Invoice management is an internal business function responsible for managing documents from vendors or suppliers. Invoices represent a source document in accounting. Source documents outline specific information relating to a financial transaction. Vendors usually provide outside services such as maintenance, utilities, office supplies, or advertising to businesses. Suppliers represent companies who provide businesses with economic resources. Economic resources include the raw materials and direct labor needed to produce consumer goods or services. Companies use invoice management processes to ensure vendors and suppliers receive payment in a timely manner.
A common invoice management process is the three-way match system found in accounts payable functions. Purchase orders represent the company’s internal information that provides individuals specific authorization to purchase items from vendors or suppliers. Two copies of purchase orders usually exist in a business. One is sent to the vendor or supplier and one is retained in the company’s accounting department. This document comes into play later on during the invoice management process.
Companies using business technology software may use electronic copies of purchase orders. Rather than maintaining a paper copy in a file, companies may scan this information into a server database. This allows individuals to review or retrieve the purchase order as needed. Business software can also increase the accuracy of purchase order information.
The second document in the three-way match invoice management system is the receiving ticket. The receiving ticket and indicates all goods or services were received by the company according to the purchase order. Receiving tickets are usually the responsibility of the company’s warehouse or administrative staff. A copy of the purchase order and receiving ticket is sent to accounting to finalize invoice payment.
Many vendors and suppliers offer customers 30 days to pay before assessing fees and interest on unpaid balances. Accounts payable clerks will file the receiving ticket and purchasing order in an outstanding file. Upon receiving the vendor’s final invoice requesting payment, the payables clerk will match all three documents to assure the information matches. Matching each document’s information is the crux of the three-way invoice management system. Companies rarely pay vendors or suppliers if the documents do not match. Once the accounts payable process is complete, clerks will cut a check for the invoice, request signature from the owner or appropriate manager, and mail the check.
Companies may use customized invoice management systems. Business owners and managers will develop a system that best supports their back office and accounting functions. Larger organizations receiving several hundred invoices each month may desire a simpler system than the three-way match. Invoice management does not require all companies to use the same system.