vendor master owner, from a request approved by [the budget owner].
• US vendors provide a signed Form W-9 before the first payment. The vendor's legal name and tax ID on the W-9 must match the vendor record.
• Requests to change bank details, payment address or contact details are confirmed by calling the vendor at a number already on file, never a number in the request. The call is noted on the vendor record.
• The person who sets up or changes a vendor does not approve that vendor's invoices or release payments.
• Vendors with no activity in [18 months] are made inactive.
• The vendor list is reviewed [every year] for duplicates, inactive vendors and missing W-9s.

8. Payment timing and methods

• Invoices are paid by their due date under the vendor's terms, not earlier, unless an early-payment discount is worth taking.
• Early-payment discounts (for example 2/10 net 30) are taken when [the controller decides the discount is worth the cash].
• Payment runs happen [weekly on Thursday]. Urgent payments outside a run need [controller] approval.
• Preferred methods: [ACH], then [virtual card], then [check]. Wire transfers need two people: one to set up and one to release.
• Checks over [$10,000] need two signatures. Blank check stock is locked and logged.
• The person who releases a payment run is not the person who prepared it.

9. Exceptions

• Any exception to this policy (a payment without a PO, a rush payment, a missing W-9) is approved in writing by [the controller] before payment.
• Each exception records the reason, who approved it and the date.
• AP reports exceptions to [the CFO] every [quarter]. A pattern of exceptions is a reason to change the policy, not to keep making exceptions.

10. Records and retention

• Invoices, approvals, POs, receipts, W-9s and payment records are kept together, so each payment can be traced to its approval.
• Records are kept for the periods in [the records retention schedule], which counsel or our accountant has confirmed.
• Records under a legal hold are not destroyed, whatever their retention period.
• Electronic copies are stored in [the document system], with access limited to [AP, finance and auditors].

11. Review and audit

• [The controller] reviews a sample of [25] paid invoices every [quarter] for approval, matching and coding.
• Vendor master changes are reviewed [monthly] by someone outside AP.
• This policy is reviewed [every year] and after any payment error or fraud attempt.
• Questions about this policy go to [name, email].