Using Invoice Processing Flowchart to Optimize AP Operations
Accountants and bookkeepers deal with invoices from different sources – almost daily. Utility companies, software providers, government institutions, and suppliers send invoices through various channels such as mail or email, and in different formats, and currencies. This variability poses challenges.
During busy seasons, it’s not unusual to hear top management or business owners complain to the accounting team about issues like these:
“Invoices sent by e-mail or signed invoices left in the “accountant’s drawer” could stay there for weeks.”
“The invoices would sometimes travel for days as some of them would be left unnoticed on
someone’s desk or in their email inbox.”
How Delayed Payments Hurt Business Operations
Delays due to inefficiencies are particularly common in companies with a manual invoice processing workflow. Invoices sent can go unnoticed for weeks.
The repercussions of missed bills or delayed payments in business can be significant, affecting vendor relationships, causing delays in goods and services, and leading to penalties and interest.
Delayed payments not only impact the business and suppliers but also affect employees in your accounts payable department.
As the department handling payments, finance and accounting departments are often stuck between grumpy suppliers who want their money as soon as possible and management emphasizing policy compliance. This is no easy feat – and 50% of AP teams are working longer hours to keep up with the increasing workload.
This balancing act contributes to burnout, frustration, and a desire among accounting professionals to seek better job opportunities.
For businesses struggling to make timely payments despite having sufficient working capital, it’s crucial to reassess the current invoice processing workflow.
And flow charts can be a great tool for identifying inefficiencies in existing processes.
Stop slow invoice processing from hurting vendor relationships, and speed up invoice processing with Envoice. Schedule a demo today to find solutions to your accounts payable pain points.
Unlock the Power of Visualization with Invoice Processing Flowcharts
Have you ever wished that top management would understand why your team is struggling with paying vendors on time?
Flow charts could be the simple but effective answer.
How to eliminate repetitive bookkeeping tasks?Book a demo
and we will show you how
Having a visual representation of what the typical process looks like for any business process including the sales invoice lifecycle, returns and replacements, and vendor payments allows companies to understand workflows better.
For AP departments, an invoice processing flowchart not only aids in understanding daily challenges but also serves as a foundation for making strategic decisions and informed improvements.
Your flowchart maps out every stage of the invoice process that your accounting department goes through when processing a single invoice. Flow charts provide a graphical presentation of all the steps involved in the invoice processing workflow from the time an invoice arrives by mail or email.
Your flowchart outlines all the different stages in invoice processing as well as individuals and departments involved, making it easier for everyone to follow the process.
Understand Your Invoicing Process Better with Flowcharts
Flowcharts serve as a powerful tool for a variety of purposes within your organization:
Better Understanding of Duties and Responsibilities
Providing a visual representation of the typical processes for your accounting team improves clarity and aids in comprehending the sequence of tasks required for specific functions.
Compliances and Consistency
Flow charts help companies ensure consistency in processing invoices for payment, establishing standard procedures, and enhancing compliance with company policies.
Efficient Employee Onboarding
For new team members unfamiliar with the invoice processing process, flowcharts facilitate faster onboarding, serving as invaluable training tools for seamless integration.
Flowcharts play a crucial role in optimizing processes by assisting your accounts payable (AP) departments in identifying inefficiencies, duplicative work, and bottlenecks that may hinder the approval process.
Proper Setting of Expectations
Flowcharts help ensure that accounting, top management, and other departments have a clear understanding of the company’s invoice processing procedures. This clarity sets expectations for payment timelines and required verifications, reducing friction between accounting, finance, and other departments.
Pinpointing Bottlenecks in Your Invoice Processing System Through Strategic Flowchart
Creating a visual representation, such as an invoice processing flowchart, is a simple yet effective method to identify inefficiencies in the invoicing process. This underscores the importance of having a clear and documented workflow that reflects the actual processes followed when your company receives a bill or invoice.
This brings us to the next question – do you have an existing flow chart for your invoice processing workflow? Does your flowchart show the actual invoice processing steps that you follow for an actual invoice?
If not, it’s time to create your invoice processing flowchart! Let’s start with the things you need to include when creating one.
What are the Key Components of an Invoice Processing Flowchart?
Process flow may vary from different companies, but most invoicing workflows include these components. Start by asking yourself some questions about your existing workflow to help you create a flowchart that reflects the process you follow in your AP team.
Indicate how your company normally receives invoices from suppliers.
- Are you still receiving paper invoices through the mail? Or are all invoices already sent through electronic channels like email?
