Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

The 6 Steps of the Invoice Management Process

The process of invoice management consists of a series of structured steps that help companies receive, verify, approve, pay, and record supplier invoices in an accurate and controlled way.

1. Invoice Receipt and Capture

The invoice management process starts when the company receives an invoice from a supplier. The invoice can arrive by email, paper mail, supplier portal, PDF attachment, or electronic data exchange, and the first task is to capture the key details correctly. At this stage, the accounts payable team or system records important information such as supplier name, invoice number, invoice date, amount, tax details, and payment terms. If this step is not handled accurately, the rest of the process can be delayed by missing data, duplicates, or format inconsistencies.

How it works:

A packaging supplier sends an invoice by email after delivering cartons to a manufacturing company. The accounts payable team opens the email, downloads the PDF, and enters the invoice into the accounting system or captures it automatically through invoice software. The system records the supplier name, invoice amount, due date, and invoice reference number so the document can move to the next stage. If the invoice arrives with a missing PO number or unclear tax information, the team may need to contact the supplier before continuing.

2. Invoice Validation

After the invoice is received, the next step is to validate whether the invoice is legitimate, complete, and accurate. This includes checking whether the supplier is approved, whether the invoice contains all required fields, and whether the amounts, dates, tax details, and line items make sense. Validation is important because it helps detect incorrect billing, duplicate invoices, or documents that do not meet internal policy or legal requirements. A strong validation step reduces payment risk and improves control before the invoice reaches approval.

How it works:

A logistics company receives an invoice for transport services from a regular carrier. Before approving it, the AP team checks whether the carrier is in the supplier master file, whether the invoice number is unique, and whether the service dates and charges match the expected agreement. During the review, they notice that the fuel surcharge was billed twice, so the invoice is flagged for correction. This prevents the company from paying an incorrect amount and creates a documented control point in the process.

3. Invoice Matching

Once the invoice is validated, companies often compare it with other procurement documents through a matching process. For PO-based purchases, this usually means two-way or three-way matching between the invoice, purchase order, and goods receipt or delivery confirmation. The purpose is to confirm that the goods or services were ordered, received, and billed correctly before payment is approved. If there is a mismatch in quantity, price, or description, the invoice is held until the discrepancy is investigated and resolved.

How it works:

A company orders office chairs through a purchase order for 100 units at an agreed unit price. When the supplier sends the invoice, the AP team checks it against the PO and the warehouse receipt that confirms only 95 chairs were delivered. Because the invoice is for 100 chairs, the system flags a variance and stops automatic approval. The buyer then contacts the supplier to correct the invoice or confirm whether the remaining items are still in transit.

4. Invoice Approval

After validation and matching are complete, the invoice moves into the approval stage. Approval means the appropriate manager, budget owner, or department confirms that the invoice should be paid based on company policy and spending authority. In many organizations, this step follows a workflow that routes invoices to the right approvers depending on amount, category, cost center, or business unit. A clear approval process helps prevent unauthorized spending and ensures accountability before the payment is released.

How it works:

A marketing department receives an invoice from an agency for a digital campaign. After the AP team validates the invoice, it is automatically routed to the marketing manager because the expense belongs to that department’s budget. The manager reviews the service scope, confirms that the campaign was delivered, and approves the invoice in the system. Once approved, the invoice status changes from pending to ready for payment

5. Payment Scheduling and Execution

When the invoice is approved, the company schedules it for payment according to the agreed payment terms and internal cash flow plans. At this point, finance decides when and how the supplier will be paid, whether by bank transfer, card, ACH, or another payment method. Good payment scheduling helps the company avoid late fees, preserve supplier relationships, and take advantage of early payment discounts where available. Once the payment is executed, the invoice is marked as paid in the financial system.

How it works:

A supplier invoice for raw materials is approved with payment terms of net 30 days. The finance team schedules the payment on day 28 to stay compliant with the contract while still managing working capital efficiently. In another case, if the supplier offers a 2% discount for payment within 10 days, the company may choose to pay earlier and reduce the total cost. After the bank transfer is completed, the payment reference is linked to the invoice in the system.

