What Are The Steps Of Invoice Processing?

 

Being a business holder, dealing with hundreds of invoices from different departments daily and managing them is not easy. The first part of account payable (AP) is to receive an invoice, and after that, there are a series of steps that will help maintain the finance's vital records. 

 

 

 

Being a business owner, everything is so messed up that no matter how careful you become blunders happen. Similar is the case with invoice processing. That is why the company might automate the invoice processing system rather than operate it manually to avoid errors and mistakes.

 

So, suppose you are a business owner and messed up with the growing complexities of the leading business. In that case, you must first understand the steps involved in invoice processing and identify the inefficiencies and risks they create.

 

Because once you know the steps and the crucial factors that majorly implement automation invoicing, you will surely be able to implement the best practices with account payable automation software.

 

So before we begin, it is essential to know what invoice processing is. Invoice processing involves steps from receiving an invoice to paying it. This sounds simple, but as the business grows and further steps are involved, these invoices may become complex.

 

The invoices can come in various forms like PDFs, emails, receipts, and even paper forms. So someone should be there who looks and file all these invoices to make financial statements.

 

However, to understand it better, we will look at the steps of invoice processing so that it becomes easy to handle problems associated with it. There are the following steps:

 

 

STEP: 1 Receiving an invoice from a vendor

 

The first step in invoice processing is receiving an invoice from the vendor. The vendor will send you an invoice of purchase or order completion once their service is completed.

 

The invoice is received via email in the form of a PDF or via mail in the form of a paper document. The clerk or bookkeeper collects this information regarding the invoice. This is done manually, but no matter how much care is taken, there are chances of errors that might develop in manual processing.

 

STEP: 2 vendor’s copy is placed in your company filling system

 

For the backup, the invoice that is received from the vendor is fed into the computer filing system. To avoid mistakes and errors, it is recommended to paste a copy of the vendor’s invoice or scan the mail. This is essential because, if any dispute may arise, proof and a copy must be there. Moreover, it is the mandatory step for the audit procedure.

 

Many companies store these invoice copies manually and pile many files in the cabinet. Finding the desired invoice becomes hectic, as keeping all the papers and files organized for audit often becomes quite challenging.

 

So now, many companies find it easy to invest in electronic devices in which the invoice copy is scanned or copied and pasted. This will save the company from many human errors, but still, they need to be cautiously arranged, scan all the copies, and be vigilant about it.

 

This step of invoice processing is time-consuming, but it will fare much better than finding the invoices manually.

 

STEP: 3 Acceptance of the invoice

 

After the invoice details are fed into your electronic system, the next step is to approve the invoice. As if the business is small-scale, one to two people are there for approval and have the authority.

 

But getting the invoice approved from a person or two who have a lot of invoices to accept, they often put the invoices in the ‘to be approved’ box. This is not a good practice, as they never get approved, and when fraud or scams happen, the AP clerks are being chased.

 

So getting an AP automation system for the approval of invoices is the best choice to make as there are fewer chances of errors and secure the business from fraud.

 

STEP: 4 Payment of the invoice

 

 

The very last step in invoice processing is the payment of the invoice. The invoice, after being approved, will move to the following payment step.

 

Here the approved invoices are being sent to the correct person where the payment is being made. This is the final step but the most crucial one, as most of the invoices get lost here, and once they are lost, all the steps are messed and payments become delayed.

 

These were the four significant steps of invoice processing. But as discussed above, these steps may become very complex as the business grows or if the business setup is complex. So rather than performing all these steps manually, buying software for invoice processing is mainly recommended. This will lead to fewer errors and simplicity.