How To Optimise Supplier Invoice Payment Processing

Maximise efficiency and improve accuracy. Discover intelligent tools for timely payments and improved cash flow while keeping your suppliers happy.

Inventories are crucial to your business’s day-to-day operations. After all, what is there to produce and sell if you don’t have these? Supplies and raw materials are needed to create your products. As such, you need to have enough inventories to generate enough revenue.

But, tracking your transactions with your suppliers can be challenging at times. You may come to your office one day and see piles of invoices on your tables. Fortunately, you have a competent and efficient accounting team. But in time, you will have to scale up your process to keep up with the fast-paced market.

With that in mind, let’s examine the supplier invoice payment processes. We will also discuss ways and tools to help you improve your workflow.

Supplier Invoices Explained

Supplier or vendor invoices are sales invoices issued for goods or services procured. The recipient of supplier invoices also gives invoices to its customers. For a clear distinction, let us put this on a company level. When we say vendors or suppliers, we refer to the suppliers of goods or services used for production.

Supplier invoices list goods and services with additional charges such as tax and shipping fees. They provide subtotals and total amounts, including taxes and fees.

Credit agreements between suppliers and customers outline payment terms and methods. They are often consolidated in monthly statements for organised payment processing, and subsequent invoices are usually omitted.

While traditionally handwritten, invoice recording now often utilises spreadsheets, offering multiple copies. Many suppliers use software-generated invoices for efficient transaction management, facilitating easy search and sorting functions.

Supplier Invoice Processing Common Workflow

Supplier invoice processing involves tracking and paying invoices. It is a complete cycle that begins with receipt and approval and ends with invoice payment.

Recording everything on the general ledger is crucial for timely payments, cash flow assessment, and maintaining inventory and service flow. It also prevents supplier issues or legal actions. Technological advancements, like automated invoice processing systems, streamline tracking processes.

Often received electronically, invoices contain all necessary information and must be scanned into the accounting system before approval and payment. This ensures faster, organised processing, avoids financial errors, and protects against overpayments. Following a structured workflow is vital to organised invoice processing.

Here are the basic steps in the invoice processing workflow.


1. Invoice Receipt

The process starts once you receive the invoice manually or electronically. You must first check the itemised goods and services with the accounting department. Once verified, you must check the billed amount to the original purchase order. In case of discrepancies, you must inform the supplier so they can resolve the issue immediately.

2. Invoice Approval
Once the issue has been settled, you can route the invoice for approval according to company policies. If there are no discrepancies upon checking, you can approve it immediately.

3. Invoice Payment
After the verification and approval, it is now ready for payment. You have to pay it based on the terms and conditions agreed upon with the supplier. You may pay it in advance if you want. Doing so will let you avail of discounts or perks, if there are any. For instance, suppliers may give a 5% discount if you pay for your order within a week.

How to Process an Invoice for Payment

Here are the basic steps in processing an invoice for payment.

1. Check Invoice
Once you receive the invoice, check the itemised goods and services. Are they procured? If so, check their corresponding prices and the other charges, such as taxes and shipping fees.

2. PO-Matching
Once checked, compare it to the original Purchase Order (PO). With the help of your competent accounting team, check for any discrepancies. Are there any discrepancies?

3. Payment Approval
If there are discrepancies, inform the supplier immediately to resolve the issue. Once settled, route it for approval.

4. Pay Invoice
You will pay for it according to the agreed terms and conditions. You may opt to pay in advance for discounts and perks.

5. Bookkeep
Record it on the general ledger for reference.

Challenges in the Accounts Payable Process

Supplies and raw materials are commonly obtained on credit agreements, accounting for accounts payable. Tracking inventories and accounts payable is essential, with purchase orders crucial for resolving invoice payment discrepancies. Accounts payable significantly affect working capital, so even minor mistakes or payment delays can harm your business.

Despite scaling up processes, the accounts payable department may face various challenges.

