Accounts payables

What is the invoice-to-pay process?

Apr 05, 2024

Many businesses still struggle with making timely payments and pushing down invoice processing costs. This is because the traditional invoice-to-pay process is known to be slow, tedious, expensive, and incredibly complex. From when you receive an invoice to after the payment is settled, there are a number of steps that you have to do as efficiently as you can.


The number of invoices that you’ll have to process will naturally increase as your business grows. With more pressure to get invoice-to-pay right and process payments faster, automation and digital payment methods are technologies that businesses must invest in for a better invoice-to-pay process.

What is the invoice-to-pay process?


Put simply, the invoice-to-pay process encompasses the various steps involved in handling invoices in accounting, and the different components involved in processing your payment requests. It starts with receiving invoices from your suppliers and vendors, followed by verification and validation of these invoices before they can be processed for payment. Once an invoice has been approved by the appropriate approvers, payment can be made to settle the invoice.


As a key part of your accounts payable, getting the invoice-to-pay process right is key to ensuring that your business operations remain smooth. Compliance, accuracy, and time-effectiveness are all important components of an efficient invoice-to-pay process.

Key components of the invoice-to-pay process

1. Invoice receipt


Invoice receipt is the first step of the process. Depending on the agreement between your business and a particular vendor, there will be different ways to do this. Your vendors can send physical invoices or email attachments such as PDFs, images, and spreadsheet files. Alternatively, invoices can be sent in a standardized digital format for easy data extraction.


While this is only the first step, it is also one of the most important steps of the invoice-to-pay process. You want an efficient invoice receipt to ensure that there are no delays and inaccuracies during the other stages, Electronic invoices, for example, will be easier to process.


Invoice verification


Once an invoice has been received and its data is captured, the invoice must be verified accordingly. You’ll have to review its accuracy and ensure that it complies with the terms and regulations. This helps you make sure that not only do your invoices have all the right information based on your purchase orders and delivery receipts but also confirms that they come from legitimate sources.


By verifying and validating your invoices during this part of the invoice-to-pay process, you’ll avoid further delays due to unexpected errors, inaccuracies, and mismatches. This verification step also paves the way for timely and accurate invoice payment. Make sure that you do your invoice verifications!


Approval workflow


There must be some sort of authorization for your invoices, as allowing them to be processed for payment without authorization protocols will result in higher risks of fraud attempts, double payments, and other errors. To avoid the costly price that you’ll have to pay from these, you must establish appropriate approval workflows.


Some invoices under a certain amount may only require one level of approval before they’re ready for payment processing. Larger invoice amounts, however, may involve several levels of approvers to ensure security. By establishing these, you can avoid confusion and begin to streamline approval chains with the help of modern automatic approval technologies.


Payment processing


No invoice-to-pay process is complete without the payment portion of it. To settle an invoice, you’ll have to pay the amount billed by a supplier, which will be shown on your invoice. If the information on an invoice matches with its corresponding purchase order and delivery receipt or if discrepancies have been resolved, you can process the invoice for payment. 


There are many payment methods you can use. While cash or cheques were popular methods in the past, there are faster modes of payment available now, such as credit cards or electronic bank transfers. Pick a method that is convenient for you and ensure your payments are made on time.


Suggested read: Best online payment methods for small businesses in Singapore

Effortlessly manage your invoices

Transform your invoice-to-pay process with Volopay
Learn more

The invoice-to-pay process in detail

Invoice receipt and capture


You can receive invoices from your suppliers and vendors in many different ways, which are often categorized as either manual or automated. A manual invoice receipt can also be done physically or digitally. Other than receiving invoices by mail, it’s also common in the modern day for invoices to be sent through email as attachments like PDFs or images. 


Although some of these methods are digital, they still require you to manually view and check the invoices. Automated electronic invoice receipt, on the other hand, allows you to receive invoices from suppliers through a self-service portal and have the invoice data automatically extracted and captured.



Verification and validation


It’s bad practice to simply pay your invoices upon receiving them and capture their data without performing verifications and validations. A standard invoice-to-pay process will have verification requirements to ensure that your invoices are legitimate, come from the right source, and match with other documents.


