Invoice processing: How it works, benefits, and best practices

Your company receives dozens, maybe hundreds, of bills from suppliers every month. Each one needs to be checked, approved, and paid on time. That's where invoice processing comes in. Simply put, invoice processing is the step-by-step procedure a company uses to manage incoming bills from vendors — from the moment an invoice is received, through verification and approval workflow, to the final payment processing and record-keeping.

Think of it as the financial equivalent of sorting through your mail, but with much higher stakes. Every invoice that lands on your desk (or more likely, in your inbox) kicks off a carefully choreographed accounts payable process involving verification, approval, and payment.

So who's actually doing this work? That depends on your company's size. In smaller businesses, invoice processing often falls to a single accountant or office manager. They're the ones making sure the electric bill gets paid while also verifying that shipment of office supplies actually arrived. But in larger organizations, you'll find entire accounts payable teams dedicated to nothing but processing invoices. Many companies now use accounts payable automation software to handle the heavy lifting, turning what used to be a paper avalanche into a streamlined digital workflow.

So why does efficient invoice processing matter so much? First, there's your business cash flow to consider. Pay too early, and you're giving away money that could be working for you. Pay too late, and you're looking at late fees and strained vendor relationships. Speaking of relationships, nothing sours a partnership faster than consistently late payments. Your suppliers remember who pays on time — and who doesn't.

But there's an upside too. Many vendors offer early payment discounts, typically 1% to 2% if you pay within 10 days instead of the standard 30. That might not sound like much, but for a company processing millions in invoices annually, those savings add up fast. On the flip side, poor invoice processing can trigger a cascade of problems: duplicate payments, missed discounts, late fees, and vendors who suddenly become less eager to extend favorable terms.

What's the cost of a lost invoice or a delayed approval to your business? If you're like most finance professionals, you've probably experienced that sinking feeling when a vendor calls about an overdue payment you didn't even know existed. The reality is that inefficient invoice processing is a direct threat to your bottom line and business relationships.

Better supplier relationships

Poor invoice processing creates a domino effect that starts with late payment fees (typically 1.5% to 2% monthly on overdue amounts) and ends with damaged vendor relationships. Suppliers who aren't paid on time become less flexible with terms and may even stop deliveries, potentially disrupting your entire supply chain. Nobody wants to explain to the production team why a key vendor has put your account on hold because of payment delays.

Improved cash flow

Timely invoice processing gives finance teams a clear, real-time view of outstanding liabilities, eliminating month-end surprises and enabling strategic cash flow planning. When you know exactly what you owe and when it's due, you can make better budgeting decisions and confidently answer the CFO's inevitable question: "How much do we owe right now?" This financial visibility and control transforms reactive scrambling into proactive management.

Cost savings

Companies with best-in-class AP processes pay 50% less per invoice than those using manual methods, while also capturing early payment discounts that can amount to hundreds of thousands annually. For example, missing 2% early payment discounts on $10 million in annual invoices means leaving $200,000 on the table. Add late fees on top of these missed opportunities, and inefficient invoice processing becomes an expensive problem that directly impacts your bottom line.

Better compliance

Proper invoice processing creates an automatic audit trail with documented approvals, tax records, and matching documentation that satisfies regulators and auditors. When auditors ask to see transaction histories, strong processes mean pulling any invoice's complete documentation in minutes rather than days of searching through emails. This level of organization turns what could be a stressful audit into a routine review, protecting your company from compliance issues and potential penalties.

Knowing the mechanics of invoice processing helps explain why some companies struggle while others breeze through hundreds of invoices daily. Whether you're using manual methods or automated software, the basic steps remain the same. Let's walk through what actually happens from the moment an invoice arrives until payment goes out the door.

Invoice receipt

Invoice receipt kicks off the entire process. Invoices arrive through multiple channels these days. Some vendors still mail paper invoices, while others send PDFs via email or upload them directly to electronic invoicing platforms. Large companies might receive invoices through electronic data interchange (EDI) connections that link directly with suppliers. This variety of formats is the first challenge many businesses face, as each format requires different handling.

Invoice capture

Invoice capture transforms those various formats into usable data. For paper invoices, this means someone typing information into the software or scanning documents for optical character recognition (OCR) technology to read. Electronic invoices skip this step entirely, with data flowing directly into the platform. The accuracy of this step determines whether everything downstream runs smoothly or becomes a game of fixing errors.

Invoice validation

Invoice validation acts as quality control for the entire process. This step checks whether the invoice matches what was actually ordered and received. This step checks whether the invoice matches what was actually ordered and received. Staff compare invoice details against purchase orders and business receipts, ensuring quantities and prices align. They also verify the invoice includes required information like valid invoice numbers, correct supplier details, and accurate payment amounts. Missing or incorrect information here means delays while someone tracks down the right details.

