Vendor Payment for General Contracting

In the accounting or payables system, run a report of all invoices with status such as “Approved for Payment” and with no payment recorded. Filter out any invoices already included in prior payment batches.

Scan the report to make sure each invoice truly has all required approvals and is not marked as “On Hold” for compliance, disputes, or missing documents. Remove or flag any that still have holds or conditions.

Review the due dates and payment terms for each invoice. Note which invoices are already due, which are coming due within the next payment cycle, and which are not yet due but may qualify for early payment discounts.

Organize the list by vendor so you see the total amount to each vendor. Also sort or tag by job number so you can see project-level payment impacts if needed.

Export the report into a spreadsheet or save a snapshot from the system to use as your working list for this payment cycle. Include columns for vendor, invoice number, due date, amount, and project.

If company policy requires, send the preliminary list to the finance manager or controller for awareness before you begin payment selection and cash prioritization.

On your working list, mark invoices that are already past their due date or will come due before the next planned payment run. These are high-priority for payment to maintain good vendor relationships.

Look for invoices with terms such as “2% 10, net 30” or other early payment discounts. Calculate whether you are still within the discount window and what the savings would be for each invoice.

With the finance lead if needed, compare potential discount savings to current cash needs. Decide whether it makes sense to pay early to capture the discount or to hold to the standard due date.

On the working list, clearly tag which invoices you will pay early to earn discounts. Note the discounted payment amount and confirm that the system will record the discount correctly.

If cash is tight, mark invoices that are not yet due and have no discount as low priority. Plan to leave these invoices out of the current payment batch if necessary to protect cash flow.

After this analysis, you should have a set of invoices flagged as “Pay Now,” “Pay Early for Discount,” and “Defer.” Save and date this version of the list for the payment planning step.

From the accounting system or treasury report, note current bank balances for the operating account and any dedicated project accounts. Review short-term cash flow forecasts showing expected client receipts and upcoming major disbursements.

Sum the amounts of all invoices flagged as “Pay Now” and “Pay Early for Discount” on your working list. Compare this total to available cash and any internal guidelines on minimum cash reserves.

Determine if there are invoices that must be paid regardless of cash constraints, such as critical utilities, equipment rentals, or key subcontractors needed to keep projects moving. Mark these as top-priority.

With the finance manager or controller, agree on a maximum total dollar amount for this payment run based on cash availability and reserve targets. Document this ceiling on your working file.

If total candidate payments exceed the ceiling, move lower-priority invoices (those not yet due or with low impact) to a “defer” status until the next run. Make sure high-priority and discount-eligible items remain in the current selection.

Create a final list or filter in your working file and in the accounting system that shows exactly which invoices will be included in this payment run and the total amount.

In the accounting system, choose the bank account from which this payment batch will be drawn. Confirm that the account matches your planning in the cash review step and that routing details are correct.

Use system filters (by status, due date, vendor, or manual selection) to select only those invoices you decided to pay in this run. Cross-check against your working list to confirm no invoice is accidentally included or omitted.

Enter the date on which payments will be issued (check date or electronic payment date). Also set the accounting posting date according to your company’s financial calendar and cut-off rules.

For each vendor in the batch, confirm the correct payment method is set (check, ACH, wire transfer, or other). Review vendor records to ensure bank details or mailing addresses are current and complete.

Verify that the system is calculating retention and early payment discounts correctly for each invoice, according to contract terms and your decisions in prior steps. Adjust settings for individual invoices if needed.

Before generating actual payments, save the batch and run a pre-payment register or proof report that lists all planned payments, vendors, and amounts for review.

Print or display the pre-payment register and compare it to your final working list of invoices. Confirm that each vendor and invoice amount matches and that the total batch amount is as expected.

Scan the register for unusually large payments, first-time vendors, or changes in payment patterns. For any such items, double-check underlying approvals and vendor details.

Spot-check bank account numbers for electronic payments and mailing addresses for check payments, especially for vendors with recent master data changes. Confirm that changes were properly authorized.

Check a sample of payments to ensure retention withheld and discounts taken match contract terms and prior decisions. Make sure any credits or prior overpayments are correctly applied.

If possible, have a second person in Finance or management review and sign off on the pre-payment register, especially for larger batches. This second set of eyes adds an extra layer of control.

