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How to process invoices to pay and get paid on time

GoCardless
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Last editedNov 20222 min read

There are many hurdles that new businesses need to jump to stay afloat in their early years. Chief among them is managing cash flow. Newer businesses tend to have lower profits as they strive to establish their brand and gain a loyal following. Furthermore, they’re often mired in start-up costs and loan repayments which can place a further strain on their margins. 

Invoice processing is the start of the accounts payable process. Having the right processing infrastructure in place is crucial to maintaining accurate records, improving visibility of your company’s finances and helping to improve cash flow. 

Accounts payable invoice processing: a step-by-step guide

The simpler the end-to-end process of accounts payable, the faster invoices are processed and the greater visibility a company has when reviewing its finances. This prevents cash flow crises by avoiding the spending of funds earmarked for accounts payable. 

Let’s take a look at the accounts payable process steps:

Step 1: Verify and track

The first step is to verify the purchase and establish the correct payment amount and terms. To do this, the vendor’s invoice should include the following information to help both parties track the impact on accounts and inventory:

  • Date the invoice was created or sent

  • Contact information including billing information

  • Description and pricing for the product or service 

  • Payment information

If any of this information is absent, obtain it from the vendor ASAP. 

Step 2: Data entry and GL coding

After verifying that all the necessary information is included in the vendor’s invoice, enter that data into the company’s accounts payable ledger, either manually or using automated accounting software. Automating the data entry process can reduce invoicing costs significantly, while also guarding against the risk of human error that can come with manual data entry. 

As the company grows and accounts payable becomes more complicated, automating this process may be more prudent. In either event, apply General Ledger Coding to make it easier for you to track your credits and debits. 

Step 3: Approval 

After verifying the information from the vendor invoice and entering the relevant data into the system, submit the invoice for approval before sending payment. 

The speed of the approval process plays a significant role in accounts payable turnaround times and therefore company revenues. When approving parties are busy, it’s all too easy for invoices to be buried under an avalanche of paperwork on their desks. Likewise, misplaced invoices can slow down the approval process significantly. Automated invoice processing systems negate the risk of lost paper invoices slowing down the approval process.

Using automation to improve invoice processing and get paid on time

The accounts payable process can get quite involved, especially as you start to accept more payments. Automation can bring down the financial and productivity cost associated with manual invoicing while also ensuring accuracy and visibility. 

While automation can help to make your accounts payable invoice processing more efficient, GoCardless can do the same for accounts receivable, especially if you accept recurring payments from clients. By accepting regular payments via Direct Debit, you spend less time chasing up late payments, enabling you to ‘set and forget’. It also provides a secure payment link along with your invoice for a more convenient and intuitive customer payment experience for one-off payments. 

We can help

GoCardless is a global payments solution, setting people and businesses free from the frustrations and cost of outdated payment methods. Find out how GoCardless can help you with one-off or recurring payments.

Article sources

https://www.hfma.org.uk/docs/default-source/our-networks/healthcare-costing-for-value-institute/approved-costing-guidance/understanding-the-general-ledger-for-costing---guidance-paper-february-2016

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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