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Are you facing difficulties in managing the invoices? It’s normal and it happens when business grows overwhelmingly. Well, to maintain this task, you have to understand the Invoice Processing Procedure first.

Usually, the account payable department performs the task of invoice processing while following multiple steps of verification. Nowadays, companies prefer to outsource the task of invoice processing, which saves both time and money.

On the other side, some companies have their dedicated invoice management software. The software automates all the tasks related to invoices precisely without creating any error in the ledger. Using the software, companies can easily handle the Accounts Payable (AP) and invoices but it has some glitches. Verifying the software-generated statement through manual inspection is the need in these organizations.

Understanding how manually the process invoice is done will help organizations in making the AP system strong. Here the blog aims to explain the Invoice Processing Procedure in simple steps.

A. Assessing the task of Invoice Processing

Every business organization aims to achieve financial success and that’s why they engage in selling its products and services. But what is the most important thing that businesses can’t comprise while selling products and services? Money! Of course yes, but invoices are the most essential thing that a company relies on generation of the invoice when selling activities take place.

Invoices are nothing but proof of sale that a seller issues when a customer purchases something. Businesses use the billing and invoicing process to keep track of their sales and payment information. Most of the time, businesses sell goods to customers or other businesses on credit. The payment for these types of sales is made after a few days, or sometimes even months. Therefore, keeping the record of the sale through invoices becomes very crucial here.

Invoices can act as a legal agreement sometimes when it comes to receiving the payment for goods sold. Businesses must have a clear understanding of the Invoice Processing Procedure to keep the resources maintained. Invoices also act as a reminder to the buyers who take goods on credit for the due payments. On the other hand, businesses also keep track of these buyers who made delays in completing the payment.

Like any accounting procedure, invoices are processed with specific measures of the accounting system. An invoices processing company tracks the outflow of money and maintains checks and balances in the accounting system. Companies nowadays outsource invoice processing services, which helps them to comply with invoices on time.

B. The 5 Steps

A typical buyer will receive the invoice immediately when they place an order and the cycle of the invoice will start from there. The cycle ends when the buyer pays the dues to the seller in monetary terms. From invoice generation to receiving payments, multiple layers are involved in the process. This section is dedicated to simplifying the invoicing task by splitting the task into five steps.

1. Receive Invoice

The task of the Invoice Processing Procedure starts when it receives an invoice from a vendor. Every company has its dedicated invoice processing system in which the business processes all invoices and realizes their payments. You can also sell invoices as it considers real-time money for businesses. For example, Facebook has bought $100 million in unpaid invoices from small companies to support them.

At present, in the digital era where most of the business operations are done online. Similarly, businesses prefer to generate invoices in softcopies and save them in their internal database. However, the main tasks of the process invoice start from manually selecting the invoices. A lot of organizations are there that still process all invoices manually rather than going for an automated tool.

Why they are still using the manual process? Well, the reason is simple, an invoice received from a vendor is very foreign to the internal Invoice Processing Procedure. Even the Invoice Processing Procedure would not consider it as an invoice without manual input. Therefore, organizations ask vendors to get invoices in paper format or via email.

2. Invoice Verification

Verifying the key information of the invoice is essentially important before putting the manually selected data into the database. The in-house invoice processing system or software must have the capacity to verify the details of the invoice. Spotting the error in the invoice is the first step of verification where the system identifies errors.

After checking the error, the system will find the details of the unique transaction. This was made while the invoice was generated and handed over. Suppose a company has a system of ordering goods based on the purchasing numbers (PO). Therefore, the invoice made against those orders must contain the PO numbers. The system will verify the PO numbers, digit by digit from the sales record.

Double verification is a must here to eliminate all the errors in processing invoices. It is for payment files and safeguards the Invoice Processing Procedure efficiently. After verifying the details, the next step which is data entry starts.

Remember that, an invoices processing company provides ample chance to vendors to rectify the details that they have made. They provide a window for correcting the invoice details and give vendors enough time for correction. Without verification in the billing and invoicing process, vendors would not get this opportunity to make corrections to the invoice.

3. Digital Storage

The digital journey of the invoice starts immediately after the end of the verification process. Small companies play smart in this area as they outsource invoice processing services and data entry tasks at a very minimal rate. However, the data entry task includes putting the name of the client accurately in the system. Besides the name, the tax ID, payment information, etc include as a part of the generation of the invoice.

As discussed before, companies prefer invoices in physical format. However, physical papers cannot comply in the digital space therefore scanning is done. The scanned images get recorded in the company’s database for future reference. Storing process invoice files in digital format helps businesses to access them whenever they need.

Errors are part of the Invoice Processing Procedure and it would come. A successful organization will accurately handle the error without creating any financial blunders. Keeping the invoices in digital files helps businesses to resolve disputes. Businesses can show invoice details when a dispute appears in the front.

4. Getting Approval

Authorizing the invoicing process is essentially important to make the financial system viable. Every organization has a dual system to check the invoice and make errors if appear. This hierarchical structure or chain of command plays a pivotal role in authorizing payments. This chain encompasses various levels of management or departments, each with distinct responsibilities in the approval process.

The objective is to establish a systematic and thorough review to guarantee that the invoice aligns with organizational policies and financial parameters. In the initial stage, department heads often involve in the invoicing checking process. They scrutinize the invoice to verify its alignment with the department’s budget and ensure that the goods or services received meet the specified standards.

For larger organizations, executives are the final checkpoint in the invoice Approval Chain. Their involvement is particularly crucial for checking the overall budget or strategic goals of the organization. By having this tiered approach, organizations can maintain financial control through the Invoice Processing Procedure effectively. Also, it resolves disputes in decision-making and prevents unauthorized or inappropriate expenditures.

In some instances, an invoices processing company implements automated invoicing systems or workflows to facilitate the approval process efficiently. This ensures a streamlined invoicing process, reduces delays in processing, and enhances invoice transparency. Ultimately, a well-structured method guarantees that invoices are thoroughly vetted. Appropriate stakeholders check before moving forward in the invoice approval process.

5. Payment Made

The final step of the Invoice Processing Procedure is realizing the payment. The main task of an invoice is to keep a record of the sale amount and facilitate payment. Nowadays, businesses prefer the transfer of payment via electronic mode for the instant realization of payment. Business checks their bank details through the internal database after payment.

Besides digital payment transfer, the cheque-based payment system is also there in this process. In processing invoices for payment, cheques were signed physically first. Then sent to the supplier physically. After receiving the cheques, suppliers deposit them into the bank and wait for the processing. The process usually creates delays in the Invoice Processing Procedure and thus companies prefer electric transfer.

Paying the dues in delay is a common practice in the business world and thus you need to consider this. Making a delay in payment fetches interest if the business deposits the same amount into the bank. Businesses can earn interest if they store money in the bank rather than paying the suppliers. However, this delay must not violate the contract, which businesses must keep in their mind.

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