Invoice approval

Invoice approval moves the process from verification to authorization. Smaller invoices might need just one manager's sign-off, while larger amounts often require multiple approvals climbing up the organizational ladder. This step frequently becomes a bottleneck in manual workflows when approvers are traveling or invoices sit unnoticed in email inboxes. Smart companies establish clear approval hierarchies and spending limits to keep things moving.

Payment

Payment happens once all approvals are in place. The accounts payable team schedules payment based on the invoice terms. Some invoices demand immediate payment, while others follow standard net-30 or net-60 terms. Finance teams balance these payment schedules with cash flow needs, often prioritizing invoices offering early payment discounts or avoiding those with steep late payment penalties.

Recording and archiving

Recording and archiving completes the cycle. Every paid invoice gets recorded in the accounting software, creating the financial trail needed for reporting and audits. Companies must store these records according to their document retention policies, which typically means keeping invoice records for seven years. In manual operations, this means filing cabinets and storage rooms. Digital platforms store everything in searchable databases.

The beauty of automation becomes apparent when you see these steps in action. Automated software handles capture through recording with minimal human intervention. The technology automatically extracts data from invoices, validates against existing purchase orders, routes to appropriate approvers based on preset rules, schedules payments, and archives everything digitally. What once took days of manual effort happens in hours or even minutes.

Many organizations are discovering that automating invoice processing doesn't just speed things up. It fundamentally changes how their finance teams work. Instead of chasing paper and fixing data entry errors, staff can focus on analyzing spending patterns, vendor negotiation for better terms, and improving financial strategies. The process remains the same, but the execution is efficient and streamlined.

Every finance professional has war stories about invoice processing gone wrong. From simple data entry mistakes that snowball into major problems to sophisticated fraud attempts that slip through the cracks, the challenges are real and costly. Let's examine the most common obstacles companies face and, more importantly, how to overcome them with invoice processing best practices.

Manual processing errors

Manual processing errors are the silent profit killers lurking in every accounts payable department. A mistyped decimal point turns a $1,000 invoice into a $10,000 payment, duplicate entries result in double payments vendors rarely volunteer to return, and wrong vendor codes send money to the wrong companies. Research shows human data entry has an average error rate of 1% to 3%, which sounds small until you have to identify, investigate, and correct errors across thousands of invoices every month.

How to solve this challenge

Brex eliminates manual processing errors through intelligent automation that uses advanced OCR technology to automatically extract invoice data with exceptional accuracy. The platform's automated two-way matching instantly compares purchase orders, receipts, and invoices while duplicate detection algorithms catch similar invoices before double payments occur. Built-in validation rules and standardized workflows ensure every invoice follows the same automated path, reducing error rates to near zero while processing invoices in a fraction of the time.

Fraud and security threats

Invoice fraud has evolved from crude forgeries to sophisticated schemes where criminals create fake companies with legitimate-looking invoices, hijack real vendor emails to change bank account information, or study your patterns to create believable fakes. The Association of Certified Fraud Examiners reports that typical organizations lose 5% of revenue to fraud annually, with billing schemes being among the most common, and one successful fraud can cost hundreds of thousands while damaging vendor relationships when real suppliers don't get paid.

How to solve this challenge

Brex provides enterprise-grade security features including a secure vendor database where payment information changes trigger automatic verification workflows, while intelligent fraud detection analyzes patterns and flags suspicious activity. The platform enforces segregation of duties, integrates with positive pay services to prevent unauthorized bank transactions, provides detailed audit trails for investigations, and includes regular vendor verification processes that identify fraudulent vendors before they can submit fake invoices.

Inefficient workflows

Inefficient workflows create a bureaucratic nightmare where invoices sit waiting for traveling managers' approvals, paper documents get lost between departments, and nobody knows where invoices stand in the process. These delays mean missing early payment discounts, incurring late fees, and frustrating vendors who may demand less favorable terms or put accounts on hold, while finance teams waste time tracking down invoices instead of analyzing spending.

How to solve this challenge

Brex improves workflows through intelligent routing that instantly sends invoices to the right approvers based on customizable rules, mobile capabilities for approvals from anywhere, and automatic escalation to backup approvers when invoices stall. Real-time dashboards provide complete visibility into invoice status from receipt through payment, while smart approval thresholds ensure routine invoices move quickly and the platform automatically captures early payment discounts, turning missed opportunities into guaranteed savings.

