Invoice management

Invoice payment - A guide to paying bills on time

Apr 05, 2024

Interacting with your suppliers and purchasing goods or services to ensure that daily operations go smoothly is key to every business, regardless of industry or size. It’s safe to say that every business will have to deal with making an invoice payment.

In fact, most businesses will have to process and pay multiple invoices a month—some up to hundreds of them.

This is why it’s important to manage your invoices efficiently. You want to make all your invoice payments on time to maintain positive relationships with your vendors and boost your business reputation.

What is the meaning of invoice in accounting?

When your vendor sends you a document detailing the goods or services they have delivered to you along with the total amount you owe them, that document is considered an invoice.

In short, the meaning of invoice in accounting is a payment request made by a vendor, which also serves as a transaction record. Your next step after receiving an invoice is to process the invoice payment.

What is an invoice payment?

Your vendors and suppliers will send an invoice to request you to make a payment for their goods or services. Simply put, an invoice payment is what you’re required to pay when an invoice comes in.

It’s important that you manage your invoices and pay according to the invoice payment terms. By having a payment system in place, you can ensure that you don’t make late payments and maintain good relationships with your suppliers.

Why is it important to make timely invoice payments?

Regardless of what the specific invoice terms are with a particular supplier, you’ll still want to make every invoice payment that you have in a timely manner. It will benefit your business and even save you from trouble in the long run.

From saving money to boosting employee morale, here are some reasons why making timely invoice payments is crucial.

Additionally, a streamlined and efficient invoice-to-pay process can further strengthen these benefits. By prioritizing timely payments within this process, businesses can avoid late fees, maintain positive relationships with vendors, and potentially even secure early payment discounts.

1. Positive vendor relationships

The more late payments you make, the less your vendors will trust you. In some cases, this may even stop vendors from wanting to sell to you. This is why it’s important to ensure that you’re making most, if not all, of your invoice payments on time.

Maintain good relationships with your vendors and prove they can trust you.

2. Cash flow management

Making payments late will negatively impact your cash flow. Not only will you have to deal with late payment fees, but your invoices will also pile up, making it harder to pay them off.

You want to manage your invoices accordingly to maintain positive cash flow each month.

You might also like to read: Cash flow statement - Everything you need to know

3. Avoiding penalties and interest

Often vendors will penalize you for making late payments. This typically takes the form of a late payment fee or an interest charge.

Any penalties will be stated in the invoice payment terms, so make sure that you read it carefully and make timely payments to avoid any penalties.

4. Preserving credit rating

Having a history of making late payments could be bad for your credit score. It shows that the business is often unable or unwilling to make payments and meet its obligations on time.

Lenders and credit card providers may end up reluctant to offer you credit until you make more regular payments on time.

5. Operational continuity

Not making your invoice payments on time could result in your vendors deciding to pause doing business with you until they receive the promised funds. For a lot of businesses, this will disrupt daily operations.

You’ll find it difficult to sell your goods or services without the necessary tools and materials from vendors.

6. Ethical business practices

It goes without saying that it’s the right thing to do to make timely payments. All your stakeholders will expect you to make each invoiced payment on time.

Vendors, employees, investors, and even customers will prefer being involved with businesses that adhere to ethical practices and meet their obligations.

7. Favorable negotiation position

Having a reputation for being able to make every invoice payment in a timely manner will help you in negotiating invoice payment terms.

You can reassure your vendors that you won’t miss payments when doing business with them and can even ask if they will offer early payment discounts.

8. Strengthened negotiation power

As you do business with your vendors and prove to them that your payments are always made on time, you could even negotiate with them after the initial agreement.

By impressing your vendors and maintaining a good relationship with them, you’ll have more power to negotiate payment discounts and better terms.

9. Employee morale

While you’re mostly dealing with external relationships when settling invoices, making sure that every invoice payment you make is on time will also boost employee morale.

It demonstrates to your employees that you have the means to pay your bills, which will inspire confidence in them. Employees will also be pleased to know that the business is well-organized.

10. Legal and regulatory compliance

At worst, you could get in trouble with the law if you don’t make timely invoice payments. Your vendors may choose to take legal action, which will mean that if you fail to respond, there will be legal consequences.