It’s recommended that businesses perform a three-way match between invoices and their corresponding purchase orders and delivery receipts. If there are any discrepancies between these documents, you’ll have to address them before the invoices can be processed for payment.


There are many ways to resolve discrepancies and address exceptions, but make sure that they are settled before you pay an invoiced amount.


Approval workflow automation


While you could attempt to route your invoices through lengthy approval chains manually, it’s not an efficient use of your time and will cause delays. Research approval workflow automation tools to help you streamline a process that is otherwise tedious and time-consuming. 


Leveraging electronic approval systems allows you to automatically route invoices to their respective approval workflows. With some workflow customization and automation, invoices above or below a certain threshold, of different types, or belonging to different departments will have the appropriate approvals in no time at all.


Set up automatic notifications to be sent to approvers when an invoice needs their attention!


Payment authorization and processing


Create, authorize, and process your payments to settle your invoice debts to vendors. When processing an invoice to pay, it’s also a good idea to integrate your invoice management platform with financial systems that allow you to make your payments easily.


You could pay your invoices with more traditional methods such as cash or cheques. However, newer payment methods may suit you better and are both fast and secure. Corporate credit cards, for example, can be a good way to pay your suppliers if they have a payment portal that accepts cards. Modern-day electronic bank transfers are also instant and secure.

Benefits of efficient invoice-to-pay process

Cost savings


When you’re running a business, time and money are often proportionate. The faster and more efficient a process is, the less you’ll have to spend money on it. This is also true for your invoice-to-pay procedures.


You want to cut back on time-consuming manual work by automating your processes as it will save you money. When you have an efficient process, you can minimize your labor expenses and reduce late payment costs.


Enhanced accuracy


The downside of relying on manual processes is that you’ll easily run into data entry errors. When you streamline your invoice-to-pay process by utilizing automation tools, you’ll be able to maintain a higher level of accuracy.


With fewer errors, you can ensure that you’re paying your invoices accordingly and adhere to related policies and regulations. Not only are you avoiding overpayments, but tax filings will also be easier when you have improved compliance.


Stronger supplier relationships


An efficient invoice-to-pay process will result in fewer risks of late payments. You’ll have more control over your payment schedules and be able to ensure that payments are always made on time. As a result, your suppliers and vendors will be more likely to trust you as a business partner.


It’s important that you build better relationships with suppliers as this unlocks a smoother procurement process and potential perks like early payment discounts.


Faster processing times


More efficient data entry and faster approval workflows will result in faster payment processing times. There are plenty of benefits that you can get by reducing the time it takes when processing an invoice to pay, such as lower hiring and training costs.


You also will find it easier to ensure that your payments are made in a timely manner. This way, you don’t run into the risk of late payment fees and penalties.


Improved cash flow management


Traditional invoice-to-pay may offer only limited visibility due to how scattered and complex the entire process is. This could result in bad cash flow management, as there is no centralized platform that everyone involved can use to track amounts owed and payments made.


With a more streamlined and efficient process, however, you can leverage new technologies to get better visibility and cash flow management. This includes introducing efficient invoice and payment tracking, which can be a vital step in understanding and improving your cash flow.


Strategic decision-making


Streamlining and centralizing your invoice-to-pay process doesn’t just help with speeding it up, but it also allows you to manage your invoice data better.


The reports and analytics that you can from an effective invoice-to-pay process are valuable for decision-making, meaning that the easier it is for you to access accurate information, the more informed your decisions will be. Not to mention that effective processes also free up resources for better resource allocation!


Reduced risk


One goal of using invoice-to-pay automation software is to centralize your process and streamline it. By having all information easily trackable and searchable on a single platform, you’ll have more visibility over all your invoices. Combined with built-in fraud detection features like automatic invoice flagging, you’ll significantly reduce invoice fraud risks.


Compliance adherence features will also help you minimize any regulatory and policy-related risks that could otherwise net your penalties.

Challenges in the invoice-to-pay process

Data entry errors


Recording your invoice traditionally happens through the data entry process. The challenge with doing it manually is that you run into many errors, as it is inevitable that tired employees who spend long hours on data entry will make mistakes.