  • Managing Supplier Invoices

It can sometimes be hard to keep track of supplier invoices, whether written or electronic. The burden doubles during peak seasons. Imagine how harder it is for those still engaging in manual processes. As such, there is a chance of losing track and not paying on time. You can ask the supplier to resend the invoice. But you will have a big problem if you are unaware of missing invoices.

  • Manual Data Entry

Let’s admit it. Processes involving manual data entry are slower and more prone to errors. It contributes to inefficiency and payment errors. More so, it is hard to maintain manual records. Imagine coming to the office with piles of invoices on your table.

  • Missing Purchase Orders

You must keep the original purchase orders. They will help you verify suppliers’ items and prices on the invoice payment. You can check for discrepancies and settle issues with suppliers. Missing purchase orders are a problem for the accounts payable team, and losing them can lead to more cash outflows due to double and unauthorised purchases.

Benefits of Automating Supplier Invoices

Before, finance teams mostly wrote invoices on paper. With the help of technological advancements, invoices moved to spreadsheets. Yet, they are still prone to errors since they involve manual entry.

Now, companies are using software-generated invoices. So, below are some reasons to automate supplier invoices as early as now.

  • More Control and Visibility

Automating supplier invoice payments gives finance managers greater control and visibility. Comprehensive automation offers transparent tracking from invoice receipt to final payment, streamlining the process.

AP automation software, such as Spenmo, allows customisation of invoice approval workflows to align with business needs and spending policies. Features like Payment Run simplify bill approval with a consolidated view of approval status, ensuring only authorised spending is processed. Built-in guardrails prevent over-budget bills, providing peace of mind and financial control.

  • Enhanced Efficiency and Accuracy

Automating supplier invoice payments enhances workflow by eliminating inefficiencies and reducing errors inherent in manual processes. Lost or misfiled invoices are avoided, saving time and streamlining operations. Digital routing enables quick review and approval, ensuring smooth document flow through accounts payable processes without delays.

Finance managers can also gain insight into upcoming payment cycles, enabling informed decisions and strategic fund allocation. Customisable payment cycles and intelligent bill prioritisation optimize cash flow management, ensuring prompt fulfilment of financial obligations.

  • Improved Supplier Relationships

Late payments could damage your business reputation and vendor relationships. Worse, suppliers may take action against your business.

With AP automation, you can monitor invoices and clearly view your cash flow, mainly working capital. Timely payments can also give you discounts and perks from your suppliers.

  • Lower Costs

Labour accounts for more than half of your accounts payable cost, including the receipt and issuance of invoices and rectifying payment errors. Keep in mind that manual processes require more work. With automation, you will incur lower labour costs and less time with data entry.

  • Audit-Ready

Automation software helps generate transactions, including invoices, anytime you want. It helps you prevent missing documents. It can make auditing less tedious. Moreover, you can easily find discrepancies if there are any.

With the help of accounting automation software from Spenmo, you can save time and resources on your supplier invoice payment process. Book a demo today.


Invoice Processing Automation Software

With automation software, companies can manage accounts payable digitally. Accounting teams can focus on more crucial tasks than sorting for missing invoices. Its functionality includes standardised coding and automated approval. There are dashboards to see which suppliers have been paid and which have not. You can see the status of invoices, whether they are for approval or payment.

Some automation software works directly with ERP platforms and B2B payment software. As such, you can maintain accurate and timely payments. Moreover, it expedites financial processes, including AP processes, and improves cash management.

Who will usually approve the payment of suppliers' invoices?

The cost centre manager approves supplier invoice payments.

What is the difference between purchase invoices and supplier invoices?

Customers send a purchase order to suppliers to track the purchasing process. Meanwhile, an invoice corresponds to the official payment request by suppliers.

Are invoices and receipts the same?

Suppliers send invoices before payment. In contrast, official receipts are sent after the payment.

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