Not only will this damage your organization’s reputation, but you could also be asked to cease operations.

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What are the tips for making invoice payments on time?

Being aware of why it’s important to make each invoiced payment on time is only the first step.

It’s important that you know how you can make your processes simpler, saving you time and ensuring that all payments are sent according to their invoice payment terms.

1. Organized record-keeping

Having your invoices scattered all over the place will result in a longer payment cycle, as employees will have to search and track down every invoice. You may even end up missing payments when invoices get misplaced.

It’s important to organize your records so you know when every deadline is and how to meet them.

2. Set up reminders

To make sure that you don’t miss any upcoming payments, you should set reminders and alerts—well in advance before the due. This way, you’ll have enough time to process your payments.

With the help of automation software, you can guarantee that you’re getting alert notifications for all your upcoming payments.

3. Prioritize cash flow

No business has unlimited money, which is why it’s important to prioritize your cash flow. By improving your cash flow, it makes it easier to guarantee that you have the cash to pay your bills.

Look at your cash inflow trends and plan your invoice payments while taking them into account.

4. Automate payments

The more steps there are involved in your invoice payment process, the less likely it is for you to make all payments on time. Automating your payments doesn’t only make your payment cycle faster, but it also ensures that you don’t forget.

Instead, payments will be automatically made by their respective due dates.

Suggested read: B2B payments methods and the current market trends

5.Negotiate favorable terms

Most vendors can offer some flexibility if you negotiate with them. Before you come to an agreement with a particular vendor, take some time to discuss the invoice payment terms.

Try to accommodate both parties, which will help you manage your payment cycles and due dates better. You could also ask for a discount for early payments.

6. Centralized approval process

One thing that draws out the payment cycle and makes it longer than necessary is approvals. The traditional method of getting approvals requires employees to chase after managers and approvers, whether that’s physically from desk to desk or through emails.

By centralizing your approvals and using one platform to request, review, and notify, approvals will be much faster.

7. Regularly review invoices

It’s good practice to review your invoices as they come in. This ensures that your invoices don’t get lost or missed. It’s important that you know the due date and amount owed for every invoice.

Along with that, you want to do a thorough review of the goods and services you receive before you make an invoice payment.

8. Use online payment platforms

Typically, manual and offline payments take longer and are more difficult to make. You want to use online payment platforms whenever possible to settle any invoice payment faster.

You’ll also get other benefits such as better payment records, automated recurring payments, and even rewards points or cashback with some payment platforms.

Suggested read: Benefits of online virtual payment for businesses

9. Schedule batch payments

When you process all your invoices on one particular date each month, it could cause a disproportionate amount of work for employees to do near the date. Instead of leaving everything to the last minute, you should schedule batch payments in advance.

This way, when it comes to releasing the payments, you won’t need to stress.

10. Maintain emergency fund for contingencies

While planning is beneficial for any business process, sometimes emergencies and situations that were not previously accounted for cannot be avoided.

You want to maintain emergency funds in case these situations happen, which will allow you to clear your payments. An emergency fund gives your business some breathing room even in tight situations.

11. Regularly update vendor information

The last thing you need is to make a payment on your invoice due date only for the payment to not go through. Not having the right vendor information can make this a likely occurrence.

You want to make sure that every time your vendors notify you of any bank account updates you reflect that in your system.

12. Review and improve processes

You may have an invoice payment process that works for you right now, but there is always room for improvement.

Schedule regular reviews of your processes to determine what pain points you may have and get feedback from employees. You can develop new strategies and decide on new tools better this way.

What are the common invoice payment methods?

There are several ways to make an invoice payment. Each method will have its own advantages and disadvantages, but you’ll want to pick the one that suits your business the most.

1. Cheque

While cheque payments are secure, they can take a long time to process. After you fill out your check, you’ll have to address the envelope and send it by mail.

2. Cash

Some vendors may take cash payments, but paying in cash to settle a large bill is risky. Cash can get stolen and offers little security, especially if you’re not making the payment in person.

3. Online card payments

If your vendor has an online payment portal, you can make your payment on invoice using a debit or credit card. It’s quick, convenient, and secure with the right encryption.

