The invoice management process consists of several critical steps:
1. Invoice Receipt: The process begins when a vendor sends an invoice to the buyer. Traditionally, this step can cause delays if the invoice is not immediately routed to the appropriate finance or accounts payable (AP) representative.
Best Practice: Implement a centralized system for receiving all invoices, regardless of their format (paper, email, or electronic).
2. Invoice Validation and Matching: Once received, the invoice must be validated for accuracy. This step includes:
- Verifying document details
- Ensuring payment terms align with contract agreements
- Cross-referencing the invoice against purchase orders and delivery receipts
Best Practice: Utilize a three-way matching process to confirm the accuracy of the invoice against the purchase order and goods receipt.
3. Data Capture and Coding: After validation, invoice details must be entered into the company’s accounting system. This step is often manual and prone to errors.
Best Practice: Implement automated data capture technologies, such as Optical Character Recognition (OCR), to extract and code invoice data automatically.
4. Invoice Approval: The invoice then moves through an approval process, which may involve multiple stakeholders depending on the organization’s structure.
Best Practice: Establish clear approval hierarchies and implement automated workflow routing to streamline the approval process.
5. Payment Processing: Once approved, the invoice is scheduled for payment according to the agreed-upon terms.
Best Practice: Consider early payment discounts when applicable and use electronic payment methods to expedite the process.
6. Recording and Archiving: The final step involves recording the transaction in the accounting system and archiving the invoice for future reference.
Best Practice: Utilize automated systems to seamlessly export data to accounting tools or ERPs, and maintain a well-organized digital archive for easy retrieval.