What Is Invoice Management? Process, Costs, and Best Tools For Your Business

The main steps of invoice management

The invoice management process usually follows seven steps, from the moment an invoice arrives to filing the paperwork:

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.

Inefficiency

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. Many finance teams say they feel overwhelmed by the sheer number of invoices they need to process.

The process often requires double or triple data entry. That takes time and makes errors more likely. Each mistake can delay payment, leading to late penalties and strained vendor relationships.

Price

Manually processing invoices is expensive. It’s also time-consuming, taking around 14.6 days to fully process a single invoice manually, according to 2025 AP benchmarks from Ascend Software.

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 2025 benchmarks from Ascend Software, all of these costs reach $10 to $15 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 $6,000 to $9,000 a year, which we’re sure you could find a better use for, if only your invoice management process were more efficient.

Compliance

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. In fact, the IRS requires businesses to keep supporting records for at least three years.

Less paper means less clutter

With a digital AP tool like Melio, every invoice and proof of payment is stored in your account and accessible anywhere, for as long as you need it. You won’t lose documents or drown in paper clutter.

Accounting software sync

Syncing your accounting software with your AP tool removes duplicate data entry and makes three-way matching easier. Now, all documents and information appear on both platforms. This 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 to suit both you and your vendors, all 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.

How do you organize invoices?

Keep every invoice in one place, sorted by vendor and due date, and match each one to its purchase order and receipt. A digital AP tool stores them for you and marks each as paid, so nothing slips through the cracks.

How do you manage invoices effectively?

Set a clear routine for receiving, checking, approving, paying, and filing each invoice. Assign who does what, agree on approval rules, and use software to cut manual data entry and track where each payment stands.

What is an invoice management system?

An invoice management system is software that handles invoices from start to finish in one place. It captures invoice details, routes approvals, schedules payments, and syncs with your accounting software so your books stay up to date.