What is Invoice Processing?

Invoice processing starts with the delivery of an invoice.
Invoice processing may use a purchase order number.
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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 29 September 2015
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Invoice processing is a series of procedures for handling invoices to make sure they are paid in a timely fashion. Individual businesses usually have their own processing systems, involving members of accounting staff, as well as supervisors and other personnel. Software to assist with invoice processing is available to streamline the process, make it easier to locate records, and provide rapid access to current outstanding invoices.

The process starts with the delivery of an invoice by fax, email, mail, or another system. A member of the accounting staff needs to open and review the invoice to decide how to proceed. It may have a purchase order number, indicating that the person in charge of that purchase order must verify it. This can involve checking the invoice against actual items received and verifying that a person approved the purchase in the first place. If no purchase order number is present, the accountant must examine the document to determine what kind of product or service is under discussion.


In electronic invoice processing systems, people can record the invoice data, including the originating vendor, details, due date, and so forth, creating a trackable database entry. Accounting supervisors can request lists of pending invoices sorted by due date and other parameters. Once an accountant approves payment, funds can be dispatched by check, electronic funds transfer, and other methods, using the vendor information on file. If a vendor is new, the accounting department may need to make contact to collect information if the billing data is not complete.

Companies log their payments by check or confirmation number, depending on how they submit funds, to create a record showing when and how they made a payment. Once the money is sent, the accounting department can note that the invoice is paid and move it out of the accounts payable column in their ledgers. If a dispute arises over payments, these records are available for review to find out where a payment went astray, and how to address the problem.

The number of steps involved in invoice processing can vary, depending on the company and the systems it uses. Failsafes are built in to avoid problems like double payments, paying on unauthorized purchases, or failure to pay an invoice within the terms allotted. At a small business, a single person can be in charge of these payments, while larger companies may have an entire accounts payable department responsible for handling all invoice processing, for every vendor from utilities providers to subcontractors a company uses on specific projects.


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