Are you tired of the complicated and time-consuming process of invoice management? In Ardent Partners’ 2025 State of ePayables report, AP and finance leaders named slow approvals (49%) and a high share of invoice exceptions (48%) as their top two challenges.

Managing invoices can be a cumbersome administrative task for your business. Whether you work in the AP department or are a business leader, it's essential to understand invoice processing and best practices for invoice management.

What is invoice management, and what is an invoice management system?

Invoice management/Invoice processing is the method by which companies track and pay supplier invoices. It's a function within the procurement process that is performed by the accounts payable/department and typically handled by accounting systems.

Simply put, this process involves getting an invoice, recording the data, validating and verifying the invoice, paying for services, and noting the transaction in company records.

With invoice management, you can regulate the company's payment process, making sure that invoices are approved appropriately to avoid penalties and take advantage of early payment discounts.

Proper invoice management brings companies benefits such as speeding up the billing and collection process, preventing human error, and saving time on data entry, which helps focus on more important projects that are the basis of business success.

Why is efficient invoice management important for cash flow and supplier relationships?

Efficient invoice management improves cash flow by helping businesses track what they owe, when payments are due, and how much money needs to leave the business. This makes it easier to plan cash outflows, avoid missed payments, and ensure that there is enough cash available to meet financial obligations.

Efficient invoice management also helps businesses to maintain good relationships with suppliers. When invoices are paid accurately and on time, it shows suppliers that the business is reliable and respects the agreed payment terms. The proper management of invoices can also reduce the number of disputes caused by missing invoices, incorrect amounts, or delayed approvals.

Managing invoice process: Step-by-step

It’s now possible to automate the invoice management process and reduce much of the manual work involved in handling invoices.

Regardless of the type of invoice, the process typically includes the following steps:

1. Receiving the invoice from a vendor

Invoices may arrive by email, through an e-invoicing network, via a supplier portal, or as uploaded files.

2. Recording the invoice data

Key information, such as the vendor name, invoice number, dates, line items, quantities, amounts, taxes, and payment terms, is entered into the accounting or AP system.

3. Validating and verifying the invoice

The AP team checks that the invoice contains the required information and confirms that the charges are accurate. When applicable, the invoice is matched against the purchase order and receipt to verify that the goods or services were ordered and delivered. If the invoice doesn’t match the purchase order or receipt, the AP team investigates the difference and works with procurement, the vendor, or the relevant department to resolve it before payment.

4. Approving the invoice for payment

Once the invoice has been validated and any discrepancies resolved, it is routed to the appropriate approvers according to the organization’s approval rules.

5. Processing the payment

After approval, the invoice is scheduled and paid according to the agreed payment terms. The payment is then recorded in the financial system, and the invoice is marked as paid.

Let’s explore key steps in more detail.

Step 1. Receive a supplier invoice when the invoice arrives

Suppliers send invoices after completing their work, providing services, or delivering products. Invoices are received by the person responsible in the relevant business department (usually accounts payable, finance, or accounting).

What invoice details should every invoice contain?

Every invoice should contain enough information to clearly show who is charging, what the business is paying for, and how much is owed. This includes details such as: 

• Document title that clearly communicates the identity of the document as an invoice 
• Invoice date to show when the invoice was issued 
• The invoice number is used to identify and track the invoice throughout the payment process 
• Supplier information, including the supplier’s company name, the specific department you transacted with (if applicable), and their billing information
• Buyer details, including the name and contact information of the business receiving the invoice 
• Description of goods or services that shows what the buyer is being charged for
• Taxes and other charges where applicable 
• Total amount due to show how much the buyer needs to pay
• Payment terms and due date to show when and how the supplier expects to be paid

Step 2. Invoice capture, data entry, and recording invoice data

Invoice capture involves collecting the invoice and entering its details into the payment system. This can be done manually or electronically using AP automation software.

How should invoice data be stored and organized?

Invoice data should be stored in a centralized digital system such as an invoice management platform, accounting software, or ERP system. The system should allow invoices to be categorized, searched, and retrieved using key filters such as supplier, department, date, or payment status.

