Invoice Processing SOP Template

1.Purpose

To capture every incoming invoice, code it correctly, route it for the right approval, and hand off a clean, approved invoice to accounts payable for payment.

2.Scope

Applies to invoices received by mail, email or vendor portal from the moment they arrive until they are approved and queued for payment. Matching, scheduling and releasing payment is covered in the separate accounts payable SOP.

Definitions

Cost center

The department or budget code an expense is charged against in the accounting system.

Coding

Assigning the correct general ledger account and cost center to an invoice before approval.

Approval routing

The automated or manual path an invoice follows to reach the person authorized to approve it.

3.Responsibilities

Invoice Processing Clerk

Captures, checks for duplicates, and codes incoming invoices, and tracks approval status.

Department Manager

Reviews and approves invoices charged to their cost center.

AP Manager

Resolves coding disputes and oversees the approval routing process.

Controller

Approves invoices above the department manager's approval limit.

RACI matrix

R = Responsible, A = Accountable, C = Consulted, I = Informed

4.Materials and PPE

Materials, tools and systems

• →Invoice capture tool or scanner
• →Accounting system invoice queue
• →Chart of accounts and cost center list
• →Approval routing workflow tool
• →Duplicate invoice detection report
• →Vendor invoice portal

5.Procedure

1. 5.1

   Receive the incoming invoice

   Invoice Processing Clerk

   The invoice processing clerk receives the invoice by mail, email or vendor portal and confirms it includes a vendor name, invoice number, date and amount before logging it.

2. 5.2

   Capture and enter invoice data

   Invoice Processing Clerk

   The invoice processing clerk scans or enters the invoice into the accounting system's invoice queue, capturing the vendor, invoice number, date, amount and line item detail.

3. 5.3

   Check for a duplicate invoice

   Invoice Processing Clerk

   The invoice processing clerk checks the invoice number and amount against the duplicate invoice detection report before proceeding, since vendors sometimes resend the same invoice.

   Checkpoint: No invoice with a matching vendor, invoice number and amount already exists in the system before it is coded.

4. 5.4

   Identify a matching purchase order, if any

   Invoice Processing Clerk

   The invoice processing clerk checks whether the invoice references a purchase order and links it in the system, flagging invoices with no purchase order for extra review during coding.

5. 5.5

   Code the invoice to account and cost center

   Invoice Processing Clerk

   The invoice processing clerk assigns the correct general ledger account and cost center to the invoice based on the goods or services described, using the chart of accounts.

6. 5.6

   Route the invoice for approval

   Invoice Processing Clerk

   The invoice processing clerk routes the coded invoice to the department manager responsible for the cost center through the approval routing workflow tool.

7. 5.7

   Review and approve the invoice

   Department Manager

   The department manager reviews the invoice for accuracy and business purpose and approves it, or rejects it with a reason if it should not be paid as coded.

   Checkpoint: Every invoice has either an approval or a documented rejection reason before it leaves the routing workflow.

8. 5.8

   Escalate invoices above the manager's limit

   Controller

   When an invoice amount exceeds the department manager's approval limit, the workflow routes it to the controller for a second approval before it can proceed.

9. 5.9

   Follow up on pending approvals

   Invoice Processing Clerk

   The invoice processing clerk monitors the approval queue and follows up with department managers on invoices pending approval close to their due date.

10. 5.10

    Resolve coding disputes

    AP Manager

    When a department manager disputes the coding on an invoice, the AP manager reviews the invoice and the disputed cost center and corrects the coding or confirms it is correct.

11. 5.11

    Queue the approved invoice for payment

    Invoice Processing Clerk

    Once approved, the invoice processing clerk moves the invoice into the accounts payable queue for matching and payment scheduling under the accounts payable SOP.

12. 5.12

    Archive the invoice image

    Invoice Processing Clerk

    The invoice processing clerk confirms the scanned invoice image and approval trail are archived in the accounting system, searchable by vendor and invoice number.

6.Quality checks

• →No invoice is queued for payment without an approval or documented rejection.
• →Every invoice is checked against the duplicate detection report before coding.
• →Invoices above the department manager's limit always show a controller approval.
• →Coding disputes are resolved and documented before the invoice reaches accounts payable.

7.Records

• →Captured invoice images and data
• →Duplicate invoice check results
• →Approval routing history
• →Coding dispute resolution notes

8.KPIs

• →Average time from invoice receipt to approval
• →Percentage of invoices approved before their due date
• →Number of duplicate invoices caught before payment
• →Percentage of invoices requiring a coding correction

9.Common mistakes

• →Coding an invoice without checking the description against the chart of accounts.
• →Missing a duplicate invoice because the vendor changed the format slightly.
• →Letting an invoice sit in a manager's queue past its due date without follow-up.
• →Approving an invoice with no documented business purpose.

10.Revision history