Steps In Invoice Processing for A Small Business

The bookkeeping and accounting activities are diverse and cover several aspects, including maintaining economic relations with other parties. The bookkeeping and accounting workflow must operate smoothly and efficiently to ensure businesses have complete knowledge about their financial performance and position. One such process involves creating and processing invoices. Invoice processing is how companies receive, verify, and approve invoices and make payments later. Since this process is complex, firms need to optimize and keep it efficient wherever possible. One way is to automate the entire function and introduce digitization in every aspect. It improves productivity and enhances visibility, accuracy, and cost-effectiveness. The per-unit costs per invoice generation and the time is taken for payment also reduced significantly compared to manual processing.

The accounts payable department conducts invoice processing services to receive, approve, and pay the invoices. On the other hand, the accounts receivable involve:

1) Creating an invoice, including customization

2) Adding payment modes

3) Sending the same with correct details to the client for checking and payment

Under bookkeeping and accounting, businesses usually cover invoice processing services under the accounts payable function. It is a tedious and cumbersome process and requires proper attention. Firms need to check it thoroughly since it allows money outflow for accounts payables. Improper management can lead to errors and discrepancies. Similarly, not verifying the details may lead to cash outflows to unknown or ghost parties. Unless the scam gets discovered, it can lead to massive financial losses.

Therefore, companies need to follow the steps diligently. These include:

· Verifying the information:

The first step involves receiving the invoice from the vendor and verifying its details. Firms need to check various information like ensuring they have received proper goods, make payment to the correct party through the information offered, and update expenses, inventory, and other financial records. The details included in the invoice that firms should verify are as follows:

1) Invoice creation date and due date

2) Contact information of both suppliers and business

3) Purchase details, expense, quantity, goods, services, etc

4) Payment details and information

· Data entry in good books:

Next, businesses must record the invoices correctly in the books per the accounting principles. Data entry can be manual or automated through tools in the software. Currently, OCR (Optical Character Recognition) technology has widespread use. General ledger coding makes it easy to track the debts and expenses in the books and software. With automated bookkeeping and accounting, human errors and costs reduce significantly. The software enables proper data tracking, faster payments, and improved services to suppliers.

· Approval process:

After entering the invoices as payables, the accounts payable department must get the information for approval and payment. The invoice gets submitted for approval, which is slower in manual processing than automated. Firms can avoid misplacing documents with automatic software and request invoice copies whenever needed.

Moreover, even email invoices can get lost or blocked, leading to the supplier staying unpaid. In such circumstances, investing in good bookkeeping and accounting software can prevent emails and invoices from lingering in mail inboxes.

· Invoice payment:

The last process involves paying the invoice after approval. The business must get the authorized official to verify the invoice's accuracy and ensure it is not a scam. The workflow must involve sending it to other authorized officials who have the payment rights.

Following the entire invoice processing function ensures businesses make payments to suppliers on time within the deadlines. However, the workflow may depend on the organization's size and hierarchy.