Every organization, big or small, must handle invoice processing. This involves the accounts payable department receiving an invoice, checking its details, getting approvals, and making payments.
Though it may seem simple, managing numerous invoices from various vendors can be frustrating. Delays in this process can affect your relationships with vendors and, consequently, your business outcomes.
This post explains what invoice processing is and why it’s important to automate.
What is invoicing processing?
Invoice processing is the entire journey from receiving the invoice to making the payment. The accounts department manages bills and invoices for credit purchases. The process includes receiving, approving, scheduling payment, and recording in the ledger.
Invoice Processing Steps
1. Receiving and Checking Invoice Details
When the accounting department receives an invoice via email, the initial task is to review the invoice details. The accounts executive compares the purchase order (PO) with the invoice, checking details like purchased quantity, order number, and billed amount. It’s crucial to verify these details, especially since the billed amount might only represent a portion of total purchases. Any discrepancies must be addressed with the vendor before proceeding.
This verification can be done manually or through software such as Collect’s payment dashboard, which streamlines tasks like invoice sourcing, tax deduction, payments, and automated accounting.
2. Approving the Invoice
After confirming essential invoice details, the accounts payable department needs approval before payment. As the business grows, handling numerous invoices can be time-consuming and may lead to misplacement in desktop folders. Automated systems manage invoices digitally, saving time and reducing manual errors.
3. Preventing Fraud and Duplication
Supplier invoices are prone to fraud and duplication, so the next step is to check for these issues. This involves ensuring there aren’t two invoices for a single purchase order, avoiding double payments. It also includes verifying details like billed amount and purchase order number to detect any discrepancies that could indicate fraud or duplication.
4. Sending the Invoice for Payment
Once the accounts payable department confirms there are no errors, fraud, or duplication in the invoices and resolves any issues, they approve the invoice and send it for payment. The payment is typically made online.
5. Entering Invoice Details in the Ledger
The final step involves recording the invoice and payment details in the company’s ledger for accounting. Manual entry can be time-consuming and prone to errors. Collect’s payment dashboard simplifies this by automatically capturing invoice details using intelligent OCR, eliminating the need for manual data entry.
Benefits of Invoice Processing:
- Improved Efficiency: Streamlining the accounts payable process through invoice processing saves time by replacing manual tasks with automation. This allows businesses to handle a large number of invoices quickly and accurately.
- Increased Accuracy: Automation minimizes human errors, enhancing data accuracy. This results in more precise financial reporting, empowering businesses to make better decisions based on reliable data.
- Reduced Costs: Automated invoice processing eliminates expenses associated with manual data entry, such as labor and paper. It also cuts costs related to errors, including late payments, incorrect payments, and dispute resolution.
- Improved Cash Flow: Swift and accurate invoice processing enables businesses to receive payments faster, enhancing cash flow and better managing working capital.
- Improved Visibility: Automated processing offers greater visibility into the accounts payable process, facilitating easier tracking of invoices and payment status. This helps businesses stay on top of their cash flow.
Importance of Automating Invoice Processing:
➡️ Automating invoice processing enhances efficiency and accuracy by reducing the reliance on manual data entry and review, saving time and money.
➡️ It helps minimize errors and prevent duplicate invoices, ultimately improving cash flow.
➡️ Automated processing provides better visibility into the invoicing process, allowing businesses to track payments and revenue more effectively.
Automate Invoice Processing with Collect:
- Easy Sourcing of Invoices: Collect allows multiple ways to add invoices, including forwarding them via email, vendors adding them directly, or importing them through accounting software.
- Auto-Capture of Invoice Details: Collect automatically captures invoice details, eliminating manual data entry and preventing duplicate payments.
- Automatic Deduction of tax: The platform auto-calculates and deducts tax for every invoice by adding the tax category of vendors.
- Quick and Seamless Reconciliation: Collect ensures seamless reconciliation between vendor payments and invoices