A consistent filing structure should also be established so the invoices can be stored according to the same categories and rules across the organization. For example, invoices can be grouped by supplier or accounting period, with supporting documents, such as purchase orders (POs) and receipts, kept alongside each corresponding invoice.

What are electronic invoices and modern invoice formats?

Electronic invoices, or e-invoices, are invoices that are created, sent, received, and stored digitally in a structured, machine-readable format that software can read and process. They allow businesses to manage invoice information electronically throughout the invoicing process.

The main difference between a structured e-invoice and a regular digital invoice is how the information is structured. A PDF invoice is a digital invoice, but it is not a structured e-invoice. Its details may need to be manually entered or extracted using OCR (optical character recognition) before a system can process them. A structured e-invoice, however, contains data in a machine-readable structure that allows software to read and process it directly.

Electronic invoice formats define how invoice data is structured and exchanged between systems. Common structured formats include XML, while EDI provides standards for exchanging structured business documents electronically. Formats such as Factur-X combine a human-readable PDF with structured XML data, while the European standard for electronic invoicing (EN 16931) defines the information and structure needed for interoperable electronic invoices.

The format a business uses depends on its systems, regulatory requirements, and what its suppliers can send. Businesses that receive invoices in different formats can use invoice capture tools to collect, extract, and process the information consistently.

How do OCR and automated data extraction improve invoice capture?

OCR (Optical Character Recognition) is a system that helps businesses capture information from invoices without entering every detail manually. It scans the invoice and converts the text into a digital format that can be entered into invoice management or accounting software. 

Intelligent document processing (IDP) takes this a step further. It combines OCR with machine learning to understand an invoice’s layout and context, not just its text. So it can handle invoices from different suppliers in different formats without a separate template for each one. For example, Precoro’s Invoice Processing works well even with non-typical formats, like multi-page documents or lengthy tables.

Together, these tools make invoice capture faster and cut down on manual data entry. They also make it easier to handle large invoice volumes while keeping data organized and ready for the next step: matching and approval.

Step 3. Validate and match invoice data against a purchase order

Before you pay an invoice, you need to know it’s accurate. Did you order these items at this price, and did you actually receive them?

To find out, the invoice is checked against two other documents: the purchase order (what you ordered) and the goods receipt (what arrived). This check is called 3-way matching. AP automation software can run it automatically as soon as the invoice is captured, so your team doesn't have to compare the documents line by line.

If all three documents match, the invoice moves on to approval. If they don't, for example, because the quantity, price, or tax is different, or not all the goods arrived, the invoice is flagged so someone can review it before it goes further.

Who approves the invoice next depends on your company's rules. Many companies set approval paths by invoice amount, department, or internal-control policy.

What role does procurement software play in invoice validation?

Invoice validation is only as good as the purchasing data behind it. Procurement software records that data as purchases happen, so purchase orders, receipts, and invoices are already linked in one system when the invoice arrives. Your team doesn't need to chase documents across email threads and spreadsheets.

Procurement software also lets you set tolerance limits, which are rules for how much difference is acceptable. For example, a small rounding difference or a minor price change can pass automatically, while anything above the limit goes to someone for review. This keeps your team focused on real problems instead of small differences that don't matter.

In Precoro, you can set tolerance limits as a percentage or a fixed amount, for all suppliers or for specific ones. Precoro can also flag possible duplicate invoices and keep a record of each document's status, which helps AP teams catch errors early and keep a clear audit trail.

What happens when the invoice, purchase order, and receipt do not match?

When an invoice does not match the purchase order (PO) or receipt, the invoice is put on hold, and the discrepancy is investigated. The hold gives the team enough time to find out what caused the difference. The mismatch could be caused by an incorrect quantity, price, tax, or an error in the invoice. Sometimes the difference occurs as a result of price changes, deliveries arriving in parts, or delays in recording received goods or services. 

Once the discrepancy is resolved, the invoice can either be corrected, approved, or rejected, depending on the outcome of the review. Procurement or invoice management software offers great help in these situations by automatically flagging mismatched invoices and showing the specific details that do not match, providing the resolution team with a clear starting point to work on. 

