Quick fact: A supplier invoice getting paid twice, an approval just sitting in someone’s inbox, or a missed payment due date can all have a quiet but very real impact on a company’s cash flow.

A trading company based in Dubai receives hundreds of supplier invoices each month. Some arrive by email, some by WhatsApp and some are just dropped into the accounts department by hand.

Now picture the nightmare of tracking all those invoices manually. You're listed twice. One is still outstanding because the manager hasn't approved it. The finance team only becomes aware of these issues when the supplier actually calls.

Takeaway

Managing accounts payable helps a business keep track of supplier invoices, ensures that you don't pay the same invoice twice and that you're actually paying the invoices when they're due. AP automation will reduce the amount of manual work, improve accuracy and of course help with cash flow.

These are the very situations that poor AP management leads to.

A good accounts payable process will help a UAE business with a large number of suppliers, VAT records and a high volume of payments to avoid extra costs and ensure the accuracy of its financial records.

What is Accounts Payable Management and why is it important?

Quick fact: Accounts payable is the money a business owes its suppliers for goods and services bought on credit.

Accounts payable management is the process of receiving, checking, authorising, recording and paying supplier invoices.

For instance a construction company in the UAE buys materials to the value of AED 40,000 on 30 day credit. That AED 40,000 will remain in accounts payable until the supplier is actually paid.

The process generally consists of five steps:

Invoice receipt: Supplier invoices are received.

Invoice coding: Expenses are charged to the correct accounting accounts.

Approval: Review buys and gets approval.

Payment: Invoices are paid in accordance with the agreed terms.

Reconciliation: Match supplier statements to the accounting records.

Good management will enable the business to plan its outgoings without in any way affecting its working capital.

Best Practices for Accounts Payable for Finance Teams

Verdict: The majority of AP problems crop up prior to payment. Poorly documented work, missing approvals and incorrect invoices all lead to a lot of extra work later on.

1. Standardize Invoice Processing

Supplier invoices come in from a number of channels so it's difficult to keep track of them.

A dedicated accounts payable email address or supplier portal gives the finance team a single point of collection for all their invoices.

Businesses should also have requirements in place for the submission of invoices.

These could be:

Supplier name and invoice no.

PO reference

Payment terms and invoice date

Relevant VAT information

Description of the goods or services

This is particularly pertinent for companies in the UAE where they are claiming input VAT as they will be required to confirm that the tax invoice meets the requirements.

2. Automate Bill Generation

Quick fact: AP automation reduces the amount of repetitive data entry, but people still have to go and check the invoice data that’s wrong.

It takes time to enter the supplier names, invoice amounts and payment dates.

With optical character recognition (OCR) AP automation software can extract the invoice data.

More advanced systems are capable of automatically assigning accounting codes, picking up on duplicate invoices and routing the documents for approval.

Some invoices can even be processed touchless (i.e. no manual intervention required) provided certain pre-set checks are met.

Imagine a distributor processing 500 invoices a month. The staff can spend their time on the exceptions (wrong amounts, missing purchase orders etc) rather than actually typing every invoice into the accounting system.

3. Employ Three-Way Matching

Verdict: An invoice paid without checking what was actually ordered and received is a risk of overpayment.

Three way matching is a comparison of three documents:

Purchase Order: What the company purchased.

Goods receipt: What was delivered.

Supplier Invoice: What the supplier actually billed you.

So let’s say a retailer in Dubai orders 100 products at 200 AED each.

The warehouse only receives 90 units and the supplier is invoiced the full AED 20,000.

Three way matching checks the quantity variance prior to payment.

Then the finance team can request the corrected invoice or look at the missing delivery.

4. Develop Clear Approval Workflows

Invoices frequently go unpaid because no-one knows who's got the authority to approve them.

A defined approval process with responsibility delegated according to invoice amount, department or expense category.

For instance a company might allow its department heads to approve purchases up to AED 5,000, with all purchases above that figure requiring the approval of the finance director. These are internal policy thresholds and not UAE legal requirements.