Choosing the right invoice processing software can mean the difference between a finance team that struggles and one that thrives. Not all platforms are created equal, and the features that matter most might surprise you. Here's what finance leaders should prioritize when evaluating solutions and why thousands of companies choose Brex for their invoice processing needs.

Intelligent data capture and extraction

The foundation of any good invoice processing software is its ability to accurately capture data from various invoice formats. Look for platforms that handle PDFs, emails, scanned documents, and electronic invoices with equal ease. Brex's advanced OCR technology reads invoices with over 99% accuracy, extracting vendor details, amounts, dates, and line items automatically. The platform learns from corrections and gets smarter over time, and even handles complex multi-page invoices with tables and various formats. This eliminates manual data entry entirely, saving hours per day while reducing errors to nearly zero.

Seamless integration with existing tools

Invoice processing software that operates in isolation creates more problems than it solves. The best platforms integrate smoothly with your accounting software, ERP, and banking platforms. Brex connects directly with QuickBooks, NetSuite, SAP, and other major financial platforms, syncing data automatically without manual exports or imports. This integration extends to payment methods too, with Brex handling ACH, wire transfers, checks, and virtual corporate cards from a single platform. Teams choose Brex because it fits into their existing workflow rather than forcing them to change how they work.

Flexible approval workflows and controls

Every company has unique approval requirements based on invoice amounts, departments, and vendor types. Top-tier software adapts to your needs rather than forcing you into rigid processes. Brex lets you create custom approval chains with unlimited flexibility, setting different rules for different scenarios. Need marketing invoices over $5,000 to go through the CMO? Done. Want all software subscriptions approved by IT first? Easy. The platform also includes automatic escalations, vacation coverage settings, and mobile approvals that keep invoices moving even when key people are unavailable.

Advanced fraud detection

Security features should go beyond basic password protection to actively prevent fraud and errors. Brex employs machine learning to detect unusual patterns like sudden vendor payment changes, duplicate invoices across periods, and amounts that deviate from historical norms. The platform enforces segregation of duties automatically, maintains detailed audit trails for every action, and includes two-factor authentication for all users. Teams trust Brex because it catches potential fraud before payments go out, protecting both money and vendor relationships.

Real-time visibility

Modern finance teams need instant access to data, not weekly reports. Look for software providing real-time dashboards showing pending invoices, upcoming payments, and cash flow projections. Brex delivers customizable dashboards that show exactly what each user needs to see, from high-level executive summaries to detailed AP clerk workqueues. The platform's reporting engine creates any report imaginable, from aging analyses to vendor spend rankings, all updated in real-time. This visibility helps teams make better decisions and answer executive questions instantly.

Dedicated support

The best software in the world fails without proper implementation and ongoing support. Brex provides dedicated implementation specialists who understand finance workflows and guide your team through setup, training, and optimization. Unlike platforms that leave you with documentation and chatbots, Brex offers real human support from people who understand accounts payable. Teams consistently cite Brex's white-glove onboarding and responsive support team as key reasons they achieve success quickly.

Transparent, scalable pricing

Hidden fees and complex pricing tiers can turn a good deal into a budget nightmare. Look for platforms with clear, predictable pricing that scales with your business. Brex offers straightforward pricing based on your invoice volume, with no hidden fees for users, integrations, or support. The platform grows with you, handling 100 or 100,000 invoices with the same efficiency. Finance leaders appreciate knowing exactly what they'll pay and getting ROI from day one through immediate cost savings and efficiency gains.

Making the switch from manual to automated invoice processing might seem daunting, but thousands of companies have successfully made this transition. With the right approach and a clear plan, you can transform your accounts payable operations in a matter of weeks, not months. Here's your practical roadmap to get started.

Assess your current process

Start by mapping exactly how invoices flow through your organization today. Document who handles them first, where they go next, and how long each step typically takes. Calculate your current metrics like average processing time per invoice, how often late payments occur, and what percentage of invoices have errors requiring correction. This baseline data becomes your ammunition for building the business case and helps identify which problems need solving first. Don't skip this step thinking you already know the answers. The actual data often reveals surprises, like that one department taking twice as long as others or vendors who consistently cause processing delays.

Set clear goals and requirements

Before looking at any software, define exactly what success looks like for your organization. Maybe you need to reduce processing time from 10 days to 3 days, or handle double the invoice volume next year without adding staff. Write down specific, measurable goals that matter to your business. Then list your non-negotiable requirements. Does the solution need to integrate with NetSuite? Must it support multi-level approvals for different invoice amounts? Should it handle international invoices in multiple currencies? Having these goals and requirements documented prevents you from getting distracted by flashy features you don't actually need.

