Invoice Processing: 3 Ways to Improve Invoice Processing

Joanna Okedara
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    Imagine making bulk shipping orders of wholesale coffee beans from a private label coffee dropshipping vendor every other month. Of course, you can manage one vendor’s invoice. However, suppose you have 500 white label vs private label coffee beans wholesale food distributors that supply you monthly? How would you manually process these invoices?

    Invoice processing is an integral part of your business process flow as a B2B eCommerce, D2C, O2O, or subscription billing service provider. Even wholesale distributorships, dropshipping businesses, and distribution warehouses need a streamlined invoice processing workflow.

    Key Takeaway - Learning what is an invoice is one thing, knowing how to process invoices is another ball game. Using a small business invoicing software can help you streamline the process of creating invoice templates and accepting invoice payments online.

    However, the story is entirely different when it comes to invoice processing. So, what is invoice processing and how can businesses automate invoice processing? Let’s find out.

    What is Invoice Processing?

    Invoice processing involves managing invoices received from suppliers from receipt to payment. In an ideal business organization, invoices are processed by the accounts payable department. Processing invoices is a complex business function, especially without an automation tool.

    Here’s the thing, working with multiple online vendors, suppliers, and wholesalers go beyond having a great supplier relationship management system. It involves having a solid warehouse inventory management system. 

    At some point, you’ll also need to integrate a robust wholesale distribution management software with the rest of your Oracle ERP system. Depending on your business model, you may need a vendor management system to keep track of vendors.

    While it is possible to run your business without some of these systems, one thing you cannot do without is an automated invoice processing software. Invoice processing is key to keeping up with a steady flow of inventory, receiving orders from customers, and order fulfillment.

    Invoice processing ensures that supply chain management remains in tune with the rest of your company’s process. Normally the invoice processing workflow is overseen by the accounts payable department, manually.

    However, with recent technological advances, account payable automation and invoice processing software can streamline and automate invoice processing. Efficient and timely vendor invoice payment ensures a steady flow of supplies, and this starts with invoice processing.


    Just like any other business process flow chart, understanding the workflow is the first step toward automating it. So, let’s show you what a functional invoice processing workflow looks like.

    Invoice Processing Workflow: 4 Components of the Invoice Processing Flow Chart


    There are four steps in the invoice processing workflow. These four steps in the invoice processing flow chart include:

    1. Receiving Invoice

    From paper invoices to digital invoices, receiving invoices from suppliers is the first step in the invoice processing workflow. Most suppliers use invoice management solutions and invoicing software to create invoice templates for businesses. Some of these invoicing tools integrate payment processing software features that make it easy to send and accept payments online

    After receipt of the invoice by the accounts payable department, the invoice is either scanned or manually entered into the accounting ledger or system. Manual entry usually takes time and costs a lot of money. We’ll get to just how much it cost to process an invoice in a bit.

    1. Copying and Filing Invoice

    The next step is entering the invoice into your system. Copying the data into your filing system is important to avoid discrepancies. However, if you use a manual filing system, then you may need to come up with an invoice filing code to keep things organized.

    On the other hand, using an electronic filing system will streamline your invoice scanning and filing process. It is also necessary to check the accuracy of the invoice with purchase records and delivery receipts. You can’t be too careful!

    1. Invoice Approval

    Once you double-check and see that the information on the invoice is correct, the next step is to send it for approval. Most small businesses usually have an individual in charge of approving invoices for payment.

    However, like other manual processes, there may be errors and inefficiencies. Invoices may be lost in a pile and the risk of late payments increases making the business incur late payments charges, or, worse, lose the trust of suppliers.

    1. Invoice Payment

    The final step in the invoice processing workflow is paying the vendors. Payment processing will be according to the agreed payment terms and conditions. Most invoicing software makes it easy to process payments.

    How to Process Invoices

    The invoice processing workflow is a huge part of your business. Improving the process can cut down on the amount of money and time spent processing invoices. Before we review how to improve your invoice processing, let’s discuss why you need to improve it.

    It always comes down to figures and statistics. So, let’s look at how much an average small business spends annually to process invoices.


    How Much Does It Cost to Process an Invoice?

    Calculating the amount of money you spend to pay an invoice is not difficult. Here’s the formula you need to calculate your AP (accounts payable) per invoice:

    Total number of invoices paid for a period of time ➗ Costs incurred to pay same invoices for same period of time = AP cost per invoice

    However, on the average, here are some statistics:

    • Business with lesser than 20,000 invoice volume spend $12.98 to process an invoice with automation and $15.98 without automation.
    • Businesses that receive about 20,000 to 100,000 invoices spend $4.24 to process an invoice with automation and $6.10 without automation.
    • Businesses that receive over 100,000 invoices spend $3.18 to process an invoice with automation and $3.62 without automation.

    Punch these figures into a calculator and you can imagine just how much your business can lose from processing invoices wrongly and without automation. It is important to streamline your invoice processing workflow to minimize these costs.

    So, how do you improve the way your business processes invoices? Let’s find out.

    How to Improve Invoice Processing in 3 Ways

    From slow internal approvals to losing the purchase order numbers, a lot of things can go wrong in the invoice processing workflow. However, it is possible to overcome these challenges and streamline the way you process invoices.

    Here are three ways to improve your invoice processing methods:

    1. Automate Invoice Processing

    The first step toward improving your invoice processing workflow is automation. Integrating AP automation software into your business processes will streamline the invoice approval process.

    Some invoice processing software can help with tracking and monitoring your entire invoicing process from receipt to final payment. You can also take advantage of the large database or storage options to file your invoices and vendor information.

    1. Paperless Invoice Processing

    Paperless invoice processing involves the process of automating your invoice capture and scanning workflow. With paperless invoice processing, you can automate invoice approval and set up supplier self-service.

    1. Implement Payment Technologies

    Another great way to streamline your invoice processing methods is by using advanced payment processing technologies and models. You can switch to top payment processing companies or implement a recurring payment or automatic billing solution.


    Frequently Asked Questions About Invoice Processing

    Invoice processing is a huge deal for businesses. Without the right tools, the process is tedious and challenging. Let’s answer some simple questions about processing invoices.

    Why Is Processing Invoices Important?

    Processing invoices is important to maintain the trust between a business and its vendors. It is a crucial part of paying for goods purchased from suppliers and wholesalers. The invoice processing workflow involves managing the accounts payable function, approving invoices, and sending payments to vendors.

    What Is Account Payable Entry?

    Account payable entry is the record of the amount payable to a business's suppliers for the purchase of goods or services. The AP entry shows the amount of money a business has to pay and the due date. Accounts payable is recorded under the current liabilities section of the balance sheet.

    What Is Invoice Copy?

    An invoice copy is a document that shows the record of transactions between a buyer and a seller. It can be used as legal proof or evidence that goods were delivered at a particular time. This can protect a business from fraudulent lawsuits. It can also be used to manage expenses.

    Let This Be Clear

    Invoice processing is one task that you cannot avoid. However, you can streamline and automate the tedious process. Using the systematic process and tips recommended in this article will help you get started with automating your workflow.

    Remember to integrate other eCommerce automation solutions like BlueCart. This will optimize your entire work process, not just invoicing. Running a business can get easier, with the right solutions. In this case, automation is the right call.

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