4. Direct debit

This refers to your vendors billing you directly to your bank account, debiting the amount owed on the invoice. It saves time, but you’ll have to ensure you have enough in your account.

5. Bank transfers

A common way to settle an invoiced payment is to transfer money to your vendor’s bank account. While it’s quick, this will require you to know the vendor’s account details.

6. Mobile payments

Payments through mobile are convenient and secure, with added layers of security while still being easy to do. Use a debit or credit card to pay through a mobile app.

7. Automatic bill payment

Your vendor may offer an option to make automatic bill payments, which is useful as you’re guaranteed to make payments on time. Like direct debit, you’ll have to make sure your account has enough money.

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How to process an invoice?

You’ll want to know all the steps involved in processing an invoice to ensure that each invoice payment is made on time. Here are key steps that you’ll want to follow when you process invoices.

1. Receive the invoice

Before you begin processing an invoice, your vendor will have to generate and send the invoice to you. If you don’t get invoiced for your purchase, you may want to ask your vendor.

2. Verify invoice details

Double-check the details on your invoice upon receiving them. You want to take note of the due date of your invoice payment terms, check the goods and services listed, and make sure that the costs are correct.

3. Record the invoice

Make it a habit to record your invoices as you receive them. This ensures that you have the right information and that you don’t forget to record any incoming invoices.

4. Assign invoice approval

You’ll want to have an approval workflow in place. Assign the invoice to one of your workflows, which will guarantee that all concerned personnel review and approve your invoice payment.

Related read: How to easily automate expense approval process?

5. Review and approve

Before payment is made, make sure that you get the necessary approvals for a particular invoice. The request for payment on invoice should also be approved by managers or other approvers.

6. Resolve discrepancies

If there are any discrepancies at any point in the process so far, you’ll want to resolve them before you initiate payment. Talk to your vendor and discuss with managers to get things sorted.

7. Obtain signatures or authorization

Once everything has been reviewed and approved appropriately, you will need to obtain signatures or other forms of authorization from approvers before you can make an invoice payment that complies with company policies.

8. Initiate payment

Schedule or create a payment using your method of choice. Make sure that you have authorization before the payment is released. Take into consideration the pros and cons of each payment method.

Related read: Best online payment methods in Singapore

9. Update payment status

It’s good practice to update the status of each invoice payment. It ensures that everyone in the company is on the same page and lets your vendors know that the payment has been made.

10. File documentation

It’s not enough to just update the payment status—you need to document the payment in your records. This way, you’ll have historical payment data and will be ready for audits.

11. Reconciliation

Regular invoice reconciliation is necessary for your invoice payment processes. During this step, you’ll be double-checking that every payment has been made appropriately. It helps eliminate missing payments and reduces fraud risk.

How to automate invoice payments?

Getting started with automating invoice payments can be daunting, but it doesn’t have to be. You want to break down each step of the process and move toward solving the pain points you have identified.

1. Select the right software

There are many automated invoice payment software on the market, but it’s important that you pick the one that can meet your business needs.

Take a look at your current processes and identify your pain points, then select a provider that can solve them.

2. Gather vendor information

You’ll want to centralize all your vendor information on a singular platform. No more chasing after different bits and pieces of information right before payment.

Gather all the necessary details and create a vendor database that you keep updated at all times.

3. Choose payment methods

Some payment methods, like cheque or cash payments, are difficult to automate. Instead, choose payment methods that integrate well with automation, such as online and mobile payments.

You could also ask if vendors can offer automatic bill payments or direct debit from their end.

4. Set up approval workflows

Don’t make your employees chase after approvers from desk to desk or wait for days on email approvals.

With the help of automation tools, you can set up approval workflows that will automatically route payment requests to approvers and notify them to review.

5. Integrate with banking

You want to be able to directly pay invoices from your invoice automation software. One way to do this is to integrate your software with your banking account, allowing you to access your funds to make payments even faster.

6. Configure payment scheduling

Have a proper schedule for your payments. This way, everyone in your organization can expect when they’ll need to ensure that every invoice payment has been cleared and settled. It also helps when you’re scheduling and automating recurring payments.

7. Implement dual controls

While you want to make your invoice payments as simple as possible, it’s also important that you take the necessary security measures.