Research and choose AP automation software

This step determines whether your automation project succeeds or struggles. Look for software offering the features that matter most like OCR capability, invoice matching, flexible approval workflows, and seamless integrations with your existing tools. Consider your company size carefully since some platforms excel with small businesses while others are built for enterprise scale. Read actual user reviews, not just marketing materials. Schedule demos with your top choices and involve the accounts payable team who will use it daily. They'll spot usability issues that executives might miss. Don't forget to verify the vendor's support quality and training resources. The cheapest option rarely provides the best value if it leaves you struggling without help.

Plan the implementation

Smart implementation starts small and scales up. Choose a pilot program focusing on one department or invoice type to test the new workflow without risking your entire operation. Prepare your data for migration by cleaning up vendor lists, organizing purchase order information, and deciding which historical data needs importing. Set up your approval workflows in the software, determining who approves what amounts and establishing backup approvers. Run the old and new processes in parallel for a few weeks to catch any issues before fully switching over. This parallel period might feel like extra work, but it prevents nasty surprises and builds confidence in the new approach.

Train your team and vendors

Even the best software fails without proper training. Schedule hands-on training sessions for everyone involved, from AP clerks to executive approvers. Create quick reference guides for common tasks so people don't have to remember everything from training. Make sure approvers know how to use mobile features so invoices don't stall when they travel. Communication with vendors matters just as much. If they need to send invoices to a new email address or upload them to a portal, give them plenty of notice and clear instructions. Most vendors appreciate more efficient processing once they see faster payments, but they need guidance during the transition.

Monitor, optimize, and scale

Your work continues after go-live as you track performance against those goals you set earlier. Monitor processing times, error rates, and user feedback closely during the first months. Are certain invoice types taking longer than expected? Do approvers struggle with mobile interfaces? Use this feedback to adjust workflows, add training, or reconfigure settings. Celebrate quick wins like clearing invoice backlogs or capturing significant early payment discounts to build momentum. Once the core process runs smoothly, explore additional optimization opportunities like bringing more invoice types into the automated workflow or connecting with procurement platforms.

Remember that change can be challenging, especially for team members who've processed invoices manually for years. Frame automation as liberation from tedious data entry, not as a threat to their jobs. When AP staff see they're spending time on analysis instead of typing, and when approvers appreciate clearing invoices from their phones, resistance melts away. Leadership support matters here. Having executives champion the project and acknowledge the team's efforts during transition makes everything smoother. With the right plan, transitioning to automated invoice processing can be smoother than you think, and the benefits start flowing almost immediately.

Invoice processing might not be the most exciting part of running a business, but as we've seen, getting it right can transform your entire financial operation. From reducing processing costs by 80% to capturing every early payment discount, the benefits of moving from manual to automated processing are too significant to ignore. The choice isn't whether to automate anymore, but how quickly you can make the transition before inefficiencies eat away at your profits and strain your vendor relationships.

The journey from paper-based chaos to streamlined automation doesn't have to be overwhelming. By following the implementation steps outlined above and choosing the right software partner, companies of all sizes can modernize their accounts payable operations in weeks rather than months. The key is starting with a clear assessment of your current state, setting specific goals, and selecting a platform that grows with your business rather than limiting it. Once automated, your finance team can finally focus on strategic work that drives value instead of drowning in data entry and paper chasing.

Brex invoice processing automation stands apart by combining powerful technology with the flexibility and support that finance teams need. While other platforms force you to adapt to their rigid workflows, Brex adapts to yours, whether you're processing 50 invoices a month or 50,000. The platform's intelligent automation eliminates manual work, prevents costly errors and fraud, and provides the real-time visibility that modern businesses demand. What really sets Brex apart is the partnership approach. From dedicated implementation specialists to ongoing support from people who actually know accounts payable, Brex ensures you succeed from day one.

Samuel DeZube, Chief of Staff at Workshop, says Brex helps automate its invoice processing and prevent duplicate payments: “Brex bill pay is really intuitive and user-friendly. I love that I can forward any emailed invoices to bills@brex.com, and Brex automatically processes them. A few times, software vendors sent invoices that we had already paid, but Brex flags that, so we donʼt pay the same bill twice.”

Matt Jungert, Senior Manager of Operations at Cottage adds: “I've used different bill pay services before and Brex has done a great job of putting their spin on it. Brex does everything you want it to do, from scanning invoices to routing approvals to processing payments, with the added benefit of having all your company spend in one place.”

Ready to see how much time and money you could save? Schedule a Brex demo today and discover why thousands of finance teams trust their invoice processing to Brex's intelligent automation platform.