These can be in the form of typos, missed zeroes, and many more. The inaccuracies in your financial records caused by data entry will delay payments.


Invoice fraud


One of the biggest reasons why verifying, validating, and approving your invoices before payments are made is so important is because of the number of fraud risks you can come across. This could come as fake invoices, duplicate submissions of invoices previously settled, or even phishing attempts.


Without clear policies or a streamlined process, the risks get worse. To avoid this, it’s important that you implement the right verification and security protocols.


Compliance and regulatory issues


It’s no secret that evolving tax codes can be difficult to keep up with. If you don’t keep up with them, however, your compliance may suffer, which could lead to penalties. Your compliance team must be on top of every regulation change and all tax calculations must be double or triple-checked to ensure that they are accurate.


Without automation tools to help you with compliance, ensuring accurate reports for tax filings and audits is challenging.


Discrepancies and exceptions


It’s not just fraud attempts that could cause discrepancies in your invoice-to-pay process. Any errors on your invoice, purchase order, or delivery receipt could cause discrepancies. When you’re performing your invoice match, all information must match between documents before an invoice is processed for payment.


However, resolving them also often takes a lot of time, which could result in payment delays and more tedious work for everyone involved.


Complex approval workflows


No one wants to chase after their managers daily just to get an invoice reviewed and approved for payment. However, traditional invoice-to-pay processes often involve many complexities that can cause delays, such as lengthy approval chains and manual reviews that take time.


Not to mention out-of-office approvers, which will cause problems if they don’t have access to the invoices. When your overall payment timeline is affected, this could result in late payments and cost you extra.


Integration issues


When you do your invoice-to-pay process manually, it’s extremely difficult to integrate it with your other financial systems, such as payment portals and accounting platforms. Even internally, you may come across issues when trying to integrate processes between departments.


It’s key that you promote efficient data sharing between all departments that are involved in the process. Using an automated invoice management system could help you ensure you have seamless integrations.

Embrace invoice payment automation

Experience the future of invoice payment with Volopay
Get started now

Best practices for streamlining the invoice-to-pay process

Implement automation


Invoice-to-pay is a notoriously slow and complex process. The last thing you want is to overcomplicate it or draw it out by still facilitating repetitive and tedious manual tasks like data entry. Instead of doing that, you want to leverage technology to take some of the weight off your employees.


There are many software available that will allow you to automate different steps of the invoice-to-pay process.


Standardize procedures


To avoid confusion, promoting uniformity and laying out clear guidelines is necessary. Make sure that you have standardized procedures and payable management procedures that are known throughout the entire organization. This will allow your employees to understand better what is expected of them when processing from invoice to pay.


Everyone will be on the same page, meaning that collaborating will be easier. As a result, you’re sure to see a smoother and faster process.


Vendor management


While the invoice-to-pay process involves a lot of internal coordination that needs to go smoothly, it’s also not entirely a one-way street. Internally, it’s important to have a well-managed vendor database.


This way, you’ll be able to easily access all the basic information that you need about your vendors. To ensure that invoice-to-pay goes smoothly, however, you want to maintain good communication with vendors and build strong relationships. This involves not only efficient vendor procurement processes but also timely and accurate vendor payouts.


Electronic approvals


The traditional invoice approval method of chasing after approvers and going desk to desk to get their signatures may have worked in the past, but in the modern day, you have access to many new tools and technologies to expedite the process.


Take advantage of electronic approval features to automatically send invoices to approvers. They’ll be alerted immediately and can review invoices on their devices from anywhere.


Customize workflows


Invoices from different departments will often require different approvers. Even within the same department, some invoices may still need different levels of approvers depending on the amount billed. You’ll want to keep this in mind when designing your approval workflows.


This is especially true if you’re making use of electronic approval technologies to streamline your invoice-to-pay process. Make sure that you explore the customization options to create the appropriate workflows.


Continuous training


Confusion and uncertainties surrounding invoice to pay will only cause the process to be delayed even further. From inaction to a myriad of errors, you’re guaranteed to have issues if you don’t train your employees and make sure that they’re comfortable with each component of the process.


You want to ensure that they’re well-informed of their invoice tasks to reduce errors. Host regular training sessions and keep employees updated on any changes you make.


