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Invoice Processing: Best Practices for Eliminating Costly Errors

Topics: Finance

As companies have become more nimble in the post-pandemic digital environment, invoice processing has taken on additional importance. This Accounts Payable (AP) function is essential for helping businesses manage budgets and cash flow to optimize enterprise spending and investing. More than half (57%) of accounting and financial professionals say their biggest AP challenge this year is the slow pace of invoice approvals. Delays in invoice processing and the fact that a sizable percentage of invoices are still received manually have AP professionals adopting automated invoice processing. This article takes you on a deep dive into accounts payable invoice processing best practices and common errors that can be avoided with an AP invoice process that leverages automation.  

Invoice Processing Stat ImageWhat is Invoice Processing? 

Invoice processing is the process AP teams use to manage incoming vendor invoices. The workflow begins with invoice receipt and follows through from payment to recording for reporting and auditing. Invoice processing ranges from simple to complex depending on a company’s size, structure, and industry.

Accuracy is essential in invoice processing for your company to understand outstanding debt and cash flow, and to meet relevant compliance requirements. Companies are turning to invoice processing automation to reduce errors and repetitive tasks, and increase timely visibility into their cash flow. Automating this function can also improve your relationships with vendors by ensuring they receive correct payments faster. 

Automated invoicing is a similar term also used on the other side of the coin, referring to the Accounts Receivable (AR) function of sending invoices out to buyers. Platforms like Apruve automate invoicing and integrate it with trade credit automation to increase AR efficiencies, improve the buying experience, and accelerate enterprise growth. Read more about automated invoicing best practices.

The Invoice Processing Flowchart: A Step-by-Step Guide to Invoice Processing 

Managing vendor invoices quickly is a primary goal in invoice processing. Speed allows you to take advantage of early payment discounts and avoid past due payment penalties. Businesses that adopt automated invoice processing gain speed by eliminating manual tasks, including handling of exceptions. By automating the workflow, you can compress the process. You reduce time and effort required for reporting and for preparation for audits, too. This invoice processing flowchart details the steps involved.

Apruve Invoice Processing Flowchart Image

1. Receive Vendor Invoice 

Invoice processing starts with the receipt of invoices from vendors. Large enterprise organizations may receive tens of thousands of invoices per month in a variety of formats, including paper invoices sent via mail and digital invoices received electronically. Streamlining to accept all invoices in a digital format can reduce manual entry errors and increase the efficiency and speed of invoice processing. Automation allows AP teams to accomplish the first few steps in this workflow faster and more efficiently to get invoices paid on time and avoid late-payment penalties.

2. Capture Invoice in ERP or Accounting System

 In this step, invoices are entered into the organization’s financial system. A platform that automatically captures, codes, and routes invoices for internal approvals can reduce the administrative work as well as common invoice processing errors such as incorrect amount entered and paid, and invoices routed to the wrong person for approval. 

3. Verify and Route Invoice for Approval

AP teams are responsible for invoice verification to prevent duplicate and fraudulent payments. A digital platform that matches data on invoices to internal database information can catch questionable patterns and supply missing information on incomplete invoices more quickly and with less effort than manual verification. It can also catch simple but costly calculation errors. Using automation to route invoices internally for approval also increases efficiency in invoice processing and can reduce errors such as approvals provided by the wrong person.

4. Pay Invoice

Once invoices are authorized for payment, the AP team pays the invoice. With manual processes, this may include writing and sending a check, or authorizing electronic payment through the organization’s ERP or accounting system. With an invoice processing automation platform, electronic payments can be made with less human intervention via check, ACH, or wire transfer.  Automation reduces the potential for errors such as wrong amount paid and ensures payments are quickly received by the correct vendor.

5. Archive for Reporting and Audits:

 Invoice history is saved for backtracking to resolve vendor issues, populate reporting, and enable auditing. AP teams can avoid the time, effort, and potential for error with manual entry by using an automated invoice processing platform. 

Invoice Processing Best Practices and Common Mistakes 

The following are best practices and common mistakes that can both be managed when you implement automated invoice processing.

Invoicing Best Practices 

With automated invoice processing, your AP team can move to tailored, rules-based processes rather than treating all invoices in the same manner. For instance, regularly-occurring invoices for items like website hosting or office supplies can be efficiently fast-tracked for approval. Invoices that are large, and require multiple layers of review can be started on a more extensive process faster, too. 

Another invoicing best practice is understanding where automation can provide the most value in your company’s process. As detailed in the invoice processing flowchart above, it is a series of steps that can be automated. Your workflow does not have to be 100% automated to gain value. 

Common Invoice Processing Errors 

Many of the common invoicing mistakes are related to manual processes, typos, and human errors. These costly invoice processing errors include the following: 

  • incorrect amounts applied for payment
  • incorrect fees or taxes paid 
  • invoices routed incorrectly for approval
  • payments applied to the wrong vendor account
  • duplicate payments made

An automated invoice processing platform can reduce or eliminate many of these errors to deliver a faster, more accurate and efficient process, and better insight into company cash flow. There are other benefits, too, including the ability for your AP team to continue their work remotely when needed. By reducing or eliminating paper in invoice processing, you save on office and storage space while benefiting the environment. Your company also adds another digital process that enhances enterprise connectivity. 

To learn about enhancing connectivity with your customers through automated invoicing, talk with the specialists at Apruve. Apruve financed trade credit automation can help your enterprise make transformative gains with speed, efficiency, and customer engagement on the A/R side of finance, which at the same time helps an enterprise’s business customers reach greater efficiency on the A/P side.

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Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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