Invoice-to-pay — commonly referred to as invoice processing — is the system of handling invoices from arrival, approval, posting to release of payment. Invoice-to-pay is a part of the larger procure-to-pay (or purchase-to-pay) process; it can also be the payment process for cash-based accounting.
An invoice is a bill or tab issued from seller to buyer to request payment for a sale or transaction. Once the goods or services are received by the buyer, the seller submits an invoice for payment. Typically, invoices are grouped into two categories: invoices associated with a purchase order (PO) or invoices without a purchase order, sometimes called a direct payment. Either type of invoice can be either recurring or one-time.
Once an invoice arrives at the door of a business, it is routed to the accounts payable department. There it is checked for accuracy and matched with a PO (if applicable) before being entered into the system for processing and eventual payment. An invoice-to-pay process usually follows these steps:
- Receive an invoice or request for payment from supplier
- Determine if the supplier is on the approved vendor list
- Enter the invoice information into accounts payable
- Review the invoice information
- Match the invoice to a PO, if applicable
- Approve invoice for payment
- Review and hold any invoices if needed
- Release payments as part of a scheduled run
Because the invoice-to-pay process can be cumbersome, many businesses and organizations are automating their systems with digital services or technology. This not only helps handle the volume of invoices to pay, but also increases accuracy and reduces the risk of errors and fraud.
The invoice-to-pay sub-process of the larger accounts payable process is essential and important since it involves nearly all of a company’s payments other than payroll. Regardless of a company’s size, the goal of any accounts payable is to only pay the legitimate and accurate invoices of a company. To safeguard a company’s cash and other assets, accounts payable should have internal controls that protect the invoice-to-pay process. A few reasons for these controls include:
- Preventing payment of a fraudulent invoice
- Preventing payment of an inaccurate invoice
- Preventing duplicate payment
- Ensuring that all invoices are accounted for and paid
Many businesses are automating their systems to increase efficiency and accuracy of their accounts payable process. When this process is accurate, then all the financial statements that are drawn from that information can be confidently accurate and up-to-date. Some other accounts payable best practices include:
- Requesting that vendors send all invoices directly to the accounts payable (AP) department
- Entering invoices individually and not in batches
- Ensuring separation of duties in approval and release of payments
- Always paying from original invoices and not copies or statements
Source: Invoice Payment Process
Source: Entering Supplier Invoices (Navigator Consulting)