Invoice data capture


To eliminate the numerous errors and delays created by a manual data entry process, it’s recommended for businesses—especially bigger ones with more invoices each month—to utilize data extraction tools. Optical character recognition (OCR) technology, for example, allows you to simply scan or snap a picture of your invoice to capture its data.


By leveraging these technologies, you’ll improve the accuracy of your data extraction while reducing the time it takes.


Supplier portals


Make invoice receipt easier by inviting your suppliers to self-service portals for invoice submission. Invoice-to-pay management software will often have features that enable vendors to send their invoices straight to the platform.


This way, even the OCR data capture can be initiated automatically. As soon as you get an invoice, the system will immediately capture its data so you can begin the invoice-to-pay process. It’s less confusing for everyone!


Performance metrics


As with other processes in your organization, you want to set key performance metrics (KPIs) to measure how efficient and effective your invoice-to-pay process is. Make sure that you’re consistently monitoring your KPIs to see whether or not you’re hitting your targets.


It’ll be easier for you to determine which areas require more attention this way. These can be your guidelines for future improvements. Use your KPIs to measure these improvements.

Why should you automate the Invoice-to-pay process?

1. Efficiency and time savings


One of the biggest benefits of invoice-to-pay automation is that you can do the whole process more efficiently. From cutting back on the time needed to perform accurate data entry to streamlining approval workflows, your employees won’t be bogged down by tedious manual tasks. As a result, they can focus on strategic tasks.


2. Reduced error rates


When you have hundreds of invoices to process each month, the errors you come across can cost you a lot of valuable time. Automation tools such as OCR and automatic alerts reduce human touchpoints and promote higher accuracy. There will be fewer discrepancies and disputes when your process is more accurate.


3. Cost reduction


Manual work might seem cheaper than automation at a glance, but that’s not true. Not only will you have to spend money on the hiring and training process, but you also run into the risk of payment delays or overpayments. Automation tools, on the other hand, help you avoid these and reduce your labor costs.


4. Improved cash flow management


Implementing an effective invoice-to-pay process with the help of automation will improve your cash flow management. You won’t have to worry about delays, as faster processing means that you can guarantee timely payments to your suppliers. Feeling overwhelmed by your invoices is a thing of the past when you can control your cash flow better.


5. Enhanced supplier relationships


As automation streamlines invoice to pay, you’ll be making timely payments to suppliers without question. This will inspire trust from them, which could lead to you getting benefits such as payment discounts when you settle your invoices early. Suppliers also appreciate transparency and predictability, making it more likely for them to keep working with you.


6. Streamlined approvals


Avoid bottlenecks in your invoice-to-pay process by automating your approvals. With streamlined workflows, you get faster processes. Your employees won’t have to chase after approvers or delay payments when an approver isn’t in the office. Instead, approvers can review invoices from their mobile devices or computers from anywhere with ease.


7. Regulatory compliance


Automation tools will have built-in compliance features, such as automatic tax calculations. This helps you ensure that you adhere to tax and regulatory requirements when paying your invoices. There won’t be errors made during tax calculations, resulting in fewer risks of compliance-related penalties that could happen otherwise.


8. Security


Contrary to popular belief, trusting your invoice data to third-party software providers can prove to be more secure than manually processing everything internally. With the right provider, you’ll gain industry-standard data security encryptions and enhanced access controls. You also get fraud protection features, such as alerts of suspicious invoices.


Transform your payment process with ease!

Streamline your payment process and elevate your business operations
Schedule a demo

How to automate invoice to pay process

1. Evaluate current processes


Before you can make improvements to your invoice-to-pay process, you have to evaluate what the current process looks like first. Make sure that you fully understand your existing steps and processes, as this will help you identify pain points and bottlenecks.


You’ll find it easier to determine which automation tools will be the most useful for tackling your pain points.


2. Choose the right software


There are many different invoice-to-pay automation software providers. While many of them have similar goals, they will have different offerings and plans. Do your research and decide which software suits your business needs the most.


Consider how useful it will be for you in the short and long term. Some factors to think about include user-friendliness, integration capabilities, customer support, and more.