- Do you use a vendor portal for managing all invoices?
- To whom do suppliers send their invoices?
- Which employee is in charge of receiving paper invoices and making sure it doesn’t go unnoticed?
What invoicing tasks happen when you receive an invoice from suppliers? Who needs to update records or relevant systems to make sure you pay bills on time?
Do you have a payable register that you need to update or forms you need to fill out with invoice data?
Are you relying on manual data entry to update your invoicing or accounting software? Or are you using a tool to scan invoices and extract information automatically through Optical Character Recognition (OCR)?
Invoice verification and validation
Now onto the next stop for invoices – verification and validation phase.
- How do you ensure that the invoice received through mail or email is a legitimate expense for your company and not fraudulent?
- How do you validate the accuracy of invoices in your organization?
- Who oversees this process? Do you require a delivery receipt or purchase order?
- Do you need to attach the preliminary bill or the pro forma invoice?
- How do you make sure that the vendor sends the corrected invoice if you requested changes or adjustments?
- How do you make sure that invoices are valid? What steps do you take to make sure the vendor is correct?
Routing invoices for approval is often the next step in the process.
- Who needs to approve invoices?
- How would accounting send the invoices to the approver? Is it through email or by delivering actual paperwork to the approver?
- What happens when the approver is out?
- Is there a substitute approver?
- What’s the next step if the approver requests clarification about the expense?
- Will the question go directly to the department that incurred the expense, the accounting team that validated the invoice or both?
- How would you document any invoice-related communication?
Once you secure approval, payment processing comes next. In this step, you need to understand who is in charge of all approved invoices. How does the department schedule payment and what payment methods do you normally use?
Recording and Reconciliation
At what point do you update the accounting records when invoices get approved? Who is in charge of updating the accounting system and other databases? Who is in charge of archiving and filing? Who will have access to all invoice-related information?
After answering all these questions, you will have a better picture of what the flowchart would look like for the invoicing process.
Create a draft flowchart based on the information you have. Sit down with your team to figure out where bottlenecks happen. Often, broken processes, siloed systems, manual routing, and poor visibility into invoice status are to blame for delays in getting invoices approved and paid.
Brainstorm with your team to come up with strategies to reduce penalties and late payments to suppliers. Solutions may vary depending on your company’s situation, but it usually includes:
1. Improving existing workflows to eliminate unnecessary steps and simplify the process.
2. Add more employees if you don’t have enough people on your team.
3. Invest in automation to reduce manual work done by your accounting or AP department.
Let’s talk about the automation of invoice processing as a solution for inefficient workflows. One survey revealed that 25% of AP departments are solving their problems by hiring additional employees to ease the workload, while 25% plan on automating AP processes. 
While you can hire more employees and substantially increase your operating costs automation becomes a viable alternative for a few reasons:
- Costs less than hiring new employees
- Reduces the steps in your invoice processing workflow without sacrificing data accuracy
- Directly causes higher employee productivity
- Greater process visibility, and better cash flow forecasts
What does an automated workflow look like?
Here’s an example from Stillabunt, a marketing company in Estonia.
Stillabunt faced the following challenges:
- Just two employees who performed invoice processing on top of other tasks.
- All invoices received in PDF or picture format had to be forwarded to one email address. Paper invoices landed on the desk of the person responsible for purchasing – not an ideal situation
- During busy seasons the two people processing invoices were overwhelmed by the workload and backlogs in invoice processing were common
For Stillabunt, the answer was to integrate their accounting software with ENVOICE for automated invoice processing. The company was able to solve all their invoice processing challenges with the ENVOICE tool which costs only $11 a month. The convenience of the easy sign-up, and payment. ENVOICE also integrates with popular accounting software was hugely attractive for Stillabunt.
Happily, they are still using ENVOICE and are loving the enhanced features they get as the automation software is updated.
They managed to get their invoice processing flowchart down to 4 core steps and they’ve seen the benefit across their accounting processes.
Get the same benefits as Stillabunt by trying our automation too for free. Sign up for an account today.
Gone are the days when accounting teams had no choice but to enter invoices manually. Automating invoice processing has brought a whole new way of doing things to AP departments with the help of machine learning technology.
Companies have taken their accounts payable process to new places by embracing invoice automation. They’ve been able to track invoices, benefit from early payment discounts, and route invoices for approval within a few simple steps.
When one considers the cost-benefit ratio of purchasing an automation tool like ENVOICE you quickly see how much you can get back for your investment. Take the next step now
Sign up for a free Envoice account because it’s time for a better way!
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