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Bookkeeping 101: What’s invoice management?

A small business owner managing invoices.

Let’s put the paperwork on the table: Regardless of industry or how big (or small) your business is, we know for sure that it receives multiple invoices (or bills, as you probably call them) every week. That is just a fact of a business owner’s life.

But, it’s not enough to just let them pile on your desk or clog up your inbox, right? Each invoice needs to be verified for authenticity and accuracy, paid, and documented in your company’s records. That, in a nutshell, is invoice management, a vital part of accounts payable (AP).

Trouble is, it’s as exhausting as it is crucial, especially when done manually. In this article, we’ll cover what the invoice management process entails, what its main pains are, and how online AP tools can help alleviate them.

Your vendor sent you an invoice, now what?

The invoice management process is vital to ensuring your payments are accurate and timely and to minimizing the risk of accidentally paying fraudsters.

But, there’s more to it than just paying and filing invoices as they come. The typical invoice management process can be quite elaborate, depending on the size and structure of your team, among other things.

The main steps of invoice management

Invoice management is typically composed of the following main steps:

1. An invoice arrives

An invoice, either in paper or digital form, arrives at your business, addressed to the vendor’s point of contact. This is usually the person who placed the order, not necessarily the person who handles the bills.

2. Forwarding

The point of contact shares the invoice with whoever is in charge of bookkeeping in your particular organization. This can be an accountant, a bookkeeper, an office manager, or the owner of the company, depending on how it’s structured. For easy reference, we’ll refer to them as the bookkeeper from now on.

3. Authentication

The bookkeeper verifies the invoice is authentic and accurate. This includes performing three-way matching, a process that entails comparing the contents of the invoice against the purchase order and order receipt. The most important details that need to be matched are the sum, the goods provided, and the vendor’s payment information.

4. Corrections

If discrepancies are found—and if you’ve ever been through this process, you know they’re quite common—the bookkeeper needs to contact the vendor for corrections or clarifications. Once that’s done, the invoice management process starts anew and you’re right back to square one, where you started.

5. Approval

Once verified and authenticated, the invoice needs to be submitted for approval according to your company’s internal workflow.

6. Payment

Congratulations! You have confirmed all the details in the invoice are correct and received the necessary approval. You can now process the payment according to your vendor’s accepted payment options.

7. Paperwork

Once the payment is complete, the receipt, payment confirmation, and invoice need to be filed in the company’s records and kept for future reference.

What are the main pains of invoice management?

In case we gave you the wrong impression, let’s say this outright: invoice management isn’t all fun and games (in fact, more often than not, no fun and games whatsoever are included in the process). Below, we’ve outlined the main challenges the process raises for businesses, especially when it’s all done manually.


Due to the complexity of invoice management and the number of people and stages it typically involves, many businesses view it as a major challenge. In a survey, 82% of finance departments said they were overwhelmed by the number of invoices they need to process.

Because of its meticulous nature, the process often requires a lot of dual (or triple) data entry that not only takes time but also makes it prone to errors. Each mistake can create further delays in payment, potentially leading to late penalties and damaged relationships with vendors.


Manually processing invoices is expensive. It’s also time-consuming, taking 8.6 days to fully process a single invoice, according to a report by market research firm Ardent Partners. Staff hours naturally cost money and could otherwise be spent to make some.

You know what else costs money? All the physical goods—such as paper, printers and toners, folders, pens, etc.—that are used in the process. This may sound like pocket change but it really adds up. These items also take up storage space, which you’re probably paying for too.

According to the Ardent Partners report, all of these costs reach an average of nearly $12 per invoice, when taking into account labor, office supplies, transaction fees, and overhead. Even if you only have 50 invoices to process each month, this accumulates to $7,200 a year, which we’re sure you could find a better use for, if only your invoice management process were more efficient.


For compliance reasons, invoices need to be saved and organized for long periods of time, often years. This is difficult to do, especially with hundreds or thousands of paper documents. If they’re lost or damaged, even by incidents outside your control—for example, fading ink or a busted pipe in your storage room—you can find yourself in trouble with the tax authorities.

5 ways digital AP tools can help with invoice management

While a digital accounts payable tool can’t solve all of your invoice management woes, it can definitely help. Here’s how.

Less paper means less clutter

With a digital AP tool, like Melio, everything, from invoices to proofs of payment, is saved right in your account and accessible from anywhere at any time, for as long as you need it. This way, you don’t have to worry about documents getting lost or damaged.

Accounting software sync

Three-way matching and other invoice verification methods are easier when you sync your accounting software with your AP tool. Now, all documents and information appear on both platforms, eliminating the need for dual data entry. This both saves you time and eliminates potential errors.

Image-to-text technologies

AP tools like Melio can automatically extract data from PDFs or snapshots of your invoices. All you have to do is upload a file or photo of your invoice and the system will automatically get the information it requires. There’s no need to type amounts, vendor details, or any other data. All you have to do is just review the extracted text for accuracy, which takes a fraction of the time.

Payment approval workflows

With an online AP tool, you can assign different roles to your team members (or even an outside accountant) and set thresholds for payments requiring approval by you or another manager. This makes the payment approval workflow faster and easier to track. Instead of paper invoices piling up on a manager’s desk awaiting approval, with a digital AP system, you can easily see where each payment stands and send polite reminders if an approval request has been kept waiting too long.

Online payments

There’s no longer a need to alternate between phone payments, the bank’s site, your vendors’ payment portals, or writing physical checks. Instead of manually sending payments and filing each invoice as paid, you can pay all your invoices in one sitting by using an online tool to manage your AP.

You can also use different payment methods according to your own preferences and those of your vendors without leaving the platform. For a fee, you can even pay by credit card when your vendor only accepts checks, allowing for some extra flexibility (not to mention card perks).

And, as far as paperwork is concerned, your invoices are automatically marked as paid on your AP system as well as synced accounting software, so your books are always in order, and there’s no chance you’ll end up paying the same invoice twice. Trust us, duplicate payments happen more often than you’d think.

Save time, money, and headaches

You likely didn’t go into business for the love of invoices. You just accept them as a necessary evil like the rest of us.

That’s why it’s time you start spending less on invoice management and more on growing your business and doing what you love. Your first step? Sign up for Melio today to pay all your invoices online. You’re welcome.

*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.