Last editedMay 20222 min read
Late payments can result in a company’s services, supplies and materials being interrupted, as well as hurt supplier relationships. While one or two late payments can be forgiven, continued overdue payments will severely hinder your business.
For this reason, companies need to have an efficient invoice payment process in place. Invoice processing plays a major role in business management. It comprises a series of steps that need to be taken by accounts payable, in order to efficiently manage vendor or supplier invoices, from their receipt to payment.
With the advent of technology, invoice processing has become far more streamlined. Companies can now upgrade their invoicing systems so that invoices are received, recorded, and paid automatically. Invoice processing is now generally performed with specialist invoice automation software, e.g., Invoiced, or Chargebee, and referred to as automated invoice processing.
Now, let’s find out a little more about the invoice payment process.
What is the invoice payment process?
Invoice processing is a term referring to all the steps involved in the tracking and payment of supplier invoices. Whether an invoice is received via email, as a PDF attachment, or as an electronic invoice, it needs to be automatically scanned into the accounting system. From here, the invoice undergoes a designated workflow approval and payment process.
There are several steps involved in the invoice payment process, including receiving the supplier invoice, getting it approved, establishing a payment date, paying the invoice, and recording it in the general ledger.
Steps involved in the invoice payment process
1. Receipt of invoice
The accounts payable department verifies that the stated items or services have been procured. They then match the amount billed to the amount listed on the original purchase order (PO). Any discrepancies must be resolved with the supplier before the invoice can be routed for approval.
2. Approval of invoice
If all the information is correct, the invoice is sent for approval as per company protocol.
3. Payment of invoice
Once the invoice is approved, it will be sent for payment according to the terms agreed with the vendor. Sometimes companies choose to pay invoices early to take advantage of discounts, for example 2% Net 10 (or 2% savings for paying a bill within 10 days).
Benefits of online invoice payment processing
With an established invoice processing workflow in place, your accounts payable department becomes far more efficient. They can quickly and easily track what’s owed to suppliers, make sure payments are approved correctly, and make payments in a timely fashion.
Other advantages of online invoice payment processing include:
Consistency in processing vendor invoices more quickly and more efficiently
No more mislaying or losing invoices – or having to go back to suppliers for a copy of the invoice
A reduction in late payment fees since invoices are paid on time
Ability to take advantage of early payment discounts offered by vendors for paying invoices, often within 10 to 15 days
The elimination of instances of errors and double data entry across multiple systems
Potential to develop more robust supplier relationships
Assurance that the supply chain keeps moving smoothly, since suppliers are paid on time
Reduces repetitive data entry labor, and enables employees to focus on core business activities
Automated invoice processing software features
Different invoice processing platforms offer varying features, but it’s recommended to look out for the following when considering an automated invoice processing system:
Automated approval workflows
Dashboards showing which suppliers have been paid
Option to see which invoices are awaiting payment, and which need to be approved
Ability to integrate with a company’s existing software and systems, e.g., their ERP
Manual invoice processing is time-expensive and error-prone, so it’s surprising how many companies have yet to turn to automated invoice processing. Software helps to simplify the accounts payable process and enable companies to improve cash management, as well as record and review their transactions to ensure they’re legitimate, and ensure suppliers are getting paid on time.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.