6. Recording and Reconciliation

The final step in invoice management is recording the transaction properly and reconciling it with the accounting records. This means the invoice and payment are posted in the accounting or ERP system so that liabilities, expenses, and cash movements are accurately reflected in the general ledger. Companies also archive the related documents for audit, reporting, and compliance purposes. This final step is essential because it closes the invoice lifecycle and ensures the financial records match what was actually approved and paid.

How it works:

After a maintenance invoice is paid, the AP team posts the expense to the correct cost account and reduces the accounts payable balance in the ledger. The invoice, approval trail, and payment confirmation are stored together in the system so they can be reviewed later during an audit. At month-end, the finance team reconciles supplier balances and confirms that the invoice no longer appears as an open liability. This helps keep the company’s financial statements accurate and complete.

3 Real-Life Examples of the Invoice Management

1. SONIC

SONIC, America’s Drive-In, handled invoice management through a highly manual process before changing its system. Each company-owned restaurant received supplier invoices locally and then mailed batches to headquarters, where the AP team manually keyed them in, reviewed them, and followed up on missing or late invoices. With around 450,000 invoices per year, this created delays, lost documents, supplier calls, and a slow approval cycle. The company wanted a more controlled invoice management process with better visibility, fewer late payments, and faster handling.

To improve the process, SONIC implemented Basware AP Automation and digitized invoice capture, workflow, review, cost allocation, and approvals. The system automatically routed invoices to the right approvers, sent reminders, escalated overdue approvals, and integrated the data with SONIC’s ERP. As a result, about 97% of invoices were processed electronically, the company saved about $160,000 per year, and invoice staffing was reduced by 25%. This example shows how invoice management becomes more effective when invoice receipt, approval, and tracking are automated end-to-end.

2. Duni

Duni, a global tabletop and packaging company, was processing about 100,000 invoices annually through a shared service center. Its invoice management process relied too heavily on manual work, especially in email-based approvals, which limited speed, transparency, and control. The company needed a more standardized workflow that could reduce manual posting steps and improve invoice handling across the business. It also wanted stronger matching and better audit visibility in its AP process.

Duni improved its invoice management process by using Medius AP Automation to simplify invoice posting and automate approval routing. The new setup supported two-way matching between invoices and purchase orders, increased the touchless processing rate from 32% to 70%, and achieved 97% automatic distribution for approvals. The company also gained more transparency and easier access for auditors, which strengthened control across the full invoice lifecycle. This is a strong example of how invoice management improves when validation, matching, and approvals are built into one structured workflow.

3. KBC

KBC, a banking and insurance group, processed more than 90,000 invoices per year with around 15,000 potential users involved in related workflows. That scale made invoice management difficult without a clear digital process, especially when multiple people needed visibility into coding, verification, approval, and payment status. The company wanted more transparency, better traceability, and a more efficient way to move invoices through the AP process. In other words, KBC needed invoice management that could be monitored in real time rather than handled through fragmented steps.

KBC addressed this by digitizing accounts payable with Tungsten ReadSoft Process Director. After implementation, invoices were immediately digitized, coded, and sent for approval, and users in SAP could see exactly where each invoice was in the process and who was handling it. The company reported that every workflow included a traceable history, giving management a full overview of the AP process from registration to payment. This example shows how invoice management becomes much stronger when invoice status, approval flow, and audit trail are visible in one system.

7 Best Practices for Invoice Management Process

Here are some of the best practices for the invoice management process that you should know about!

1. Prioritize invoices

The AP department must set priorities for the invoices. The invoices should be paid according to the payment date and terms. It is important to prioritize your invoices by timing to avoid late payments. 

Additionally, if you are using credit cards, you can pay the cards with the highest interest first. This will save you a lot of money in the long run. 