Dual control requires two people to create and authorize a transaction, making it safer without adding too many steps.

8. Validate and approve invoices

Often the process of validating and approving invoices takes a lot of time, especially when done manually.

Automation tools can help you easily capture invoice data using OCR technology and automatically send invoices to review through the approval workflow.

9. Automate payment execution

With the help of technology such as OCR and automated payment scheduling, you can significantly reduce the manual work required to execute payments.

Schedule recurring payments in advance and use OCR to help you capture invoice data to make accurate payments faster.

10. Monitor and review

Each business will have its own policies and processes. After the initial setup, you want to keep on monitoring the new automated process.

Regularly review each step to see what works for your business and what doesn’t. This way, you can keep making improvements.

11. Vendor communication

Make sure that you stay in touch with your vendors throughout the entire process. While your payments may be automated now, you’ll still want to make sure that vendors are receiving them in a timely manner. Let vendors know that you’re open to communication.

12. Data security and compliance

While you want to automate your processes to make each invoice payment as easy as possible, make sure that your data is kept securely on your tools.

Other than working with providers with industry-standard security, you also want to implement measures like two-factor authentication.

13. Continuous improvement

When you do regular reviews of your processes, you’ll find it easier to identify any pain points that still exist. It’s important that you keep up with technology trends and research new ways to improve your invoice payment process for the best output.

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Understanding the invoice payment terms

You may come across some acronyms and terms that are commonly used for invoice payments. These terms will provide you with details on when your invoice due dates are and what payment methods are expected of you.

Here are some common terms you’ll want to understand.

Net 7, Net 21, Net 30

When you see the term ‘net’ followed by a number on an invoice, it simply means that you are required to pay your invoice within that number of days from the invoice’s issue date. For example, net 30 means that you’ll have to pay in 30 days.


Short for payment in advance. You will be required to pay the vendor in advance before their goods or services are delivered to you.


Short for cash in advance. Similar to PIA, CIA means that you’ll have to pay upfront, but CIA specifically means making the payment in cash.

Upon receipt

While there are some invoice terms that allow you to pay a number of days before you have to make your payment, upon receipt means that you’ll have to pay immediately after receiving the invoice.


Short for end of month. This refers to the due date of the invoice, which is the end of the month the invoice is received.


Short for month following invoice. While EOM refers to paying at the end of the same month as the invoice, MFI means that you’ll have to make the invoice payment at the end of the month following the invoice.

How to deal with late payments from clients?

There may be times when you, unfortunately, have to deal with clients making their invoice payments to you late. Here are some ways to deal with it or prevent it from happening.

1. Set clear payment terms and communication

To minimize the risks of late client payments, you want to be clear about your invoice payment terms when negotiating with your clients. Make sure that you set clear terms before the agreement.

Communicate these terms with your clients and resolve any doubts.

2. Invoice reminders

Periodic reminders of an invoice payment will make a client more aware of the invoice deadline. If a payment is already late, reminders let your client know that the payment must be made as soon as possible.

Automation software can help you send automatic reminder notifications.

3. Offer incentives for early payments

You can avoid late payments entirely by offering incentives for early payments. Having a discounted rate for clients who are paying before the due date, for example, can motivate them to fulfill those early payments.

You won’t have to worry when the payment due date comes.

4. Late payment penalties

In case discount incentives don’t motivate your customers to pay early, it’s also a good idea to set and communicate late payment penalties.

This will dissuade customers from making late payments, ensuring that you’re collecting funds from your invoices on time.

5. Flexible payment options

Demanding your clients to pay in cash may result in them having a difficult time meeting those requirements.

Whenever possible, you want to offer flexibility and allow clients several payment options and methods to choose from, which will encourage faster payments.

6. Client relationships and communication

Communications with your clients shouldn’t end after the invoice payment terms are agreed on. Maintain positive relationships and communicate with clients the entire time you do business with them.

This will help in ensuring that they are more agreeable during late payment negotiations.

7. Partial payments and negotiations

If your client has expressed that it’s going to be difficult for them to make a payment because of their circumstances, try negotiating with them. Offer a partial payment plan to ensure that the client will be able to slowly pay the invoice.

