Invoice Processing

Invoice processing is an important part of doing business. If companies do not process invoices in a timely manner, not only will they lose money, but their credit rating and vendor relations might be adversely affected.

What Is an Invoice?

An invoice is a document that is issued by a seller, or vendor, to a buyer. Invoices usually include a date, the buyer's purchase order number, product codex, product descriptions, the price of an individual product unit, the quantity of product delivered, and a delivery date. Also included are billing and shipping addresses. There will be a total dollar amount due for all products. Other information might include credit terms, shipping costs if any, order date, and any other miscellaneous charges listed as separate line items. There will also be a grand total due.

Invoice Credit Terms

Vendors allow buyers certain credit terms, or the allowable period that a buyer has in order to pay a bill. If the invoice is paid late, the buyer's credit may be affected. A typical term is “net 30,” which means a buyer has thirty days in which to pay. A term of “2% 10 net 30” means that a buyer can take 2% off of the invoice if the buyer pays within ten days. If the buyer does not pay within ten days, the buyer must pay the whole amount of the invoice within thirty days. Most companies will expedite invoice processing in order to get any discount offered.

Invoice Processing

Actual steps of invoice processing vary by company. However, there are certain steps that every company must take in order to make a payment on an invoice. The following are the critical steps companies must take in processing invoices:

• The invoice must be matched with the original purchase order. This is to make sure that the invoice was issued with the correct products and product costs listed.


• The invoice must be matched with the appropriate information from the Receiving Department. The Receiving Department will provide documents that include the purchase order number, the date the product was received, a list of the product numbers received, and the actual number of units that were received. These documents and the invoice are compared to make sure that the items received match the items invoiced.


• When all of the line items on the invoice are matched, the invoice is approved for payment.

By Laura Evans