3. Data capture and invoice receipt


Make use of the available automated data capture tools that you get from your software. Most of the best invoice-to-pay management software will provide you with tools like self-service portals and OCR technology.


When possible, you want to automate your invoice receipt and do it electronically, whether that is true supplier portals or email integrations.


4. Verification and validation


The invoice matching process can be time-consuming and tedious to do, especially with a large amount of invoices. Avoid the hassle by automating the process.


Set it up so that when an invoice comes in, it will be automatically cross-referenced with its corresponding purchase order and delivery receipts. Customize your validation rules accordingly so your system can automatically flag discrepancies for review.


5. Approval workflow automation


Your invoice management software of choice should have approval workflow automation features. This is key to streamlining the approval process, as it allows you to set up automatic and electronic approval workflows that will route each invoice to its appropriate approvers.


You want to customize your workflows based on the types, departments, and approval hierarchies of your invoices.


6. Integration with financial systems


Chances are you’ll already have other systems in place, such as accounting or enterprise resource planning (ERP) systems. Make sure that you set up integrations between all your systems before you start using your new software for the invoice-to-pay process.


When you have seamlessly integrated systems, you can automatically and accurately transfer data between one system and another.


7. Reporting and analytics


Don’t miss the reporting and analytics tools available to you. Analytics tools, which come with the best invoice-to-pay software, will give you better insights into your spending patterns. Cutting costs won’t have to be such a complicated decision anymore!


Make sure that you are also using them to help you track your invoice-to-pay performance. Identify your areas of improvement easily this way. 


8. Compliance and security


When you pick your invoice to pay automation software, you want to do enough research and ensure that your provider complies with all industry regulations and has top-notch data security measures.


These will prove helpful to you when doing things like customizing access controls or making tax calculations. Get your data automatically encrypted to provide you with even more data security.


9. Testing and training


Implementing new tools for your invoice-to-pay process may require you to conduct tests to ensure they all work smoothly. Monitor the way your invoice-to-pay system works after implementation in case of any issues that you must resolve.


Aside from that, training sessions are also necessary to educate staff and suppliers on how to use your systems.


10. Continuous improvement


Just because you’ve implemented new systems and automation tools successfully, it doesn’t mean that that’s the end of building a strong and efficient invoice-to-pay process.


Regularly review your process to see if all your systems are working accordingly. This also helps you identify bottlenecks that still persist. By getting feedback from users and other stakeholders, you’ll be able to build better optimization plans.

Conclusion


It’s no secret that the traditional invoice-to-pay process comes with a number of challenges. Starting from slow payment processing to error-riddled data, you’ll find that it’s difficult to implement an efficient process if you stick to the traditional manual work.


This is why it’s key to leverage automation tools. Features like optical character recognition, automated approvals, and real-time invoice tracking will make invoice-to-pay much easier to do. As technology advances, the need for automation and digital payments will continue to increase.


Automate your invoice management now to keep up with the digital world, stay competitive, and maintain your business operations.

Optimize your invoice management process with Volopay!


Say goodbye to lengthy and tedious manual processes. With Volopay, your invoice-to-pay process and expense management don’t have to be difficult. Get access to tools like automated invoice capture, accounts payable, customizable electronic approval workflows, a vendor database, invoice tracking, virtual accounts, and many more. Processing an invoice to pay can be done from end to end in just a single platform. 


Even better, you get integration capabilities and real-time updates on your invoices and payments! No more long hours spent on ensuring accuracy and transparency when it’s built into the Volopay platform.


All vendor information, invoice data, and transaction details can be found in just a few clicks on our dashboard. Need a vendor bank account? No problem! Just search for the vendor name on your Volopay account and get all the details. You can even make a payment to the bank account through the platform and get it automatically recorded for ease.


Volopay also offers easily customizable approval workflows that can be set up and used entirely digitally. No more chasing approvers from desk to desk or hounding them for signatures! Have your invoices automatically routed to their corresponding approval workflows instead and get alerts for the approvers. 


The key to an efficient invoice-to-pay process is to streamline it and automate your tasks. Volopay is the right partner to help you manage your invoices effectively. 

Streamline your payment process

Get Volopay for stress-free invoice payments and expense control
Get Volopay now