Finance & accounting
Accounts payable process: a step-by-step guide for Philippine companies
The accounts payable process from purchase order to payment: invoice matching, vouchers, withholding tax and BIR Form 2307, approvals, checks and AP reports.
The accounts payable (AP) process makes sure the company pays the right supplier, the right amount, at the right time, only for goods and services it actually ordered and received. In Philippine companies, AP also handles expanded withholding tax on supplier payments, the issuance of BIR Form 2307, and check-based payments that need careful monitoring.
The AP process step by step
- Purchase request and purchase order. A requisition is approved and a PO is issued to the supplier (purchase requisition workflow).
- Receiving. The warehouse or requesting department records what was actually received, with the delivery receipt (goods receiving).
- Supplier invoice. AP records the supplier's invoice and checks it against the PO and receiving report (three-way match).
- Voucher preparation. AP prepares a payables or billing voucher with the accounting entries and computes withholding tax.
- Approval. Authorized approvers review and approve based on amount limits.
- Payment. Check or bank transfer is prepared, signed and released (check vouchers and disbursement controls).
- Withholding tax documents. BIR Form 2307 is issued to the supplier for the tax withheld, and the withholding is remitted and reported.
- Recording and reconciliation. Payment is recorded, the payable is cleared, and supplier statements are reconciled.
Withholding tax on supplier payments
Many payments to suppliers are subject to expanded withholding tax (EWT). The rate depends on the type of payment (for example professional fees, rentals, contractors, or purchases by companies classified as top withholding agents) and on the supplier. AP should:
- Determine the correct EWT rate for each supplier and transaction type
- Withhold at payment or when the obligation becomes payable, per BIR rules
- Issue BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) to suppliers
- Remit and report withholding taxes on the prescribed forms and schedules
Rates and classifications change; maintain them in the system with effective dates and confirm with your tax adviser.
AP controls that prevent losses
| Risk | Control |
|---|---|
| Paying for goods not received | Match invoice to receiving report |
| Duplicate payments | Check invoice number and amount per supplier before posting |
| Fictitious suppliers | Supplier accreditation and master data changes approved by someone outside AP (supplier accreditation) |
| Unauthorized payments | Approval limits by amount and role; dual signatories on checks |
| Changed bank details fraud | Verify bank detail changes by calling the supplier on a known number |
| Missed early payment or late penalties | Payment calendar based on terms |
Payment terms and scheduling
Most Philippine B2B suppliers offer terms such as 30, 60 or 90 days. AP should schedule payments by due date, combine payments per supplier per run, and keep finance informed of upcoming cash needs. A weekly payment run with an approved list is easier to control than ad hoc payments. See cash flow visibility.
AP reports finance needs
- Payables aging by supplier and company
- Payments due this week and next
- Vouchers awaiting approval and their age
- Checks issued but not yet encashed
- Withholding taxes withheld and to be remitted
- Supplier balance confirmations
AP for groups of companies
In multi-company groups, AP is often centralized. Keep each company's suppliers, vouchers and bank accounts separate, while allowing a shared team to process all of them. Intercompany payables should be recorded in both companies and reconciled monthly.
Where Cirquolus fits
Cirquolus Accounts payable manages payables by purchasing workflow, delivery receipt records, billing and check vouchers, and AP reports. It connects with purchasing, supplier management and financial management, so payables come from received purchases rather than re-encoding.
Frequently asked questions
What are the steps in the accounts payable process?
Purchase order, receiving, invoice recording and matching, voucher preparation, approval, payment, withholding tax documentation, and reconciliation.
What is BIR Form 2307?
The Certificate of Creditable Tax Withheld at Source, which a withholding agent issues to the payee showing the tax withheld from payments.
How do you prevent duplicate supplier payments?
Validate invoice numbers and amounts per supplier, require matching to receiving reports, and pay only from approved vouchers.
Who should approve supplier payments?
Approvers defined by amount limits and role, separate from the people who record invoices and maintain supplier master data.
Bring this workflow to a Cirquolus demo.
Show us your current process, companies and branches. We will map it to the modules you need and propose a realistic rollout.