Besides, the separation of duties is also important.

The ideal situation is that the person who creates the supplier record is not the same person who then approves and releases payment to that supplier.

5. Simplify Payment Terms and Benefit from Early-Pay Discounts

Quick fact: good cash management doesn't mean you pay every invoice as and when it arrives.

Businesses should ensure they pay their suppliers by the dates in the contract and when they have the cash.

Sometimes suppliers give you a discount if you pay early.

Take the payment term 2/10 net 30.

The buyer gets 2% off if paid within 10 days, otherwise the full amount is due in 30 days.

If you pay an invoice of AED 50,000 early you'll save AED 1,000.

But first of all the finance team should have a look at the upcoming payroll, rent and other obligations.

6. Strengthen internal controls and fraud prevention

Any one can pose as vendors or request changes to banking details resulting in supplier payment fraud.

You should never accept a convincing email asking you to pay into a new bank account as sufficient authority.

The finance teams should independently check the bank details have been updated using an established supplier contact.

Additional controls are available: duplicate invoice detection, restricted payment access and separate payment preparation and approval.

Also, keeping payment logs is useful for investigating any suspicious transactions.

7. Vendor Master Data Cleansing

Outdated supplier data leads to payment problems that are completely unnecessary.

A vendor master record must have correct contact details, payment terms, banking details and the appropriate tax information.

Finance teams should be actively looking for inactive suppliers, duplicate vendor records and missing documentation.

Essential AP Metrics Every Finance Team Needs to Monitor

Quick fact: measure AP performance on the basis of payment efficiency, processing accuracy and outstanding liabilities.

AP Metric	What It Measures
Days Payable Outstanding (DPO)	Average time taken to pay suppliers
Cost Per Invoice	Processing expense for each invoice
Invoice Cycle Time	Time between invoice receipt and processing completion
Touchless Processing Rate	Percentage processed without manual intervention
Exception Rate	Percentage requiring investigation or correction

Rather than just setting the bar on payment speed, finance teams should be looking at these metrics on a regular basis.

A higher DPO can help you save cash, but if you go too far in the delay then you can actually damage your supplier relationships.

Conclusion

Good accounts payable management is knowing what you owe, when it's due and who approved it.

Businesses in the UAE can reduce payment errors and keep financial records organized with standardized invoice processing, proper approvals, regular reconciliation and AP automation.

The point is not only to pay suppliers faster. It is about paying the right amount to the right supplier at the right time.

FAQs

What will happen to a business that doesn't manage its accounts payable?

The first is late payments. Then you've got supplier complaints, duplicate invoices and cash flow problems. If that continues then the company will actually struggle to work out what it actually owes. Bad AP records will have a knock-on effect for VAT reconciliation and for financial audits.

How frequently does a finance team carry out account reconciliations for accounts payable?

It's good practice for the finance team to be looking at their open invoices on a weekly basis and to be doing supplier reconciliations at least once a month. If you've got hundreds of invoices then you may want to look more frequently. The sooner you spot a missing invoice or a payment difference the easier it is to rectify.

Can accounts payable automation completely replace the manual process?

Not at all. AP automation software can do all the stuff like capture the invoice data, spot duplicates, send out the approval reminders and schedule the payments. Someone still has to look at the bad invoices, the odd transactions and the supplier disputes. It takes the repetitive work off the table so the accountants can concentrate on the work that actually requires their attention.

How can UAE businesses prevent the same supplier invoice being paid twice?

Check the invoice numbers, the supplier details and the amounts before you approve any payment. It's very useful to have accounting software that can highlight duplicate invoices (particularly if they're coming in via different channels). It's also worth checking supplier statements regularly. A single duplicate payment may not be a big deal, but if you're making the same mistake over and over again it can have a massive impact on your cash flow.

Accounts Payable Management: Best Practices for Finance Teams

What is Accounts Payable Management and why is it important?