{"id":3696,"date":"2023-05-03T00:24:00","date_gmt":"2023-05-03T05:24:00","guid":{"rendered":"https:\/\/www.northone.com\/blog\/?p=3696"},"modified":"2024-07-04T12:20:17","modified_gmt":"2024-07-04T17:20:17","slug":"invoice-payment","status":"publish","type":"post","link":"https:\/\/www.northone.com\/blog\/accounting\/invoice-payment","title":{"rendered":"What Is an Invoice Payment? Definition and Guide"},"content":{"rendered":"\n

Understanding how to pay invoices efficiently and on-time is key to running a successful business. Prioritizing prompt, accurate invoice payment helps you build and maintain relationships with suppliers, which are vital to your long-term success.<\/p>\n\n\n\n

What is an invoice<\/a> payment, and how can you make sure you pay your invoices on time, every time? Keep reading to learn more.<\/p>\n\n\n\n

<\/span>What is an invoice payment?<\/strong><\/span><\/h2>\n\n\n\n

An invoice payment refers to funds sent by a  customer to a supplier as compensation for the products and services it received. Often, these payments are made according to a predetermined schedule.<\/p>\n\n\n\n

It all starts with an invoice: a document that outlines all goods and services provided and the requested amount payable for them. The invoice should also include the date, item quantities, VAT information, and a unique invoice number. When a supplier issues an invoice to a customer, it triggers the payment for the product or service supplied.<\/p>\n\n\n\n

A supplier can make or request invoice payments in many ways, but the most popular route today is an e-invoice, or electronic invoice. These include all the same details as a paper invoice and usually offer convenient payment options, like checks, ACH payments, virtual card payments, and more.<\/p>\n\n\n\n

<\/span>The invoice payment process<\/strong><\/span><\/h2>\n\n\n\n

The end-to-end invoice payment process begins when a customer receives  an invoice and ends with reconciliation. Here\u2019s a breakdown of each step in detail:<\/p>\n\n\n\n

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  1. Invoice capture:<\/strong> This step occurs when a customer receives an invoice, whether through the mail, fax, email, or another method. An invoice must be entered into an accounts payable system when received, either manually or through automatic capture on invoicing platforms.<\/li>\n\n\n\n
  2. Approval and authorization:<\/strong> Once the invoice is in the system, the proper individuals confirm and approve amounts. This step may require coding for accounts, projects, or cost centers. If your business uses purchase orders, all POs must match. Automated approval processes are preferred to manual ones, as approval requests are digitally routed to the right people, rather than passed from desk to desk for signatures.Payments must also be authorized before they\u2019re released. Typically, the business controller or CFO completes this step. Automated processes can route the payments directly to the appropriate person, who can approve or reject them at the touch of a button.<\/li>\n\n\n\n
  3. Payment execution:<\/strong> Many accounts payable departments render the payment themselves depending on both their own and supplier preferences. Payments can be sent via virtual card, check, ACH payment, or another method. Again, automated processes save time and hassle. There are too many hands involved with manual payment processing\u2014you\u2019re more likely to experience missed or delayed payments due to errors or payments being physically lost in the mail. Automation and electronic payments enable faster invoice payment with fewer errors.<\/li>\n\n\n\n
  4. Analysis:<\/strong> Many accounts payable platforms have special features that aggregate and analyze data in real time. High-quality analytics tools can help AP teams calculate key metrics automatically, enabling data-driven decision making that helps businesses improve efficiency, increase accuracy, and\u2014best of all\u2014save money.<\/li>\n\n\n\n
  5. Reconciliation: <\/strong>Finally, all invoice payments must be reconciled. Using your accounting software, you\u2019ll compare your supplier statements (which detail how much you owe) with your accounts payable ledger (which lists your transactions). For each payment you\u2019ve made, there should be a corresponding \u201cmatch\u201d\u2014an invoice from the supplier for the same amount.<\/li>\n<\/ol>\n\n\n\n

    <\/span>How to make invoice payments on time<\/strong><\/span><\/h2>\n\n\n\n

    Late invoice payments create hassles for both the customer and the supplier, and they damage otherwise fruitful partnerships. Businesses of every size should take responsibility to pay invoices on time. Here\u2019s how you can pay your suppliers\u2019 invoices promptly:<\/p>\n\n\n\n