Step 4. Manage invoice approval and the approval process

After an invoice has been validated and matched, the next step is to send it to the appropriate person or department for approval. Note that approval structures vary by company and may depend on factors such as invoice value, department, and internal approval policies.

Only after the invoice is approved can it proceed to the payment stage according to the agreed payment terms. Invoice processing methods may vary depending on the company’s processes.

If your business uses automated invoice management software, some or all of these steps will be automated for you. For example, in Precoro, you set up approval workflows once, and each invoice is routed automatically based on your rules. You can create approval steps based on:

• Invoice amount, for example, sending anything over $5,000 to finance
• Department, location, or project
• Budget status, with an extra approval step only when a purchase goes over budget
• Custom fields your company adds

Steps can run in sequence or in parallel. When an invoice needs their sign-off, approvers get an email and a push notification. They can approve or reject it from their desk or on the go with the Precoro mobile app for iOS and Android. Approvals don't have to wait until someone's back at their laptop.

Step 5. Pay the invoice and record the payment

An approved invoice still has to be paid at the right time. Pay too late, and you risk late fees and unhappy suppliers. Pay too early, and you give up cash you could have kept longer. If a supplier offers an early-payment discount, like 2% off for paying within 10 days (often written as “2/10 net 30”), timing also decides whether you get it.

To pay on time, AP teams schedule payments around each invoice’s due date and payment terms, pick a payment method (like ACH, wire, or check), and send the funds. Once the payment goes out, it has to be recorded in the accounting system, and the invoice has to be marked as paid. This keeps your books accurate, stops the same invoice from being paid twice, and gives auditors a clear record from purchase order to payment.

If you pay invoices in one tool and record them in another, this is where mistakes slip in. Payments get entered twice, marked paid late, or not recorded at all.

In Precoro, payment happens in the same place as approval. U.S. customers can pay an approved invoice right from Precoro by ACH, same-day ACH, or wire transfer. Only fully approved invoices can be paid, so nothing reaches payment without going through matching and approval first. Your team can:

• Review payment details one last time before sending
• Pay the full amount or make a partial payment
• Save supplier bank details once in the vendor profile, so no one has to re-enter account numbers
• Track each payment’s status, such as processing, paid, failed, or returned, as it updates
• Mark several invoices as paid at once when they're paid outside Precoro

Finance teams can also pay approved invoices from the Precoro mobile app.

Best invoice management practices

The best invoice management practices include prioritizing invoices, streamlining approval workflows, detecting potential fraud, tracking invoice disputes, and using invoice automation to reduce manual processing. 

These practices are important for preventing issues such as cash flow problems, slow invoice payments, and late payments, all of which can affect a business’s financial planning and supplier relationships. 

Businesses, irrespective of their size, can adopt these practices to improve payment accuracy, reduce delays, maintain better visibility into invoices, and manage supplier payments more efficiently. 

1. Prioritize invoices based on invoice status and invoice volume

Keeping track of which invoices need attention and when they are due is essential for managing cash flow and avoiding late payments. Missing payment deadlines can lead to late fees, missed early-payment discounts, or strained supplier relationships.

A practical priority order is:

• Overdue invoices — address these first to prevent further late-payment consequences and resolve any issues holding up payment.
• Invoices due soon — prioritize invoices approaching their payment deadline to avoid becoming overdue.
• Invoices with early-payment discounts — review and approve these early enough to take advantage of available discounts.
• Invoices from critical or essential suppliers — consider these carefully when a delayed payment could disrupt operations or essential services.
• Invoices with later due dates — process these according to their payment terms while ensuring they do not become overdue.
• Invoices awaiting information or approval — flag and follow up on these promptly so they don’t become payment bottlenecks.

Invoice volume should also be considered. When AP teams handle large numbers of invoices, grouping them by due date, supplier, status, or payment run can make processing more efficient.

This approach helps AP teams focus first on invoices with the most immediate payment deadlines or financial and operational consequences, while keeping the rest of the payment queue organized.

2. Streamline invoice workflows and the approval workflow

A complicated invoice workflow can create unnecessary delays, duplicate work, and more opportunities for errors. Review your current process from invoice receipt to payment and identify where invoices spend the most time waiting for action.