2. Identify bottlenecks to streamline the workflow

Complex systems are usually the cause of errors or payments that occur. It is important to look at the existing workflows and check where the bottlenecks arise to mitigate their effects. 

Streamlining the invoice can promote a standardized and centralized process throughout the organization. 

Additionally, automation can greatly reduce the invoice processing time, ensuring the timeliness and accuracy of payments. 

3. Create a strong fraud detection

When it comes to dealing with money, there is always a risk of fraud. Sometimes, even your own employee will be involved in this kind of activity. When paper checks are the source of payment, the chance of fraud is even higher. 

The AP automation will help solve this problem through approval systems and precise audit trails. Having a real-time display status of the invoices can show discrepancies and errors that you could check to see if there is any fraudulent activity being committed. 

4. Settling disputes with suppliers

Failure to pay invoices will not just create cash flow problems, but it will also affect your good relationship with your supplier. 

In addition, settling disputes is important to see if your supplier is still compliant with your requirements. If it’s clear that your supplier is not compliant anymore, then you can consider finding new suppliers.

Although this may happen, it is good to end your relationship with your supplier on good terms. This will keep your reputation intact. 

5. Use automation

Automation removes the burden of manually tracking the movement of invoices internally. Also, it eliminates many bottlenecks that are related to traditional invoice management processes. Automation can give you the following benefits:

• Transparency of the movement of the invoice
• Improve the relationship with your suppliers
• Streamlines the procurement process
• Enhance the productivity of your employees
• Saves a lot of time and money

6. Create a structured approval workflow

A structured approval workflow helps the company define who reviews, verifies, and approves invoices before payment is released. This is important because unclear approval paths often create delays, missed deadlines, and inconsistent control over spending. A well-designed workflow also ensures that high-value or unusual invoices receive closer review than routine transactions.

For example, a company can assign standard invoices to department managers, while larger invoices above a set threshold must also be approved by finance. This makes the invoice management process faster for routine purchases and more controlled for higher-risk transactions. In addition, clear approval rules improve accountability because every person involved knows their role in the process.

7. Prevent puplicate payments through strong controls

Another important best practice is to build controls that detect duplicate invoices before payment is made. Duplicate payments can happen when a supplier resends an invoice, when the same invoice is entered twice, or when invoice details are slightly changed and not noticed during review. This creates unnecessary cost, weakens cash control, and can also be a sign of deeper process problems or fraud risk.

Companies can reduce this risk by using automated checks that compare invoice number, supplier name, date, and amount before the invoice moves to payment. It is also helpful to require approval before recording invoices in the system and to perform regular AP audits to identify duplicate or suspicious transactions. These controls strengthen the invoice management process by improving accuracy and protecting the business from avoidable payment errors.

The Importance of Invoice Management

Invoice management is important because it helps companies control how supplier invoices are received, verified, approved, and paid. A well-managed invoice process reduces the risk of late payments, duplicate invoices, and billing errors that can negatively affect financial performance. It also supports better cash flow planning by giving the business a clear view of outstanding obligations and upcoming payments.

In addition, effective invoice management strengthens supplier relationships because invoices are handled accurately and paid on time. It also improves transparency, compliance, and internal control by creating a clear record of each step in the payment process. When supported by standardized procedures or automation, invoice management can save time, reduce administrative effort, and improve overall efficiency within the procurement process.

Conclusion

Invoice management is an important part of the financial and procurement process because it helps companies control how invoices are received, verified, approved, and paid. When this process is clearly organized, it reduces late payments, errors, duplicate payments, and risks related to weak financial control. At the same time, it gives the company better visibility into its obligations and supports more effective cash flow planning.

The defined types and steps of invoice management show that invoice handling is not only an administrative task, but also an important element of efficient business operations. Standardization, structured approval workflows, and greater transparency improve compliance, accuracy, and overall process control. For that reason, effective invoice management plays a key role in improving operational efficiency and supporting the financial stability of a company.