Invoice processing is an essential aspect of running a company. It includes receiving a supplier invoice, authorising it, determining a remittance date, paying the invoice, and putting it into the general ledger. Late payments to vendors can impair your supply of services and raw materials. It jeopardizes your supplier relationships. While one or two late payments may get excused, continuously delaying can be detrimental to your business. Install invoice software to avoid such a situation in your business.
Workflow for processing invoices
Establishing an effective invoice processing procedure is critical. This process consists of the following steps:
- Receipt of invoice
The goods or services will get verified by the accounts department. The amount billed will then be compared to the amount on the original purchase order (PO). If the charges and the PO differ, resolve the matter with the supplier before sending the invoice for approval.
- Approval of invoices
Generate an invoice using invoicing software and then route it for approval by corporate regulations to verify the validity of the information.
- Payment of invoices
The invoice will get scheduled for payment depending on the conditions negotiated with the seller after it gets authorised. Companies may opt to pay an invoice early to receive a discount in specific instances.
Your accounts payable department will be more efficient if they track what’s due to suppliers, verify payments are correctly approved, and execute payments using an established invoice processing protocol. Accounts payable information must be correct to produce an accurate balance statement. Opt for GST invoicing software, which will aid the AP department in creating the right bill abiding by the Indian government law.
What is a journal entry for invoice processing?
You must enter a vendor invoice into your accounting system when you get it. After being recorded as a liability on the balance sheet, the invoiced amount becomes an accounts payable (AP) offset as a cost on the income statement.
Benefits of using invoicing software in India
The accounts payable department uses automated invoice processing software to
- optimise invoice processes
- gain better control over internal processing activities with tracking capability and
- speed up the processing of vendor bills.
Accounts payable teams may use these automated invoice processing systems to automate the capturing, coding, and sending of invoices for approval, assigning approvers, and moving bills into financial services for payment.
5 Steps to entering an invoice into the accounts payable system
To input an invoice into the accounts payable system, follow these five simple steps:
- Enter the invoice in your general ledger as a credit
- The item is classed as an “open invoice” after it gets entered.
- Enter the invoice payment date (consider taking any discount opportunities provided).
- Make a debit to the respective accounts (On the income statement, the bulk of AP items are reported as costs, although in some situations, an offset can get recorded to prepaid assets or fixed assets).
- When an open invoice gets paid, it is deducted from accounts payable and replaced with a debit and a credit to cash.