Start by centralizing invoice intake and processing so invoices do not get scattered across email inboxes, paper files, spreadsheets, and different departments. Then standardize how invoices are coded, validated, routed for approval, and recorded.

Your approval workflow should also reflect the type and value of each invoice. For example, low-value invoices that meet predefined criteria can follow a shorter approval path, while higher-value purchases or exceptions can require additional review. Set clear approval rules, assign backup approvers, and establish escalation procedures for invoices that remain pending too long.

If you still process invoices manually, reduce unnecessary payment runs and batch invoices where practical. However, payment schedules should still account for due dates, early-payment discounts, cash availability, and supplier terms rather than relying on a fixed number of payment runs each month.

Finally, replace paper-based steps and manual data entry where possible. Invoice automation can capture invoice data, route invoices to the right approvers, match invoices with purchase orders and receipts, and flag exceptions for review. This allows AP teams to spend less time moving invoices through the process and more time handling discrepancies and other exceptions.

3. Establish reliable invoice fraud detection

Invoice fraud can involve fake invoices, duplicate invoices, altered bank details, or payments to unauthorized vendors. Strong AP controls should make these issues harder to introduce and easier to detect before money leaves the business.

Start by separating key responsibilities. The person who creates or changes vendor details shouldn’t be the only person approving invoices or releasing payments. Require additional approval for new vendors, changes to supplier bank accounts, and unusual or high-value invoices.

Use a consistent process to verify invoices before payment. Check the vendor against your approved supplier records, compare the invoice with the purchase order and receipt when applicable, and look for duplicate invoice numbers, unusual amounts, unexpected payment terms, or changes in bank details.

A centralized invoice workflow and audit trail can make these controls easier to enforce. Each invoice should have a clear status, such as received, under review, approved, scheduled, or paid, with a record of who made each change and when. Exceptions can then be flagged for investigation instead of being lost in email threads or paper files.

For payments involving changed bank details or other high-risk exceptions, verify the information through a trusted channel already on file rather than relying solely on the contact details provided on the invoice.

4. Track invoice disputes and resolutions

Track invoice discrepancies from the moment they are identified until they are resolved to prevent disputed invoices from being overlooked, paid incorrectly, or delaying payments unnecessarily.

When reviewing an invoice, compare it with the purchase order, receipt, contract, and payment terms where applicable. Common issues include incorrect prices or quantities, duplicate charges, missing discounts, unexpected fees, or goods and services that were not received.

When a discrepancy is found:

• Record the issue and assign an owner responsible for resolving it.
• Place the invoice on hold until the issue is resolved.
• Have the owner investigate and coordinate the resolution with the supplier or the relevant internal team.
• Document the outcome, such as a corrected invoice or credit note.
• Release the invoice for payment once the issue is resolved and approved.

A centralized dispute log makes it easier to track blocked invoices, owners, resolution status, and outstanding issues.

5. Use invoice automation to automate invoice management and cut costs

Everything on this list works whether or not you automate your AP process. But the more invoices you handle, the harder it gets to follow these practices by hand.

Paper invoices are the clearest example. Someone has to open each one, type the data into your system, chase approvals by email, and file the paperwork. Along the way, invoices get lost on your end or your supplier's end, and no one can easily see where one is stuck.

An invoice management system takes over most of that manual work. Here's what changes:

• You can see where every invoice is. Each invoice has a clear status, like pending approval, approved, or paid. AP doesn't have to chase approvers and can answer supplier questions right away.
• Suppliers get paid on time. Faster approvals and fewer lost invoices mean fewer late payments and fewer “when will we get paid?” emails, which builds trust with your suppliers.
• Purchasing and payment stay connected. Invoices are matched automatically against purchase orders and receipts, so the procurement process runs as one flow instead of a series of handoffs.
• Your team spends less time on data entry. Invoice details are captured automatically, and only the invoices with a problem are sent to a person. AP can focus on fixing exceptions instead of retyping data.
• Each invoice costs less to process. Less manual handling means less staff time spent on every invoice.

How do ERP and accounting integrations improve invoice management?

