Accounts Payable Invoices Processing

Processing accounts payable (AP) invoices is a crucial aspect of financial management for businesses. This process involves the receipt, review, and payment of invoices from suppliers and vendors. Here's a step-by-step guide to accounts payable invoice processing. Extract Data From Invoices ( Vendor, customer), sales bills, shipping bills, purchase orders, PAN/Aadhar Card, Etc.
1. Receipt of Invoices: Invoices are received either physically or electronically. Electronic invoices may come through email, EDI (Electronic Data Interchange), or other automated systems. Paper invoices are often scanned and digitized for electronic processing.
2. Document Review: Ensure the invoice is complete and accurate. Verify details such as date, invoice number, vendor details, and itemized charges.  Confirm that the goods or services were received and match the purchase order or contract.
3. Coding and Approval: Assign appropriate general ledger codes to the invoice based on the nature of the expense. Obtain necessary approvals. This may involve routing the invoice to different departments or individuals for authorization.
4. Data Entry: Enter the invoice details into the accounting or ERP (Enterprise Resource Planning) system. Verify the accuracy of data entry to prevent errors in payment processing.
5. Three-Way Match: Compare the invoice with the corresponding purchase order and receiving report (three-way match). This ensures that what was ordered is what was received and billed.
6. Exception Handling: Address any discrepancies or exceptions identified during the matching process. If there are discrepancies, investigate and resolve them with the vendor before proceeding.
7. Approval Workflow: Ensure the invoice goes through the appropriate approval workflow as defined by company policies. Approvals may involve managers, department heads, or other designated personnel.
8. Payment Processing: Schedule payments based on the payment terms negotiated with the vendor. Common payment terms include Net 30 (payment due within 30 days), Net 60, or Net 90.
9. Payment Approval: Obtain final approval for payment. Some organizations may require dual authorization or additional layers of approval for significant payments.
10. Payment Execution: Issue payments through electronic funds transfer (EFT), checks, or other agreed-upon methods. Record payment information in the accounting system.
11. Reconciliation: Regularly reconcile accounts payable records with the general ledger to ensure accuracy. Identify and resolve any discrepancies.
12. Document Retention: Maintain organized records of all invoices, approvals, and payments. Adhere to document retention policies and comply with legal and regulatory requirements.
13. Reporting: Generate reports on accounts payable activities for management and auditing purposes. Analyze trends, identify opportunities for process improvement, and ensure compliance.
By following these steps, organizations can streamline their accounts payable processes, reduce errors, and maintain good relationships with suppliers and vendors. Automation tools and software can further enhance efficiency in accounts payable invoice processing.