Invoice processing sounds something very simple, but are you aware of what it actually means and all the steps involved in invoice processing? If not then you have been landed to the right place as after this blog you will be having a fair knowledge on this subject.
WHAT IS INVOICE PROCESSING AND IT’S IMPORTANCE
Invoice processing involves the complete cycle of receiving an invoice from the supplier, verifying it, approving it, remitting the payment and then documenting it in the accounting books. Whether you get an invoice by mail, as a PDF attached to an email, or as an electronic invoice, you must first manually or automatically scan the data it includes into your accounting system. The invoice then proceeds to a particular workflow approval and payment.
This is very important as most of the businesses are based on this cycle especially if we talk about the whole supply chain sector. If the vendor invoices are not paid on time it can interrupt your incoming stream of supplies, raw materials, services and also damage your relationships with the suppliers. Many companies use automated systems such as ERP systems to receive and record their invoices on time and pay all the bills on time.
STEPS INVOLVED IN INVOICE PROCESSING
The process involved in invoice processing are as follows:
STEP ONE – Receiving an invoice from the vendor: Once the work is finished, the service is rendered, or the product is delivered, the vendor sends an invoice. The invoice data needs to be entered into your accounting program. An AP clerk or bookkeeper often performs this task manually.
STEP TWO – Placing and scanning a copy of the vendor’s invoice into your filing system: Best practices recommend that you copy or scan the invoice into your paper or electronic filing system as a backup in addition to entering the data from the invoice into your system. This is essential in case there are subsequent discrepancies found. And for auditing purposes, it’s the right procedure. Using countless filing cabinets is necessary if you are creating and storing paper copies. Organizing all of the paper copies so that you and/or the auditors can find them quickly in case of need.
STEP THREE – Approval of the invoice: Now the next step is to getting the saved invoices approved. Email a PDF copy of the invoice to the approver until you get the approved mail.
STEP FOUR – Payment of the invoice: One the invoice is authorized, it needs to be paid.
How complex and time-consuming the invoice processing is? Well, it depends on the size, rules and hierarchy of the company. But this is the simplest instruction on how invoice processing is done.