How Does Invoice Management Process Work?

Every organization has its own way of doing its invoice management process. However, whatever invoice you are dealing with, the process in invoice management will typically include the following:

1. Receiving the invoice from your supplier

In this step, the supplier sends invoices after finishing a project, delivering materials, or providing services. 

The invoices are then received by the person that is in charge which is typically the accounts payable department. 

The invoice that the organization will receive must include:

• The date when the supplier sent the invoice
• Contact information of both parties
• The purchase details
• The payment details

The invoices are typically sent as a paper document or attached to an email that the supplier will send. 

2. Recording the invoice

After the invoice has been sent, the details are checked and entered into the payment system. This is done manually by an AP employee or through invoice management software. 

Aside from storing the invoice, it is crucial to make a copy or digital version of the invoice in case the original copy is lost or accidentally deleted. Additionally, the copies of invoices can help if suppliers find discrepancies or attempt to request an additional payment. 

3. Validating the legitimacy of the invoice information

After the invoice has been logged and checked, the accounts payable employee will send the invoice for final approval before executing the payment. 

Depending on the size of the organization, there may be two or three executives who have the authority to approve the invoices.

If all the documents match, the invoice will be approved for payment. In AP automation, the software will automatically compare the documents if they match before approving an invoice for payment.

4. Approving payments

Of course, the last step in the process is paying the supplier. Depending on the recipient, it can take days or even weeks before the supplier receives the payment. 

The payment system is crucial in the duration of payment acceptance due to the fact that email confirmations can be ignored or lost. 

That is why the AP employee must talk directly to the supplier to make sure that it understands when it can expect to receive the payment. 

How the Invoice Management Process has Changed?

The changes in the invoice management process have sped up, especially when the pandemic started. The stacks of documents that we normally see in offices have been reduced drastically.

Digitization has taken over the invoice management process. Nowadays, you can send documents through emails or messaging applications. Due to this, people can now easily communicate rather than send letters.

The automation in invoice management has also helped organizations to improve the process. It reduces errors and makes the process faster. Additionally, it reduced menial tasks that are in the process to give more time for employees to focus on more important processes. 

Best Practices for Invoice Management Process

1. Prioritize invoices

The AP department must set priorities with the invoices. The invoices should be paid according to the payment date and terms. It is important to prioritize your invoice by the 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 relationship with your suppliers
• Streamlines the procurement process
• Enhance the productivity of your employees
• Saves a lot of time and money