Running Payment: A Complete Guide

A running payment is the process of executing payments that have been approved and are ready for disbursement, typically in bulk or as part of a scheduled payment cycle. It involves moving funds from a business's account to its vendors, suppliers, or service providers after all invoice checks and internal approvals are complete.

Key Takeaways:

• Running payments is the final step in accounts payable, where approved invoices are processed and funds are disbursed.
• A structured payment process improves cash flow, strengthens vendor relationships, and reduces financial risk.
• Key stages include invoice receipt, validation, approval, scheduling, execution, confirmation, and reconciliation.
• Implementing best practices like batching, dual authorization, and automation enhances accuracy and efficiency.
• Regular reconciliation and secure data handling maintain financial control and audit readiness.

What Is a Running Payment

A running payment refers to the actual execution phase within the accounts payable process, where approved and validated invoices are processed for payment. It involves the systematic transfer of funds from a company’s bank account to its vendors, suppliers, or service providers. 

This step typically occurs after all preceding steps, such as invoice matching, validation, and internal approval, have been completed. Running a payment often includes preparing a batch of payments, selecting the payment method (such as bank transfer, check, or digital payment), initiating the transactions, and ensuring that all necessary authorizations and controls are in place. This process may be handled manually or automated through accounting or enterprise financial systems. 

A well-run payment process ensures that obligations are met on time, helps maintain healthy supplier relationships, reduces the risk of late fees or service disruptions, and contributes to accurate cash flow management. In essence, running payments is the point where financial commitments are fulfilled, making it a critical function in a company’s financial operations.

Running Payment Process

The running payment process refers to the steps a business or system takes to initiate, authorize, and complete a payment, typically for vendor invoices, employee salaries, or other payables. It’s a core part of accounts payable or financial operations and usually includes these stages:

1. Invoice Receipt

This is the starting point of the payment process. A business receives an invoice from a supplier, contractor, or service provider, which serves as a formal request for payment. Invoices can arrive through various channels, email, postal mail, electronic data interchange (EDI), or uploaded through a vendor portal. The invoice typically includes details such as:

• Invoice number
• Supplier name and contact
• Amount due
• Due date
• Itemized list of goods or services provided

2. Invoice Validation

Before an invoice is paid, it must be validated to ensure it’s accurate and legitimate. This step helps prevent fraud and accounting errors. Validation usually involves:

• Matching the invoice with the corresponding purchase order (PO) and goods receipt note (this is known as the three-way match).
• Checking unit prices, quantities, tax calculations, and total amounts.
• Verifying that the vendor is approved and that no duplicate invoice exists.
• Confirming that the invoice complies with internal policies and tax regulations.

3. Payment Approval

Once validated, the invoice needs internal approval before payment. The approval process varies based on company policy, but often involves:

• Routing the invoice to one or more approvers, depending on the amount and department.
• Including senior management or finance leadership for high-value transactions.
• Using tiered approval levels to enforce financial control.

4. Payment Scheduling

After approval, invoices are queued for payment. At this stage, the business decides when to pay based on:

• Invoice due dates and early payment discounts
• Current cash flow and payment cycles (e.g., paying bills every Friday)
• Vendor terms (e.g., Net 30, Net 60)

5. Payment Execution (Running the Payment Process)

This is the core of the payment cycle, when the actual disbursement of funds happens. The process involves:

• Preparing payment files that include payee details, amounts, bank accounts, and remittance information.
• Initiating payments through chosen channels, bank transfers (ACH, SEPA, wire), checks, or virtual cards.
• Executing single or batch payments in a secure, controlled environment.
• Ensuring dual control, where two authorized persons are required to release large payments.

6. Payment Confirmation

After payments are executed, confirmation is received from the bank or payment service, indicating which payments were successfully processed. At this stage:

• Vendors may receive a remittance advice with payment details for their records.
• The system updates the accounts payable ledger to reflect that the invoice has been paid.
• Failed or rejected payments are flagged for follow-up and correction.

7. Reconciliation

Finally, businesses perform reconciliation to ensure that payments made match the entries in the accounting records. This includes:

• Comparing payment records against bank statements.
• Investigating any discrepancies (e.g., overpayments, duplicate payments, or bank errors).
• Updating the general ledger and financial reports to reflect accurate cash outflows.

Running Payment Best Practices

Here are some best practices for running payments that help ensure accuracy, efficiency, and financial control:

1. Centralize Payment Scheduling

Coordinate all payments from a central schedule. This allows better cash flow forecasting, helps avoid missed or duplicate payments, and makes it easier to track due dates and early payment discounts.

2. Use Payment Batches

Group payments by due date, vendor, currency, or payment method. Running payments in batches improves efficiency and reduces administrative overhead, especially for recurring or high-volume payments.

3. Enforce Dual Authorization

Implement a dual-approval process for releasing payments, especially large transactions. This internal control helps prevent fraud and errors, as it requires two sets of eyes before funds are released.

4. Maintain Up-to-Date Vendor Records

Ensure vendor information (e.g., banking details, contact info, tax IDs) is regularly reviewed and updated. This minimizes the risk of misdirected payments and helps meet compliance standards.

5. Match Invoices Accurately

Always perform a two-way or three-way match (invoice vs. purchase order and goods receipt). This verification step ensures that you’re only paying for goods and services received and prevents overpayments or duplicate payments.

6. Automate Where Possible

Use automation tools to streamline invoice processing, approvals, and payment execution. Automation reduces manual errors, accelerates cycle times, and provides a clear audit trail.

7. Reconcile Payments Promptly

Reconcile payment records against bank statements regularly, ideally, daily or weekly. This ensures errors or discrepancies are caught early, which supports accurate financial reporting and fraud prevention.

8. Secure Sensitive Data

Protect banking and vendor data with strong access controls, encryption, and secure systems. Limit access to payment functions based on roles and responsibilities.

9. Document Payment Policies

Have clear written procedures for how and when payments are processed. This promotes consistency, accountability, and faster onboarding for new finance team members.

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Conclusion

Running payments is more than just transferring funds, it’s a structured, strategic process that ensures your business meets its financial obligations accurately, securely, and on time. 

Follow each step carefully, from receiving and validating invoices to scheduling, executing, and reconciling payments, so you can strengthen vendor relationships, maintain healthy cash flow, and reduce operational risks. 

Applying best practices like centralized scheduling, automation, and dual authorization further enhances the reliability and efficiency of your payment cycle. 

With the right tools and processes in place, your business can transform payment management from a manual task into a seamless, value-adding function.

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