Record the reviewer’s name, date, and any notes directly on the pre-payment register or in the system. Keep this with the batch records as proof that the review was completed before payments were issued.

Based on company policy and the total batch amount, identify who must authorize the payment run (for example, finance manager for smaller batches, controller or executive for larger ones).

Send the payment batch summary, pre-payment register, and any notes on unusual payments or cash impacts to the designated authorizer. Include total amount, number of vendors, and planned payment date.

Briefly outline any relevant factors such as tight cash position, critical vendors in the batch, or early payment discounts being taken. This context helps the authorizer make an informed decision.

Be prepared to answer questions about specific payments or to adjust the batch (for example, remove a non-critical payment) if the authorizer requests changes.

Once the authorizer is satisfied, obtain their written or electronic approval (signature on the register, email confirmation, or approval within the payment system).

Save the authorization documentation with the payment batch file and note the approver, date, and time in your tracking log or system.

In the accounting system, open the authorized payment batch and confirm one last time that the content has not changed since approval. Initiate the payment run process according to system instructions.

If paying by check, ensure check stock is loaded in the printer, secured from unauthorized access. Print checks and verify that numbering is correct and consecutive. Immediately remove printed checks and secure them.

For electronic payments such as ACH or wire transfers, generate the payment file from the system in the format required by your bank. Save the file in a secure, access-controlled location.

Spot-check a few printed checks and electronic payment records to confirm that vendor names, amounts, and bank details are correctly output.

Log in to the bank’s portal using authorized credentials and upload the payment file. Follow bank procedures to validate and approve the file for processing, including any required security tokens or dual approvals.

Once checks and electronic payments are generated and submitted, confirm that the accounting system has updated invoice statuses to “Paid” or equivalent and that payment numbers are recorded.

For check payments, match each check to its vendor, insert checks and remittance stubs into envelopes, and address them correctly. If some checks will be picked up, mark those for hand delivery rather than mailing.

Ensure that each payment includes a remittance advice listing invoice numbers, dates, and amounts paid for that vendor. For electronic payments, prepare remittance emails or portal notices with the same level of detail.

Check vendor records for preferences such as “email remittance only” or specific contacts for remittance information. Follow these preferences to reduce confusion and ensure information reaches the right person.

Take check envelopes to the mailroom or postal service promptly. For any checks being picked up in person, require identification or signature and log the name and time of pickup.

For electronic payments, send remittance emails or system-generated notices the same day the payment is transmitted. Include contact information in case the vendor has questions.

Mark payments as “Mailed,” “Picked Up,” or “Transmitted” in your tracking log, including the date and method. This helps you respond accurately if vendors ask when a payment was sent.

After the payment run, verify that each invoice in the batch now shows a status of “Paid” or equivalent and that a payment reference number is attached in the accounts payable ledger.

Ensure that payment journal entries have been posted from the subledger to the general ledger, reducing accounts payable and cash accounts by the correct amounts.

When bank statements or online activity are available, match the total of the payment batch to the withdrawals from the bank account. Investigate any differences between the batch total and bank amount.

If any checks are returned or electronic payments are rejected by the bank, identify the reason (wrong address, closed account, incorrect bank details). Reverse or adjust entries in the system as needed and contact the vendor to correct information.

For failed payments, change invoice status back to “Approved for Payment” or similar, so they can be included in a future payment run once issues are resolved.

Save reconciliation notes, bank confirmations, and any correspondence about returned payments in the payment batch file for future audit or reference.

Create a folder (digital or physical) for each payment batch using a consistent naming convention, such as “YYYYMMDD_PaymentBatchNumber.” Place all related documents into this folder.

Include the pre-payment register, authorization documentation, vendor invoices, remittance copies, bank confirmations, and reconciliation notes in the batch folder. Ensure documents are dated and labeled clearly.

Limit access to payment records to authorized finance and management staff, while allowing read-only access to others who may need payment information for job cost reviews.

Confirm how long payment records must be kept under company policy and legal requirements. Note destruction or archiving dates if your system tracks them.

When audits occur, use the organized payment batch folders to quickly produce requested documents showing approvals, calculations, and bank evidence for specific payments.

From time to time, review your payment records for recurring issues or gaps (for example, missing approvals, unclear remittances). Use what you find to refine the Vendor Payment process and strengthen controls.