Common accounts payable mistakes in small businesses: prevention and best practice
Small businesses don’t have spare cash or hours to waste. Accounts payable (AP) is often where money slips away through duplicate bills, late fees, and manual errors that stack up. The good news: most issues are avoidable with a few clear steps and light automation. This guest post covers the most common mistakes, why they hurt, and practical ways to fix them with simple processes and an AP automation software that connects to Xero or QuickBooks Online.
Why AP mistakes hit harder than you think
AP touches cash, supplier trust, and reporting accuracy. Errors don’t just annoy vendors, they:
Drain cash through duplicate payments and missed discounts
Add avoidable costs such as late fees and rework
Distort budgets and management reports
Damage supplier relationships, which can lead to tighter terms or higher prices
Most problems come from manual entry, paper trails, unclear approvals, and weak controls. Clean those up and you’ll protect cash, save time, and keep suppliers on side.
The most common mistakes and how to fix them
1. Duplicate invoices and payments
Duplicates slip in when the same invoice arrives by email and post, when numbers are formatted differently, or when a credit note looks like a new bill. Without a duplicate check at entry, you can pay twice.
How to fix it:
Search by supplier, amount, and date before posting
Match bills to purchase orders and receipts where they exist
Use a central AP inbox so each invoice has one path in
Run a monthly duplicate payment report and recover credits quickly
2. Late or missed payments
What goes wrong
Due dates hide in inboxes, approvers are away, and cash timing isn’t clear. Late payments mean fees, strained relationships, and lost early-payment discounts.
How to fix it:
Keep a single payment calendar with reminders
Set approval limits so small bills don’t wait for senior sign-off
Nominate backup approvers for holidays and travel
Schedule payment runs to land on discount windows
3. Manual entry errors
What goes wrong
Re-keying invoice data into spreadsheets or basic systems creates typos and coding mistakes. Wrong amounts, vendor names, or account codes ripple through budgets and reports.
How to fix it:
Capture data digitally and standardise coding rules
Review exceptions rather than every line
Lock account codes for common suppliers to cut miscoding
Reconcile weekly so mistakes surface early
4. Lost or misplaced invoices
What goes wrong
Paper gets buried, email attachments go missing, and nobody is sure which version is final. The result is late payments and poor visibility.
How to fix it:
Use one AP inbox for all suppliers
File digitally by supplier and month with a standard naming rule
Run a weekly missing documents review against your PO and receipt list
5. Approval bottlenecks
What goes wrong
Unclear authority, single points of failure, and long chains of sign-off slow everything down.
How to fix it:
Map approval limits by amount and category
Add backups for each budget holder
Route by department or project so the right person reviews the right bill
Give finance visibility to nudge stuck items
Controls that protect cash without slowing you down
Segregation of duties
Don’t give one person the power to set up vendors, approve bills, and release payments. Even in a small team you can split work:
One person captures or reviews bills
A different person approves
A third person runs the payment file or authorises the bank release
If you’re short on headcount, rotate roles monthly and require owner approval above a set amount.
Regular reconciliation
Weekly checks catch problems while they’re easy to fix. Reconcile:
Bank feeds and card statements
Vendor statements against your ledger
Open POs and goods received notes against unpaid bills
Keep a short exceptions list and assign each item to someone with a date to close.
Strong audit trails
Auditors and managers want the who, what, when, and why. Keep:
PO, bill, receipt, and approval notes in one place
Time stamps for approvals and edits
A clear log of vendor master changes
AP automation records these automatically, which saves hours at month end and during audits.
How automation can help
Automation makes accounts payable easier to run and harder to get wrong. Studies show that 88% of manual AP documents contain errors. Automation eliminates these costly mistakes while freeing employees for higher-value tasks.It removes rekeying, speeds up approvals, and gives you clear visibility of what’s waiting, what’s approved, and what’s ready to pay.
Capture and accuracy
OCR reads invoices and pulls in amounts, dates, and supplier details, so you don’t type them by hand. Validation rules spot missing or unusual data before it hits your ledger. The result is fewer typos, fewer duplicates, and cleaner coding.
Matching and control
Two or three way matching compares purchase orders, invoices, and receipts. If something doesn’t line up, it’s flagged for review before money leaves the bank. You get stronger control without piling work on the team.
Approvals that move
Routing rules send each invoice to the right person based on amount, department, or project. Reminders keep things moving, and mobile approvals mean invoices don’t stall when managers are away. Finance can see where every invoice sits and nudge when needed.
Payments and cash flow
Scheduled runs line up with due dates and early payment discounts. That helps you avoid late fees, protect cash, and keep supplier relationships steady. You decide the timing, the system handles the admin.
Cloud and integrations
Cloud tools scale as volumes grow, keep documents searchable and secure, and make e-invoicing simple. Suppliers can submit bills directly, which cuts paper and chasing. Connections to platforms like Xero or QuickBooks Online keep suppliers, coding, and statuses in sync, so you don’t copy data between systems.
You don’t need a big project. Start with a central AP inbox, turn on digital capture, and set simple routing rules. Add matching, budget checks, and scheduled payment runs as confidence builds. You’ll see fewer errors, faster cycle times, and better control over spend without slowing the business.
A simple plan to move from manual to digital
You don’t need to change everything at once. Steady progress beats a big bang.
Phase 1: Stabilise the basics
Create a central AP inbox, agree file naming, map approval limits, and confirm supplier details. You’ll cut noise and get one version of the truth.
Phase 2: Reduce errors
Switch high-volume suppliers to e-invoicing, turn on two- or three-way matching where POs and receipts exist, lock common coding and tax rules, and start weekly bank and vendor statement reconciliations.
Phase 3: Speed up approvals
Add backup approvers for every budget holder, enable mobile approvals, schedule twice-monthly payment runs tied to discount dates, and add a simple dashboard covering overdue, waiting approval, and ready to pay.
Phase 4: Strengthen visibility
Review budget to actuals monthly with approvers, run a monthly duplicate payment and credit note sweep, and track AP cycle time and late fees as health metrics.
Best-practice checklist you can use today
Central AP inbox for all invoices
Standard naming and digital filing rules
Purchase orders for spend above a set limit
Two- or three-way matching for PO-backed spend
Approval limits with backups for holidays and travel
Payment calendar with reminders and discount flags
Weekly vendor statement and bank reconciliation
Monthly duplicate payment and credit review
Controlled vendor master with change logs
Searchable, time-stamped audit trail
What to measure so you know AP is healthy
Here are some important KPIs to keep track of while you are measuring your AP performance:
Cycle time from receipt to approval
Percentage of invoices approved on time
Late fees paid this month and quarter
Duplicate payments found and credits recovered
Share of spend covered by POs and matching
Invoices touched more than once and why
Trends matter more than a single point in time. If cycle time is falling and on-time approval is rising, your process is getting healthier. If late fees spike, look at bottlenecks or gaps in your payment calendar.
FAQs
What’s the fastest way to reduce errors without changing systems?
Create one AP inbox, standardise file names, and review exceptions weekly. These three steps cut duplicate risk, make invoices easier to find, and surface issues earlier.
Do I need purchase orders for everything?
No. Use them where they add control, for example inventory, contractors, and higher-value services. For small ad hoc spend, set a sensible threshold and keep clear notes.
How do I stop invoices waiting on busy managers?
Set limits so routine spend doesn’t need senior sign-off, add backups, and use mobile approvals. Route by department or project so the right person sees the right bill at the right time.
What if my team is tiny and I can’t split duties cleanly?
Rotate roles on a schedule, involve the owner for larger amounts, and use automation logs to create a second line of oversight. You’ll still reduce risk even with a lean team.
Which automation features give the biggest win first?
Start with digital capture and routing rules. Add two- or three-way matching for PO-backed spend and mobile approvals. Those four moves cut re-keying, speed up sign-off, and improve control.
Final thought
AP mistakes aren’t a cost of doing business. They’re a sign the process needs a tidy up. With clear rules, weekly discipline, and practical automation, small teams can pay on time, keep suppliers happy, and protect cash. Start with the checklist, set smart approval limits, and let automation handle the admin so your team can focus on review and cash decisions.