Invoice processing
The steps a business takes to receive, check, approve, record and pay a supplier invoice.
In short
- The steps: receive, capture, validate, match, code, approve, pay and post.
- Cost and time per invoice are the usual measures of how well it works.
- Most delays happen in approval, not in data entry.
Invoice processing is the everyday work of accounts payable. It covers everything that happens to a supplier invoice between arriving and being paid.
The steps
- Receive: invoices arrive by email, mail, supplier portal or e-invoicing network.
- Capture: supplier, invoice number, date, amounts, tax and lines are recorded.
- Validate: the supplier is known, the tax details are complete and it is not a duplicate.
- Match: the invoice is compared with the purchase order and receipt, where they exist.
- Code: accounts, cost centres and tax codes are assigned.
- Approve: the budget owner confirms the spend.
- Pay: the invoice is scheduled for payment by its due date.
- Post: the transaction is recorded in the general ledger.
Where time goes
Data entry is the most visible cost but rarely the biggest delay. Invoices typically wait longest for approval or for someone to resolve an exception. Invoices that arrive at the wrong place, such as a salesperson's inbox, can lose days before AP even knows about them.
Useful measures include cost per invoice, days from receipt to approval, the share of invoices paid on time and the share processed without exceptions.
Worked example
Where nine days went
A company measures its invoice cycle and finds it takes nine days on average from arrival to approval. Capture and coding take less than a day. Six days are spent waiting for approvers, and two more on invoices that went to the wrong inbox first. Fixing routing and adding approval reminders cuts the cycle to four days without changing data entry at all.