No matter the size of your business, you know just how important it is to stay on top of your company’s finances. One essential aspect of managing your finances is invoice processing, whether that is receiving, reviewing, or paying invoices for goods and services your company has received.

Analog or patchwork invoice processing can lead to delayed payments, missed opportunities for discounts, and even damage to your company’s reputation. On the other hand, an effective invoice processing system can streamline your financial operations, reduce costs, and improve your cash flow.

Below, we’ll explore the key components of a successful invoice processing system, including invoice capture, approval workflows, and payment processing. We’ll also discuss the benefits of automating your invoice processing and provide tips for optimizing your process to maximize efficiency and minimize errors. By better understanding how to manage your company’s invoices effectively and efficiently, you’ll be better able to focus on growing your business.

What is invoice processing?

Invoice processing refers to the steps involved in receiving, reviewing, and paying invoices for the goods and services your company receives from vendors as a regular part of running a business. This process typically involves several stakeholders, including accounts payable staff and managers or executives responsible for overseeing financial operations.

Here are the key components of an invoice processing system.

1. Invoice capture

The first step is to receive the invoice from the vendor. Invoices can arrive in various formats, including paper documents, electronic files, or email attachments. You must have complete information to begin this step.

2. Invoice verification

Once the invoice has been received and entered into your accounting system, it has to be verified for accuracy. This involves checking that the details on the invoice match the purchase order or contract, ensuring that the prices and quantities are correct, and confirming that any discounts or credits have been applied correctly.

3. Approval workflows

After the invoice has been verified, it needs to be approved for payment. This typically involves a workflow process where the appropriate parties, such as department managers or executives, review and approve the invoice. The approval process may be manual or automated, depending on the size and complexity of the organization.

4. Payment processing

Once the invoice is approved for payment, it must be processed in your accounting system. This involves recording the amount in your accounts payable ledger, generating a check or electronic payment, and sending it to the vendor.

5. Reconciliation

Finally, it’s important to reconcile your accounts payable ledger to ensure that all payments have been recorded correctly and that there are no outstanding invoices or discrepancies.

It’s important to note that these steps can be automated using invoice processing software, significantly streamlining the process and improving accuracy and efficiency.

What is invoice processing automation?

Invoice processing automation uses software and technology to streamline the steps involved in invoices processing for goods and services your company has received. This includes automating invoice capture, verification, approval workflows, payment processing, and reconciliation.

Invoice processing automation software typically uses artificial intelligence (AI) and machine learning algorithms to extract data from invoices and compare it to purchase orders or contracts, reducing the need for manual data entry and improving accuracy. The software can also automate the approval workflows, routing invoices to the appropriate parties for review and approval based on pre-defined rules and thresholds. Once an invoice has been approved, the software can automatically generate a payment and send it to the vendor.

Benefits of automatic invoice processing

Your invoicing process can quickly become overwhelming as your business grows and expands. Invoice processing is essential for managing financial operations. You don’t have to do it the old-fashioned way, and that’s where automated invoice processing comes in. With the help of specialized software, you can streamline your invoicing process and reap a range of benefits.

Let’s explore the advantages of automating your invoice processing, from improved accuracy and efficiency to cost savings and increased visibility. Some of the benefits of invoice processing automation include the following:

  • Improved accuracy: By reducing the need for manual data entry and automating invoice verification, automation can significantly reduce errors and inaccuracies.
  • Increased efficiency: Automation can reduce the time and resources needed to process invoices, allowing staff to focus on other tasks and increasing productivity.
  • Faster payment processing: Automation can speed up the approval and payment processing, reducing the time it takes to pay invoices and improving vendor relationships.
  • Better visibility and control: Automation can provide real-time visibility into your accounts payable process, allowing you to monitor your financial operations more closely and quickly identify potential issues.

Invoice processing automation can help businesses save time, reduce costs, and improve their financial operations.

Finding the best invoice processing software

There are numerous solutions out there that provide comprehensive tools to help small businesses and startups manage their finances. In addition to identifying a solution that offers invoicing and payment processing features, be sure to look for these other benefits:

  • Easy accessibility: Ideally, you should be able to access your account from your phone or computer, making it easy to make payments and keep tabs on your finances from anywhere you work.
  • Fast payments: Having the ability to send ACH or wire payments and pay invoices quickly from your phone or computer can help you avoid late fees and keep your accounts positive.
  • Digital banking tools: Basic digital banking tools that are easy to use can help you simplify your banking processes. You can easily keep track of your finances with automatic categorization for purchases and receipt management features.
  • Hassle-free banking: Business owners are often on the go, and having to visit a physical bank can be inefficient. A good invoice processing solution gives you easy access to your deposit account from your phone or computer and allows you to easily move funds so they’ll be accessible when you need to pay your invoices.

NorthOne offers a comprehensive solution for small businesses, making invoice processing and all your other small business financial tasks easier to complete.