What Is a Payment Run and How Does the Process Work?

A payment run is a systematic process businesses use to disburse multiple payments simultaneously, primarily to vendors and suppliers. This approach streamlines the accounts payable function, moving away from individual, manual payment processing. It represents an organized method for settling outstanding financial obligations, ensuring efficiency in operations.

Understanding a Payment Run

A payment run involves grouping various invoices together for collective processing, rather than handling each one individually. This systematic approach allows companies to manage and disburse numerous payments in a single, often automated, batch. Businesses use payment runs to enhance efficiency, maintain greater control over financial outflows, and improve accuracy in their accounts payable cycle. Integrating payment runs into the broader accounts payable cycle helps ensure timely disbursements and maintains favorable vendor relationships.

Pre-Payment Run Activities

Before initiating a payment run, preparatory steps ensure accuracy and compliance. This involves thorough invoice verification, confirming invoices are legitimate, accurate, and correctly coded. The process includes checking required fields like invoice number, date, vendor details, and total amount.

Robust approval workflows are essential, confirming that all payments have the necessary internal authorizations. This often involves different management levels, depending on the invoice amount or type. Vendor master data is also verified to ensure banking information and addresses are current and accurate, preventing fraudulent payments and ensuring funds reach the correct recipient.

Payment terms, such as “Net 30” or “2/10 Net 30,” dictate when invoices are due and if early payment discounts are available, guiding invoice selection. Cash flow planning ensures sufficient funds are available to cover scheduled payments and optimize working capital. Finally, reconciliation involves matching invoices to purchase orders and goods receipts to confirm that goods or services were received as ordered, often referred to as three-way matching.

The Payment Run Process

Once preparatory activities are complete, the payment run begins. The process starts with initiating the run within an accounting system, where specific invoices are selected based on predefined parameters like due dates and payment profiles. The system then processes these selected transactions, generating payment files and creating relevant accounting entries.

During this phase, the system identifies eligible transactions and produces a detailed report of proposed payments. Common payment outputs include Automated Clearing House (ACH) files for electronic bank transfers or physical checks. The system generates post-run outputs such as remittance advices, which explain the details of the payment, and payment summaries, along with updating ledger accounts to reflect the disbursed funds. A final reconciliation confirms that all payments have been successfully sent and that corresponding accounts have been accurately updated, ensuring financial records are precise.