Invoice processing is something all organisations have to deal with, be it big or small.
It starts with the accounts payable department receiving an invoice, verifying its details, getting approvals, and making payment. While it might sound simple, these steps can get frustrating when handling many invoices for different vendors.
Not to mention, any delay in invoice processing can impact your vendor relationships and, by extension, business outcomes.
This blog post highlights what invoice processing is and why you should automate it.
What is invoice processing?
It is the process of handling an invoice right from its receipt till the time the payment is made. The accounts payable department (usually the accounts team) handles the bills and invoices raised against credit purchases.
It involves functions such as receiving the invoice, approving it, setting a remittance date, making the payment, and finally recording it in the ledger.
Invoice Processing Steps
1. Receiving and Verifying the Invoice Details
As soon as the company’s accounting department receives an invoice for payment via email, the first step is to verify the details of the invoice. The accounts executive matches the purchase order (PO) with the invoice and matches the purchased quantity, order no., and the billed amount.
The bill amount can vary depending on the type of invoice. Sometimes, the invoice could represent only a part of the total purchases. All this must be verified before proceeding further, and in case of any discrepancy, the issues must be resolved with the vendor.
This can be done either manually or through software like RazorpayX Vendor Payments. It automates various activities, from easy invoice sourcing, auto-deducting TDS, built-in payments to automated accounting.
2. Getting the Invoice approved
Once all the important invoice details are verified by the accounts payable department, they must send the invoice for approval before making the payment. As the size of the business increases, the number of invoices also increases, making the approval a time-consuming process.
Invoices can even get misplaced in the folders on the desktop of your accountant. Automated invoice processing systems solves this problem by managing the documents digitally and saving time, all the while eliminating manual errors.
3. Checking for fraud and duplication
Supplier invoices are highly susceptible to fraud and duplication. The next step in is checking for any possible fraud or duplication.
Sometimes, there might be two invoices against a single purchase order resulting in duplicity of payment. Similarly, there could be other discrepancies, like a difference in the billed amount or purchase order number. The invoices should be thoroughly checked for duplication and fraud.
4. Forwarding the invoice for payment
After checking the invoices thoroughly for errors, fraud, and duplication and sorting out all the issues, the accounts payable department then gives its approval and forwards the invoice for payment. The payment for the invoice is then made, usually online.
5. Recording the invoice in the company’s ledger
The last step is to record the invoice and the payment details in the ledger for accounting purposes. Manual data entry and recording can be time-consuming, cumbersome, and vastly error-prone.
This is when RazorpayX Vendor Payments saves the day. It auto-captures invoice details with an intelligent OCR, saving you manual data entry. And you never have to worry about paying twice with its smart de-duplication algorithm.
Benefits of automated invoice processing
A software that automates processing, making it quick and efficient refers to automated invoice processing. Here are some of the benefits of automated invoice processing
- Faster Invoice Processing: Manual invoice processing takes several weeks to complete. Using software can help reduce this time significantly and make the entire process quicker and, most importantly, error-free.
- Helps avoid delays and penalties: Sometimes, vendor invoices can have associated penalties and late fees. Automated invoice processing software keeps track of the invoices and makes the payment within the due dates. This further helps you avoid payment delays and late fees.
- Avoids errors and frauds: Lost invoices, miscalculations, and process errors are very common in manual invoice processing. The software helps avoid human-induced errors and also keeps a check on any fraud or duplicity.
- Reduces cost: Manual invoice processing requires more staff, thus resulting in higher salary costs. It also requires costs incurred in case of any error or delay. Using invoice processing software frees your resources, thereby reducing the overall cost involved.
- Improves vendor relationships: Vendor relationships are very crucial for the growth of a business. Constant errors and delays in invoice processing can result in tensions. Automated invoice processing helps avoid conflicts and helps build strong relationships with them.
Automate invoice processing with RazorpayX
Having understood the benefits and importance of automated invoice processing, here’s how RazorpayX Vendor Payments can help you:
- Easy sourcing of invoices– RazorpayX allows you to add invoices to the software in multiple ways. You can either forward them via email, let vendors add invoices directly on the portal, or import the invoices through accounting software.
- Auto-capture invoice details– It saves you from doing manual data entry by auto-capturing the details of the invoice. It also helps avoid duplication of invoices and saves you from paying more than once.
- Automatic deduction of TDS– Just add the TDS category of the vendors, and RazorpayX auto-calculates the TDS amount and deducts the TDS for every invoice.
- Quick and seamless reconciliation– It provides you with seamless reconciliation between vendor invoices and the accounting software.
Automation is the key to streamlining invoice processing. RazorpayX can help you save time, effort, money, and resources by automating invoice processing, payment, reconciliation, and TDS deduction. Sign up now to automate invoice processing!
What are the steps of invoice processing?
Invoice processing steps involve - receiving the invoice, approving it, setting a date of remittance, making the payment, and finally recording it in the ledger. Please read the detailed elaboration of each step in the blog.
What is the purpose of invoice processing?
It is a part of vendor management function of accounts payable department in companies to manage invoices from vendors and make payments for services received from vendors. It starts with the accounts team receiving an invoice, verifying its details, getting approvals, and making payment.