What happens when accounts payable invoice processing doesn’t happen on time? Service providers/suppliers keep the services on hold or stop supplying the raw material. This ‘hold’ and ‘stop’ may cause a loss to your business. Can your business afford that loss at any stage?
Coming to the major reason that causes late payments is the way your accounts payable team handles the supplier’s invoices.
If you look at the age-old process of handling invoices (manual invoice processing), it takes around weeks to release the payment. While in this digital age, it shouldn’t take more than a few hours.
First, let’s understand the invoice processing in-detail and then how the processing time can be reduced.
What is Accounts Payable Invoice Processing?
Invoice processing in accounts payable refers to systematic handling and management of supplier invoices within a business. The process contains receiving, verifying the invoice and then processing the invoice.
The ultimate purpose of accounts payable invoice process is to ensure accurate and timely payments while maintaining a transparent financial record.
Importance of Accounts Payable Invoice Processing
Accounts payable teams often rely on invoice processing to verify the accuracy of supplier invoices. This ensures that the amounts, terms, and other invoice data on the invoices match the agreed-upon terms and purchase orders.
But, how does this facilitate the business’ financial operations?
- Strengthens supplier-vendor relationships:
Accounts payable invoice processing helps prevent overpayments, underpayments, and disputes. This in turn, supports effective financial management and vendor relationships. - Ensures that payment obligations are met on time:
Effective invoice processing ensures that payment obligations to suppliers and vendors are met on time. This helps in preventing any disruptions in the supply chain and maintaining smooth cash flow operations. - Enables effective budgeting and forecasting:
Businesses can precisely track their expenses, identifying where and how their funds are allocated. This detailed insight into spending patterns allows for a more accurate budgeting process, and allocating resources effectively. - Identify Cost Patterns:
Through the systematic analysis of processed invoices, businesses can identify recurring cost patterns, potential areas of overspending, or irregularities in pricing. This information is instrumental in making informed decisions to optimize expenditure and eliminate unnecessary or excessive costs.
Accounts Payable Invoice Processing Steps
Step #1: You Receive an Invoice and Verify the Accuracy of Its Details
When invoices arrive, specific details are verified. These are:
- Agreed-upon prices
- Billed items
- Invoice terms
This thorough review helps prevent potential overpayments, discrepancies, or unauthorized charges. It safeguards the company’s financial integrity and maintains trust with suppliers and vendors.
Step #2: Scan and Record the Invoice into the Company’s System
After the initial examination, a copy of the vendor invoice is scanned into the company’s filing system.
This step ensures that all invoices are digitally archived and readily accessible, thus providing a secure backup of financial records.
This way, it enhances the efficiency of accounts payable operations while maintaining a reliable archive of financial transactions.
Step #3: Accounts Payable(AP) Department will Approve Invoice Details & Assign Accounting Codes for Ease of Tracking
Once the invoices pass the verification process, they are routed to the designated AP Department within the organization. These authorized individuals perform the following tasks:
- Assess the validity of the expenses.
- Assign appropriate accounting codes for invoice tracking and categorization.
This step streamlines the payment approval process. It reduces delays and ensures accurate allocation of costs within the company’s financial records.
Step #4: Invoice Payments are Scheduled to Avoid Late Fees
After receiving the necessary approvals, the accounts payable department proceeds to settle the invoices within the agreed payment terms.
By adhering to the scheduled payment dates, the company:
- Avoids late fees.
- Maximizes the benefits of early payment discounts.
- Strengthens its financial standing and relationships with vendors.
To make invoice processing easier and ensure timely payments, suppliers recommend that businesses adopt Intelligent Document Processing (IDP). IDP, an AI-based Optical Character Recognition (OCR) technology, facilitates data scanning. Furthermore, it utilizes Artificial Intelligence (AI) and Machine Learning (ML) to process and comprehend data, enhancing the overall invoice processing efficiency.
Invoice processing softwares like KlearStack contribute to making invoice processing faster and less laborious. The integration of IDP into accounts payable invoice processing is known as automated invoice processing
Benefits of Automating Invoice Processing in Accounts Payable
Let’s understand the benefits with the help of KlearStack. KlearStack is an accounts payable invoice processing software
- Saves Time
KlearStack reduces manual data entry. It allows your employees to focus more on more meaningful and productive tasks. - Reduces Errors
KlearStack ensures that all your suppliers’ invoices are processed accurately and timely. It also reduces the scope of human-errors. - Saves Money
By cutting down on manual data entry and paper usage, KlearStack helps you save resources and ultimately money. - Improves Transparency
KlearStack provide you with clear visibility into the status of invoices. This enables you to make informed decisions and plan effectively for upcoming payments. - Ensures Compliance
With detailed audit trails and streamlined compliance processes, you feel confident that your financial operations align with industry standards and regulations. This reduces the risk of penalties or legal issues. - Strengthens Relationships
Timely and accurate payments through KlearStack fosters positive relationships between you and your suppliers. - Promotes Sustainability
Going paperless with tool like KlearStack not only reduces clutter but also reflects a commitment to environmental sustainability. This allows you to contribute to a greener, more eco-friendly and paperless workplace. - Facilitates Growth
KlearStack can easily adapt to increased workloads, allowing you to handle larger volumes of invoices without feeling overwhelmed. - Encourages Data-Driven Decisions
KlearStack generates valuable data insights. This empowers you to make informed decisions, identify cost-saving opportunities, and contribute to the overall success of the business.
Through the insights provided by an automated system, a financial services firm can make data-driven decisions, identify areas for cost reduction and strategic investment.
Ready to Automate Accounts Payable Invoice Processing?
Choose none other than KlearStack. It is a template-free AI-based OCR solution meaning you don’t have to train the model for every new invoice layout.
It is smart enough to comprehend and process a completely new layout with a significant accuracy.
Don’t wait—Schedule a demo session today. It’s completely free.
FAQs on Invoice Processing in Accounts Payable
Invoice processing in accounts payable refers to the systematic handling of supplier invoices within a business. It involves tasks such as verification, approval, payment scheduling, and recording in the company’s financial records.
Invoice processing involves four steps–
Step 1: Invoice receipt and verification
Step 2: Record keeping
Step 3: Approval
Step 4: Payment processing and scheduling
These ensure accurate and timely management of financial transactions.
The accounts payable process involves the end-to-end management of the company’s short-term financial obligations to suppliers and vendors. It encompasses tasks such as invoice processing, payment management, expense tracking, and regular reconciliation of accounts. These tasks maintain financial accuracy and transparency.
The four key functions of accounts payable include–
1. Invoice processing
2. Record-keeping
3. Payment management
4. Vendor relationship management
These four functions ensure the efficient management of financial transactions. This would mean timely payments and strong supplier-vendor relationships.