ERP (Enterprise Resource Planning) and accounting integrations connect invoice management with the systems that your business already uses to manage its finances. This enables invoice information to move seamlessly between procurement, accounts payable (AP), and accounting systems without requiring the same data to be manually entered in each system.

Once an invoice is approved, the important information can be sent to the accounting or ERP system for payment and record-keeping. This keeps financial records up to date and provides finance teams with better visibility into invoices, payments, and outstanding obligations.

Integrating these systems also reduces duplicate data entry and the errors that come alongside it. It creates and maintains a more connected workflow from purchasing and invoice approval to payment and financial reporting.

What are the compliance and legal requirements for e-invoicing?

The e-invoicing requirements vary by country and can depend on factors such as the business type, transaction, and applicable tax rules. This is why it is important for businesses to understand the requirements that apply to their location and industry before adopting an e-invoicing process.

These requirements may cover the information that an invoice in that area must contain, how invoices are issued and stored, tax reporting, and how long invoice records must be retained. For instance, IRS business recordkeeping requirements provide guidance on how long businesses should retain supporting records. Some jurisdictions also require businesses to submit their invoice data directly to tax authorities or use approved e-invoicing networks.

Businesses should also ensure that their invoice management systems maintain accurate records and provide an audit trail for invoices and related transactions. This makes it easier to demonstrate compliance and retrieve the necessary records when they are needed.

How much time and cost can invoice automation actually save?

Invoice automation can reduce the time accounts payable teams spend on repetitive tasks such as data entry, invoice matching, and approval follow-ups. The amount of time and money saved depends on factors such as invoice volume, the complexity of the approval process, and how much of the process is automated.

Automation can also reduce the costs that are associated with manual data entry, processing errors, duplicate payments, and late payments. As more invoice tasks are handled automatically, AP teams can spend less time on routine processing and more time resolving the exceptions while managing supplier relationships.

How do you move from manual to automated invoice management?

The transition process from manual to automated invoice management starts with you reviewing the current process, identifying where most of the time is spent, and where most errors occur. 

Next is to select an invoice management system that fits the business’s accounting or ERP system. The business can then configure automated data capture, matching, approval rules, and payment workflows based on its requirements.

It is important that you test your new invoice management process with a smaller group of invoices before launching it across the organization. Your teams should also be trained on the new workflow and given clear procedures for handling exceptions that require manual review. 

Once the new system is in place, businesses can start monitoring processing times, errors, approval delays, and other performance measures to identify areas that still need improvement.

Manual vs. automated invoice management: What are the pros and cons?

Precoro as an invoice management solution

Invoice management works best when it isn’t disconnected from the purchasing process that created the invoice in the first place. Precoro brings procurement and AP into a single system, so teams can capture invoices, route them for approval, match them to purchasing documents, and maintain a complete transaction history from request to payment.

Why use Precoro for invoice management?

Precoro is an agentic procurement and AP centralization platform that helps finance and procurement teams reduce manual invoice work while keeping invoices connected to the rest of the purchasing process.

Instead of processing invoices as standalone documents, Precoro connects them with purchase orders, receipts, suppliers, budgets, approvals, and payments. AI-powered Invoice Processing captures invoice data, while the Matching Agent compares invoices with the related purchasing documents.

The result is a more structured AP process: fewer manual handoffs, clearer accountability for approvals, and better visibility into what was ordered, received, invoiced, and approved before payment.

Precoro is used by more than 1,000 customers across 80+ countries and supports procurement and finance teams that need to manage purchasing and AP across departments, locations, and legal entities.

Want to see it before you talk to anyone? Take the AP product tour to follow one invoice from capture to payment.

What are the benefits of invoice management with Precoro?

With Precoro, you will finally be able to focus on more important matters for your business. Here are the benefits you will get:

Reduce manual invoice work

Invoices don’t have to move between inboxes, spreadsheets, and accounting systems before someone can process them. Precoro’s AI-powered Invoice Processing captures invoice data and brings it into a structured workflow, reducing repetitive data entry for AP teams.

Catch discrepancies before payment

An invoice shouldn’t be reviewed in isolation. Precoro connects invoices with the documents that came before them and uses the Matching Agent to compare invoice details against purchase orders.

