Issue and settle vendor payments overview

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Applies to: Dynamics 365 Finance, Dynamics 365 Project Operations, Dynamics 365 Supply Chain Management

This article describes how you can use Dynamics 365 products to support the organization's requirements to issue and settle vendor payments.

Introduction to issue and settle vendor payments

The issue and settle vendor payments business process area focuses on paying vendors according to the agreed-upon payment terms, ensuring that payments are made accurately and on time, and settling them against invoices either manually or through an automated process.

Issue and settle vendor payments is an essential step in the Source to pay end-to-end business process flow and structured and defined approach to issuing and settling vendor payments is critical to prevent financial risks and payment delays and ensure financial stability within your organization.

The issue and settle vendor payments business process area should be defined and incorporated into the overall implementation during the plannings phase. This phase typically occurs at the beginning of a project's lifecycle. It involves establishing project goals, defining project scope, and developing a detailed project plan.

Stakeholders

Many people across the organization should contribute to the decision-making process and design of the issue and settle vendor payments area. The following list provides examples of such stakeholders:

  • Accounts payable clerks – Responsible for processing accounts and incoming payments in compliance with financial policies and procedures. Accounts payable clerks are also responsible for verifying, classifying, and recording accounts payable data, and for preparing bills, invoices, and bank deposits. They might also be responsible for reconciling the accounts payable ledger to ensure that all bills and payments are accounted for and correctly posted. They might also verify and investigate any discrepancies by reconciling vendor accounts and monthly vendor statements.
  • Finance department – Responsible for financial supervision, financial reporting, and analysis.
  • Executive leadership – Responsible for payment oversight, approvals, and alignment with the organization's strategic goals, which helps secure the necessary resources and funding.

Issue and settle vendor payments process flow

The following diagram illustrates the issue and settle vendor payments business process area. Each solid gray rectangle on the diagram represents an end-to-end business process. The solid blue rectangle represents the business process area. The diagram shows the subprocesses for the business process area. The arrows on the diagram show the flow of the business process in an organization. If a subprocess can lead to more than one other subprocess, the parallel subprocesses are shown as branches.

Flow diagram with steps for the process that is explained further in the next paragraphs.

The issue and settle vendor payments process area flow diagram covers the following steps:

  • Start

  • Source to pay end-to-end process

    Parallel branches to this end-to-end process are the Design to retire end-to-end process, Inventory to Deliver end-to-end process, and Concept to market end-to-end process.

    • Define policies and procedures for procurement

    • Manage vendor relationship

    • Procure materials and services

    • Process inbound goods

    • Process vendor invoices

    • Issue and settle vendor payments

      • Does cash discount apply? condition

        • A parallel branch for Yes leads to the Configure and apply cash discounts subprocess.
        • A parallel branch for No leads to the Is pre-payment? condition.

      • Configure and apply cash discounts

      • Is pre-payment? condition

        • A parallel branch for Yes leads to the Generate and post prepayments subprocess.

          Downstream to this subprocess is a Record financial transactions subprocess that connects to the Record to Report end-to-end business process.

        • A parallel branch for No leads to the Generate and post payments subprocess.

          Downstream to this subprocess is a Record financial transactions subprocess that connects to a Record to Report end-to-end business process.

      • Generate and post prepayments

      • Generate and post payments

      • Does promissory notes apply? condition

        • A parallel branch for Yes leads to the Generate and process promissory notes subprocess.
        • A parallel branch for No leads to the Settle vendor transactions condition.

      • Generate and process promissory notes

      • Settle vendor transactions

      • Has payment been canceled? condition

        • A parallel branch for Yes leads to the Cancel a vendor payment subprocess.
        • A parallel branch for Yes leads to End.

      • Cancel a vendor payment

  • Design to retire end-to-end process

    • Introduce new products and services

      This process connects to the Procure materials and services subprocess.

  • Inventory to deliver end-to-end process

    • Process inbound goods

    • Process vendor invoices

      Downstream to this subprocess is an Issue and settle vendor payments subprocess.

  • Concept to market end-to-end process

    • Introduce new services

      This subprocess connects to a Procure materials and services subprocess.

  • End

Issue and settle vendor payments benefits

There are many key benefits that can be used to monitor and measure the success of implementing technology to support the issuing and settling of vendor payments. The following sections outline the key benefits that an organization might monitor and measure for this process.

Automated vendor payment proposal

In Dynamics 365 Finance, you can use vendor payment proposals to settle invoices either manually or through an automated process. Organizations that pay vendors on a recurring schedule can automate the process of generating vendor payment proposals by specifying criteria and a scheduled time.

Learn more at Automate vendor payment proposals.

Various payment formats

Dynamics 365 supports various payment formats, including checks, electronic payments such as ACH, NACHA, Wires, and BAC, credit cards, and more. The process also covers communication with financial institutions and the generation of files or documents that are sent to the vendor either through the mail or electronically.

Learn more in the following articles in the documentation for Dynamics 365 Finance:

Centralized payments

Organizations that include multiple companies can create and manage payments by using a single company that handles all payments. This approach provides better visibility into the payment process, because payment clerks can view invoices across companies. In addition, a dedicated payment workspace provides better visibility into overdue invoices and gives an easy way to keep track of invoices and payments across organization.

Learn more at Centralized payments for Accounts payable.

Efficient settlement process

In Dynamics 365, you can settle transactions between different document types, such as invoices, payments, credit memos, and fees. The settlement process can also generate new transactions, which can help streamline the payment process.

Learn more at Settlement overview.

Next steps

If you want to implement Dynamics 365 solutions to assist with your issue and settle vendor payments business processes, use the following resources and steps to learn more. (Links are added when articles are ready.)

  1. Manage vendor relationships
  2. Develop sourcing strategies
  3. Define procurement catalogs
  4. Define policies and procedures for procurement
  5. Plan supply
  6. Procure materials and services
  7. Process vendor invoices
  8. Issue and settle vendor payments (the article that you're currently reading)
  9. Manage vendor debits and chargebacks
  10. Create and process promissory notes
  11. Process vendor rebates and incentives
  12. Analyze vendor performance

You can use the following resources to learn more about the issue and settle vendor payments process in Dynamics 365.

Contributors

This article is maintained by Microsoft. It was originally written by the following contributors.

Principal author: