Accounts-payable (AP) optimisation is no longer just about processing invoices faster. In 2025, it is your frontline defence against £3.6 billion of UK payment fraud (UK Finance), one of the easiest levers to unlock 1.5-2% early-payment discounts, and a critical part of staying compliant with Making Tax Digital (MTD) for VAT and CIS.

Below are five AP best practices designed specifically for UK accounting firms, SMEs, and finance teams.

1. Automate with UK MTD & PEPPOL Standards in Mind

The UK AP automation market is forecast to exceed £1.2 billion by 2026 as digital compliance accelerates.

When selecting AP automation software, ensure it:

• Connects with HMRC’s API for MTD-compatible VAT submissions
• Can send/receive PEPPOL e-invoices, required for trading digitally with NHS trusts, local councils, and many large PLCs
• Uses Confirmation of Payee (CoP) to verify supplier bank details before every payment, cutting APP fraud risk significantly
• Automates approval workflows, data capture, and coding

Automation typically saves 4–7 minutes per invoice.

For a business processing 500 invoices a month, that’s 40-60 hours of staff time freed for advisory, reporting, or credit control work.

2. Grab Early-Payment Discounts (EPD)

Many UK suppliers offer 1.5–2% discounts for settling invoices within 7–10 days.
On a £50k monthly spend, this equates to £9k–£12k saved per year- enough to fund a part-time bookkeeper.

How to Lock In EPD Every Time

• Load EPD terms into your AP software
• Set automated reminders three days before discount expiry
• Use Faster Payments to pay on the morning of day 8, maximising cash in the bank while still qualifying for the discount

These small operational habits add up to significant yearly savings.

3. Simplify the Workflow – UK-Specific Steps

A streamlined AP workflow reduces errors, prevents invoice duplication, and accelerates approvals.

Create a Single Invoice Inbox

Use one central email address such as accounts@yourdomain.co.uk and auto-forward it into your AP tool.
Immediately reject paper invoices digital-only is now the UK industry standard.

VAT Number Validation

Use HMRC’s free VAT number checker API to validate every new supplier.
Invalid VAT numbers are the fastest way to lose reclaimable input VAT.

Centralise Your Data

Store purchase orders, bills, attachments, and payment history in one dashboard.
This gives you instant audit trails for:

• Companies House submissions
• R&D tax-credit claims
• Year-end accounts
• External audits

4. Set Up a Secure Vendor Portal

A vendor portal gives suppliers 24/7 access to invoice status, remittance advice, and payment timelines reducing “Where is my payment?” calls by up to 70%.

Vendor Portal Security Checklist

• Host on a .uk domain, with SSL and two-factor authentication (2FA)
• Include a bank-detail change request form requiring:
  • A scanned letter on official company headed paper
  • Approval from two internal signatories

This simple two-step process prevented 92% of dummy-vendor fraud attempts in a 2024 ICAEW study.

Vendor portals also improve supplier relationships and eliminate email-based processing delays.

5. Eliminate Fraud – UK-Focused Controls

Fraud in the AP process can cause severe financial and reputational damage. These UK-specific controls help prevent it.

Internal Controls

• Segregate duties:
  • One person enters invoices
  • Another approves
  • Another releases payments
• Upload your supplier list to Companies House quarterly dissolved companies sometimes linger in old ERPs
• Review user permissions regularly

Payment Verification

• Use sort-code lookup to confirm the bank is located in the UK
• Treat overseas accounts as high-risk unless fully verified
• Run a monthly duplicate-invoice report (search by invoice number + amount)

GDPR Compliance

Encrypt all remittance emails containing bank details.

A breach involving financial data may trigger fines up to £17.5 million under GDPR.

Frequently Asked Questions

What is the best AP automation software for UK MTD compliance?

A. Xero, QuickBooks and Sage 50 all hold HMRC MTD accreditation.

For trading with public-sector or large enterprise clients, ensure your system also supports PEPPOL e-invoicing.

How much can a UK small business save with early-payment discounts?

A. The Chartered Institute of Procurement & Supply reports an average 2% saving on supplier spend.

On a £500k purchase ledger, that’s £10k+ annual savings.

Is Confirmation of Payee (CoP) compulsory for business payments?

A. Not yet, but the UK Payment Systems Regulator is consulting on making CoP mandatory across most business payments by 2026. Adopting it now future-proofs your controls.