This gives AP teams the context they need to identify mismatches and resolve exceptions before an invoice moves forward.

Keep invoice approvals moving

Route invoices to the right approvers based on your company’s approval rules. Everyone can see what requires their attention, while finance gets a clear record of who approved or rejected an invoice and when.

Get one connected record from purchase to invoice

When procurement and AP use separate systems, finance has to piece together the story behind every invoice.

Precoro keeps purchase requests, purchase orders, receipts, invoices, approvals, suppliers, and related records connected. Instead of searching through emails and spreadsheets, teams can trace an invoice back to the original purchase and see its supporting documents in one place.

Improve visibility across entities and locations

Centralized invoice data gives finance and procurement teams a clearer view of purchasing activity across departments, locations, and legal entities.

Precoro also supports separate budgets, workflows, currencies, and tax settings for different entities, helping growing organizations maintain centralized oversight without forcing every part of the business into the exact same process.

Connect AP with your existing finance stack

Precoro is designed to work alongside accounting and ERP systems rather than require companies to replace them. Approved procurement and invoice data can flow into the systems your finance team already uses, while Precoro manages the operational workflows and controls around purchasing and AP.

What results have companies seen with Precoro?

Here’s what companies changed after moving their AP and purchasing work into Precoro.

Edenred: On-time invoice payments from 6% to 85%

Edenred is a U.K. financial services company with more than 10,000 employees. Its purchasing was fragmented: invoices often arrived without a purchase order or the documents needed to check them, and the finance team had to chase the missing details. After Edenred centralized purchasing in Precoro and introduced a “no PO, no pay” policy, invoices with a PO rose from 50% to 80%, and on-time invoice payments rose from 6% to 85%.

Ridgeline Discovery: 90% less time on invoice processing

Ridgeline Discovery is a Swiss biotech firm with 11–50 employees. Its finance team used to handle invoices through email and could spend half a week on them. After switching to Precoro, with centralized tracking and digital approvals, the team cut invoice processing time by 90%.

Capital City Public Charter School: Three-way matching in 30 seconds

Capital City is a school in Washington, D.C., with 201–500 employees. It used to run procurement on paper, so matching an invoice to its PO and receipt could take days, and documents sometimes got lost. With automated three-way matching in Precoro, the team can now check an invoice against what was ordered and received in about 30 seconds. "I can literally do it within 30 seconds compared to previously, when it would take hours," the team says.

Tymit: Month-end close in a couple of days

Tymit is a U.K. fintech that doubled its headcount in a year. Even after cleaning up its process, its month-end close took two weeks. With Precoro’s invoice processing and NetSuite integration, the finance team now closes the month in a couple of days. “If we didn't have Precoro, we would be struggling to keep up with this growth,” says Daniel Chen, Financial Analyst.

Riverstone Logistics: $100k saved a year on ERP licenses

Riverstone Logistics is a U.S. logistics company with more than 1,000 employees and 80+ locations. More than 150 operational staff were submitting purchase requests directly in NetSuite, resulting in the payment for ERP licenses they didn’t really need. By moving those requesters into Precoro, which syncs with NetSuite in real time, Riverstone saves $100K a year on NetSuite licenses. Adding three-way matching also gave the accounting team more control. “Precoro has also helped us from a control perspective, which we didn't really do before,” says Bryan Krauter, Accounting Director.

TESTEX: Approvals twice as fast

TESTEX is a Swiss textile testing company with more than 25 branches. It replaced Excel spreadsheets and handwritten approvals with automated workflows in Precoro. Within the first month, approvals became twice as fast, and ordering became three times faster.

Key takeaways

• Invoice management/invoice processing involves receiving, recording, validating, approving, and paying vendor invoices. 
• Prioritize invoices according to payment dates and payment terms to help manage payments effectively.
• Review existing workflows to identify bottlenecks and improve the invoice management process.
• Establish fraud detection measures and regularly track invoice disputes and their resolutions.
• Efficient procurement solutions like Precoro help to reduce manual work, improve transparency, minimize human errors, and gain better control over invoice management.