8. Escalation process

Sometimes you need to offer the client an ultimatum to escalate and move the process along. If follow-ups on email don’t work, you also want to consider calling the client or visiting their office. Establish an escalation process for situations like these.

9. Consistent follow-up

When a client is late on a payment, it’s important that you consistently follow up and ask for updates. If a client has promised to pay on a certain date after the due, for example, make sure to follow up on that date.

10. Legal options as a last resort

If a client has stopped responding to your attempts of communication or outright refuses to settle an invoice payment, you should look at your legal options. This should be a last resort, but look into it if there is no other way to move forward.

11. Credit policies

You want to have an established and detailed credit policy for your invoice payment. This lets your clients know when they are expected to make their payments at the latest when they purchase your goods or services on credit.

12. Advance deposits or retainers

Requiring advance deposits or retainers will ensure that you won’t run into the issue of late payments, as goods or services will only be delivered after. However, some clients may be reluctant to pay in full in advance, so try to find a middle ground.

13. Streamlined invoicing and payment processes

An easier payment process will encourage your clients to pay faster. Having an online payment portal, for example, means that your clients can pay in just a few minutes. You also want to send invoices as soon as they are generated to avoid delays.

Suggested read: Benefits of online virtual payment for businesses

How can Volopay help you with payable management?

Automate your invoice payment processes with Volopay and get the benefits of making every vendor payment on time in just a few simple steps.

With Volopay, you’ll be able to easily manage all your vendor information. Keep a database of all your vendors, their addresses, bank account details, and information on other payment methods while having it easily accessible on a single platform.

Having a cloud-based system means that your team can collaboratively manage your invoices and payments without having to be in one physical location together.

Optical character recognition technology paired with automatic recurring payment scheduling will also help make any invoice payment easier to do. Snap a picture of your invoice through your Volopay mobile application and capture the invoice data in no time. All you’ll have to do next is to create a payment, which will be automatically routed through your approval workflow with alerts to approvers. Schedule recurring payments in advance so that you won’t miss upcoming payments.

As an all-in-one expense management platform, Volopay offers a centralized solution that eliminates the need for multiple applications to track, view, and control your expenses.

You won’t have to worry about messy manual data entry, overspending on employee expenses, late invoice payments, or tedious reconciliation.

Get access to corporate cards, accounts payable automation tools, easy expense reimbursements, invoice payments, multi-currency business accounts, accounting integrations, and many more with Volopay. All your expenses are guaranteed to be made easily, safely, and in a timely manner.

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How do you ensure that invoices are paid on time?

The best way to speed up the payment process and ensure that every invoice payment you owe is made on time is by automating your invoice tasks. Setting up automatic notification alerts, for example, will remind you of when you have invoices to pay soon.

What is the payment method for a business invoice?

There are many payment methods that you can opt to use to pay a business invoice. Each will have pros and cons, so pick the one that suits your business the best. Some common ones include cheques, cash, online card payments, and direct debit.

What happens if invoices are not paid on time?

When you don’t pay your invoices on time, there will be a series of consequences for it. Whether that is a bad public perception from your customers or a worsening cash flow, there may be long-term consequences that will disadvantage your business by making late invoice payments.

How do I deal with late invoice payments?

If there’s a situation where you simply cannot pay your invoice on time, it’s important that you communicate with your vendor. Try negotiating if it is possible and ask if you could get your late fees waived. You will then want to prioritize and clear any late invoices as soon as possible.

What is the difference between a bill, invoice, and receipt?

An invoice is issued by the vendor as a request for payment from its customers, while a bill is what the invoice is received as and must be paid. Once the payment has been settled, the vendor will then generate a receipt as proof of payment.

How long should you give someone to pay an invoice?

The most common time given by most vendors is net 30, which means a customer has 30 days to pay the invoice after it has been generated. However, you can discuss invoice terms with your customers and pick a cycle that suits you best.

Is a paid invoice a receipt?

No. Once an invoice has been paid, the vendor will have to generate the receipt for it. While an invoice is a payment request, a receipt is proof of payment.

Does Volopay help in automating bill payments?

Yes. You can schedule payments and automate recurring payments so that you won’t have to input your vendor payment data for every single bill.