How Does the PO Invoice Process Work? Step-by-Step Guide

The purchase order (PO) invoice process is essential to an organization’s procurement and accounts payable (AP) workflow, ensuring financial control, fraud prevention, and operational efficiency.  

In 2025, accounts payable automation is significantly optimizing this process by reducing errors, cutting costs, and accelerating invoice approvals. Research by Ardent Partners highlights that organizations leveraging AP automation solutions see cost reductions of 50% to 80% per invoice compared to manual processing. Similarly, APQC reports that manual invoice processing costs an average of $10.89 per invoice, while automation lowers this to $1.77—an 84% reduction. 

Understanding the PO Invoice Process

The accounts payable process follows a structured workflow to validate, approve, and pay supplier invoices. This ensures financial accuracy by matching invoices against pre-approved purchase orders (POs) and delivery receipts. Below is a step-by-step breakdown:

1. Creation of a Purchase Order (PO): A purchase order (PO) is issued by a buyer to a supplier, specifying:
   • Item descriptions and quantities
   • Price per unit
   • Delivery dates
   • Payment terms
2. Delivery of Goods or Services: Once the PO is approved, the supplier delivers the requested goods or services. A Goods Receipt Note (GRN) may be generated to confirm receipt and verify the correct quantities and quality of items delivered.
3. Invoice Submission by Supplier: After delivering the goods or services, the supplier submits an invoice requesting payment. The invoice typically includes:
   • Supplier details
   • Invoice number and date
   • Itemized list of goods/services
   • Total amount due
   • Payment terms
4. Matching Invoice with Purchase Order and GRN: The accounts payable team performs a three-way match to validate the invoice:
   • Purchase Order (PO) – Confirms the order details
   • Goods Receipt Note (GRN) – Verifies that the goods/services were received
   • Invoice – Ensures the invoice details match the PO and GRN

   If discrepancies arise, the invoice is flagged for review and resolution.

5. Approval Workflow: Once matched, the invoice goes through an approval process, where authorized personnel review and confirm the payment request. Many organizations implement AP automation workflows to accelerate this step.
6. Invoice Payment Processing: Upon approval, the invoice is scheduled for payment based on agreed-upon terms. Payments can be processed via bank transfers, checks, or digital platforms.
7. Record Keeping and Audit Compliance: After payment, the invoice and related documents are archived for record-keeping, audits, and financial reporting. Proper documentation ensures compliance with accounting regulations and internal policies.

Benefits of a Well-Managed PO Invoice Process

• Cost savings: Implementing AP automation can reduce invoice processing costs by up to 90%. (SoftCo)
• Fewer errors: AP automation software reduces errors, speeds reconciliation, and improves accuracy with cloud-based AP solutions. (Forbes)
• Faster processing times: Reduces invoice cycle time from weeks to days.
• Better financial control: Prevents unauthorized purchases and overpayments.
• Improved vendor relationships: Ensures timely payments, strengthening supplier trust.
• Regulatory compliance: AP automation solutions assist in adhering to financial and tax reporting obligations. Deloitte’s Regulatory Compliance Suite helps organizations track and manage compliance efficiently, reducing the risk of non-compliance. (Deloitte)

The Role of Automation in PO Invoice Processing

Automation is revolutionizing the accounts payable process by eliminating manual tasks and ensuring compliance. Key benefits include:

1. Cost Efficiency: PwC projects a 42% increase in global cashless payment volumes by 2025, highlighting the shift toward digital transactions that further reduce AP costs. Transitioning to digital invoicing reduces reliance on paper, leading to decreased overhead expenses. (PwC)
2. Faster Invoice Approvals:
   • Reduction in Processing Time: Implementing AP automation can significantly reduce invoice processing times, streamlining workflows for faster approvals. (Deloitte)
   • Accelerated Approval Cycles: Automation enhances efficiency by minimizing manual interventions, leading to quicker invoice approvals and improved cash flow management.
3. Enhanced Accuracy: AI-driven validation ensures accurate data capture, automatically reading invoices and cross-checking details against purchase orders or contracts to catch discrepancies. This minimizes manual intervention and prevents costly payment errors. (CEO)
4. Improved Vendor Relations:
   • Eliminates late payments, enhancing vendor satisfaction
   • Enables businesses to capture early payment discounts (1-2% savings per invoice)

Real-World Success Stories of Accounts Payable Automation

Get Started with AP Automation Solutions

Optimizing your accounts payable processes with AP automation reduces costs, improves accuracy, and enhances vendor relationships. Don’t let manual inefficiencies slow you down.

See how SoftCo can help your business streamline invoice processing. Request a Demo Today.