Automating Invoice-to-Payment Process

How would you feel if your business lost a $15,000 early payment discount just because a paper invoice sat unnoticed in someone’s inbox for three weeks? Or your AP team mistakenly paid the same $25,000 invoice twice.

These aren’t fictional horror stories; they are typical consequences of relying on manual invoice-to-payment systems.

The invoice-to-payment process cycle appears easy to do — review, approve, and pay. However, without automation, it can quickly become a nightmare as it involves numerous checkpoints, validations, and potential risks. In high-growth organizations, even a single error can cascade into delays and strained vendor trust.

In this blog, we’ll break down every step of the invoice-to-payment cycle, contrast manual versus automated workflows, and explore how automation can completely transform your financial operations.

What is Invoice-to-Payment?

The invoice-to-payment (I2P) process encompasses every task done by the AP team, from the moment an invoice is received from a supplier to the point where the payment is successfully executed. It involves receiving, verifying, approving, paying, and reconciling invoices.

The I2P process ensures that suppliers receive timely payments while providing businesses with clear visibility into their spending. A well-structured I2P process helps to maintain strong supplier relationships and ensures accurate financial recordkeeping.

How Does the Invoice-to-Pay Process Work?

While the invoice-to-payment process may seem straightforward, it requires complex coordination across multiple teams and systems. The main steps involved in the I2P cycle are:

Step 1: Invoice Receipt  

Receive invoices from suppliers through email, postal mail, portals, or EDI. Step 2: Data Entry

Input invoice data into the accounting system or ERP, including scanning physical invoices.

Step 3: Invoice Validation

Perform three-way matching to verify invoices against purchase orders and delivery receipts.

Step 4: Coding

Assign General Ledger codes to ensure proper expense categorization.

Step 5: Invoice Approval

Route invoices to relevant stakeholders for approval before processing payments.

Step 6: Exception Handling

Identify and resolve discrepancies such as PO mismatches or missing signatures.

Step 7: Payment Authorization

Authorize payments based on terms, selecting the payment method and schedule.

Step 8: Payment Execution

Make payments on the due date, either internally or through third-party payment service providers.

Step 9: Reconciliation and Recordkeeping

Reconcile payments and file invoices for future reference and audit purposes.

How Are Invoices Received, Read, and Recorded?

The process of handling an invoice typically involves three distinct stages: receiving, reading, and recording—each with its own challenges.

Typical Manual Invoice Approval Process

The manual invoice approval process is time-consuming, paper-heavy, and requires substantial follow-up with approvers. Here’s how it typically unfolds:

• Initial Review 

The invoice is manually reviewed for basic completeness and accuracy. It includes checking vendor details, invoice numbers, and amounts. However, many critical errors go unnoticed due to limited visibility into matching documents.

• Routing for Approval

The invoice is routed to the relevant approver via email or printed form. If multiple approvals are required, it often results in delays and confusion. Paper trails are difficult to track, and there is no way to monitor the status in real time.

• Follow-Ups

AP staff must constantly chase approvers via email, phone calls, or physical visits for approval. Sometimes, invoices are approved weeks after the due date, resulting in late fees and strained vendor relationships.

• Approval Logging and Rework

Once approved, the AP team manually logs the approval into a spreadsheet or ERP. If disputes arise, the invoice may need to be reprocessed through the workflow, requiring additional clarification and creating rework loops.

Automated Invoice Approval Process

Around 29% of businesses require six or more approvals for processing an invoice, resulting in approval times that extend to three weeks or more. To overcome the inefficiencies of manual invoice approval, finance leaders are adopting automation.

To know more, read the full blog: https://globalpayex.com/resources/blogs/remittance-advice-challenges/