<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=586251215043677&amp;ev=PageView&amp;noscript=1">

BLOG

Invoice-Processing-and-Approval.jpg

How Does Procure-to-Pay Work?

In today’s world of invoice processing, speed is king. Early payment discounts can save accounts payable teams thousands of dollars and allow companies to receive more favorable payment terms from other vendors.

However, the procure-to-pay process by nature is slow and arduous. Many of today’s invoice processing functions are manual and bring the cost of processing an invoice to as high as $30.

So what does this process look at? Take a look at the infographic below.

Here is a deeper explanation of the infographic:

The Procure to Pay Process1. Purchase order is prepared to communicate what the company is ordering from a vendor. The person sending the PO will give a copy to the accounts payable department, the accounts receivable department, and the vendor.

2. The company receiving the goods creates a shipping document to record the goods it is receiving.

3. After the shipping document and purchase order are complete, the vendor will send an invoice to the company that has received the goods. Although the information on an invoice can vary among vendors, they must contain the following:

  • Contact information of both the vendor and purchasing company
  • Agreed prices and other terms related to the goods purchased
  • Information on how to pay the invoice
  • The date the invoice was created and sent

4. An accounts payable specialist or clerk uses either two-way matching, which matches the invoice to the purchase order, or three-way matching, which compares the two documents with the shipping document. If items have been back-ordered, the accounts payable specialist will make necessary corrections and make note of when the items should be delivered in the ERP system.

5. Verified invoices are passed to an accounts payable manager or team for review and to complete payment processing.

6. The accounts payable manager enters the invoice into its general ledger system (typically an ERP) and schedule the payment. Invoices are typically labeled “Net 30 days,” which means the payment for goods is due 30 days from the date of the invoice. Suppliers may offer an early payment discount, such as “2/10 net 30,” which offers a two percent discount if the payment is made within 10 days.

7. The accounts payable manager sends the requested payments and expected cash flow to the top financial officer to approve payment. This is often a Controller or CFO.

8. He or she then approves payment and begins the process of preparing checks, which are then sent out to the vendor.

Invoice processing is broken. But by automating the procure-to-pay process, accounts payable departments can reduce processing time by as much as 80 percent. Do you want to learn more about invoice processing?

Download our whitepaper below:

New call-to-action

Go Back