{"id":46154,"date":"2022-03-09T10:41:09","date_gmt":"2022-03-09T10:41:09","guid":{"rendered":"https:\/\/softco.com\/glossary\/invoice-processing\/"},"modified":"2023-06-07T15:21:20","modified_gmt":"2023-06-07T14:21:20","slug":"invoice-processing","status":"publish","type":"glossary","link":"https:\/\/softco.com\/uk\/glossary\/invoice-processing\/","title":{"rendered":"Invoice Processing"},"content":{"rendered":"\n<div class=\"wp-block-cover\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-background-dim-10 has-background-dim\"><\/span><img loading=\"lazy\" decoding=\"async\" width=\"1920\" height=\"960\" class=\"wp-block-cover__image-background wp-image-30043\" alt=\"\" src=\"https:\/\/softco.com\/wp-content\/uploads\/2022\/02\/Glossary-Term.jpg\" style=\"object-position:18% 49%\" data-object-fit=\"cover\" data-object-position=\"18% 49%\" srcset=\"https:\/\/softco.com\/wp-content\/uploads\/2022\/02\/Glossary-Term.jpg 1920w, https:\/\/softco.com\/wp-content\/uploads\/2022\/02\/Glossary-Term-300x150.jpg 300w, https:\/\/softco.com\/wp-content\/uploads\/2022\/02\/Glossary-Term-1024x512.jpg 1024w, https:\/\/softco.com\/wp-content\/uploads\/2022\/02\/Glossary-Term-768x384.jpg 768w, https:\/\/softco.com\/wp-content\/uploads\/2022\/02\/Glossary-Term-1536x768.jpg 1536w\" sizes=\"auto, (max-width: 1920px) 100vw, 1920px\" \/><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h1 class=\"wp-block-heading has-text-align-center\" id=\"h-invoice-processing\">Invoice Processing <\/h1>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\"><\/div><\/div>\n\n\n\n<div class=\"wp-block-group has-white-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is Invoice Processing?<\/h2>\n\n\n\n<p class=\"has-text-color\" style=\"color:#1976d2\"><strong>Invoice processing is a business activity in which employees manage incoming invoices, from the time they\u2019re received till they\u2019re paid and recorded in the company\u2019s finance system and the general ledger. The accounts payable (AP) department is responsible for invoice processing.\u00a0<\/strong><\/p>\n\n\n\n<p>Invoices are received by businesses in various forms, including paper invoices, PDFs, electronic documents, or electronic invoices. The invoice has to be scanned first, and data must be recorded before being entered into the system. The entire series of steps is what\u2019s known as invoice processing, and is usually done with the help of software.&nbsp;<\/p>\n\n\n\n<p>Since it\u2019s such a crucial aspect of running a business, invoice processing often takes priority. If invoices are not processed and cleared in a timely manner, it could derail the company\u2019s growth plans and create a cascading effect that damages the company\u2019s bottom line.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Invoice Processing Workflow<\/h2>\n\n\n\n<p>Here\u2019s the general workflow for processing invoices:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Receiving an invoice: <\/strong>the process begins when the AP department receives an invoice.&nbsp;<\/li>\n\n\n\n<li><strong>Data capture:<\/strong> the data from the invoice is captured using a standardized format and entered into the system. The AP team then applies an accurate code either manually, or via an AP automation solution.<\/li>\n\n\n\n<li><strong>Invoice matching: <\/strong>once the invoice is received, it is then matched with supporting documents. 3-way matching is generally the preferred option, as it involves matching the invoice with the purchase order (PO) and the Goods Received Note (GRN). This confirms that the order was placed by the organization, and goods were received. The invoice number is often tallied with the PO number.<\/li>\n\n\n\n<li><strong>Routing for approvals:<\/strong> the invoice is then routed for approval to the relevant authorities. In some cases, if the amount falls below a certain threshold, the invoice can be approved automatically. In other situations, such as in the case of non-PO invoices, more scrutiny is required before the invoice is approved.&nbsp;<\/li>\n\n\n\n<li><strong>Queued for payment: <\/strong>the invoice is then queued for payment using the preferred mode of payment, including wire transfer, ACH, or eChecks.&nbsp;<\/li>\n\n\n\n<li><strong>Archiving: <\/strong>once the payment is made, the vendor is notified and the invoice is archived. AN entry is made in the general ledger, and the audit trail is confirmed.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Why Automate Invoice Processing?<\/h2>\n\n\n\n<p>Manually processing invoices is tedious, time-consuming, and prone to data entry errors. It\u2019s also incredibly costly, increasing the company\u2019s operational budgets significantly.&nbsp;<\/p>\n\n\n\n<p>Automating invoice processing is generally more beneficial. Here are some of the benefits that it offers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Faster Invoice Processing<\/h3>\n\n\n\n<p>The time taken for processing invoices is greatly reduced when the entire process is automated. It allows companies to quickly and efficiently process invoices from vendors.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Reduces Penalties and Improves Vendor Relationships&nbsp;<\/h3>\n\n\n\n<p>Since invoices are processed on time, companies can eliminate late fees, which they would otherwise incur if payments aren\u2019t made to vendors on time. This also improves relationships with vendors as a whole, and the company might be able to take advantage of early-payment discounts.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Eradicate Manual Time-Consuming Tasks<\/h3>\n\n\n\n<p>Manual data entry and invoice processing is repetitive and time-consuming. It\u2019s also a low-level activity, which affects morale throughout the AP department. By automating this process, you can free up your AP teams to focus more on business-critical tasks.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Paperless Invoice Processing<\/h3>\n\n\n\n<p>All invoices that are received can be processed using optical character recognition (OCR). This ensures that the relevant data is captured and fed into the system, allowing AP departments to go completely paperless. Not only is it ecologically friendly, but it also simplifies search and recall.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. KPI Reporting and Tracking<\/h3>\n\n\n\n<p>Automated invoice processing allows organizations to establish and track KPIs. This allows finance leaders and department heads to gauge the performance of AP departments, and also review all invoice-related activities.&nbsp;<\/p>\n\n\n\n<p>In case a bottleneck is detected, those in charge can quickly take action and make adjustments to the process.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Comprehensive Audit Trail<\/h3>\n\n\n\n<p>Since everything is digitized and entered into the system, it creates a comprehensive audit trail, which is ideal for companies that are subject to internal or external audits.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Turn AP Departments Into Profit Centers with AP Automation<\/h2>\n\n\n\n<p>The <a href=\"https:\/\/softco.com\/uk\/solutions\/accounts-payable-automation\/\">SoftCo Accounts Payable Automation<\/a> software is the ideal choice for organizations that want to automate invoice processing. The solution is ideal for managing both non-PO and PO invoices, and it offers 2 and 3-way matching as well. Users can define automated approval workflows to ensure invoices are processed and routed for approvals quickly. Since all vendor data is captured automatically, there\u2019s very minimal human input, which also mitigates the risk of transcription error.&nbsp;<\/p>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>What is Invoice Processing? 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