Defining the invoice processing flowchart

Before we go deeper into the subject of an invoice processing flowchart, let us understand the key words and concepts that constitute the phrase.
An invoice is a commercial document that is used by a seller of goods or services to itemize the goods and services sold, along with their unit rates, number of units and other agreed commercial terms agreed between the buyer and the seller. It is usually meant to indicate the amount due from the buyer to the seller as a result of the transaction mentioned therein, and the payment terms. It is also commonly referred to as a ‘bill.’
A flowchart is a diagrammatic or visual representation of the series of steps that need to be taken or performed in order to complete a particular transaction or task. It depicts the sequence in which the actions need to be performed and usually includes elements like:

• Responsibility – who is responsible for a particular step
• Timeline – Within how much time should that step be performed
• Dependencies – What needs to happen before a particular task is performed
• Resources – what is received as the input and what goes out as the output of that step
• Decisions – if any are required to be taken along the way

A flowchart is a widely used document and seeks to present the relevant information in a concise manner reducing the room for interpretation that textual documents could have. Flowcharts have come to develop a vocabulary all their own with shapes like ovals and diamonds and rectangles assuming different meanings. They are amongst the most commonly used documents in organizations.
With a leadership team that has over 20 years of hands-on experience in the industry, oWorkers is able to navigate the flowcharts of different processes for a variety of clients from around the world, with ease.

How is an invoice processing flowchart generated?

There are countless processes used by companies to serve the purpose they exist for and to enable them to achieve their vision and mission. Many of them probably have flowcharts for the support of practitioners carrying out tasks required by these processes. Invoice processing is one of these processes.
An invoice is generated by a supplier of goods or services and seeks to formalize a transaction that has taken place between a buyer and a supplier. Through an invoice the supplier confirms details of the transaction, converts it into a monetary value that then becomes payable by the buyer, or client, to the supplier, or vendor, as per the terms agreed between them, which are also replicated on the invoice.
The invoice processing that is often referred to, however, is not the process of invoice generation. It is the process of the invoice by the client, or buyer, once they have received it, leading up to the point when money is paid to the supplier in exchange for the goods or services received, that is referred to as invoice processing. Though the process could differ in the detail from one company to another, the overarching steps are similar and would be the subject of an invoice processing flowchart that is developed to guide people responsible for the various parts.
Thus, the need for a flowchart emanates from real transactions that cause an invoice to be generated by a supplier and processed and eventually paid by the buyer, and from the buyer’s desire to ensure accurate and efficient processing.
oWorkers supports clients in 22 languages, thanks to a diverse talent pool that is multi-national and multi-ethnic. The language of flowcharts is, however, universal, and understood regardless of native language.

Types of invoices

Invoices can be of many types. While the broad workflow defined on the invoice processing flowchart should be the same, users may need to make adjustments depending on the type of invoice they are dealing with. Though there is no finite, statutory list of invoice types, some common ones are covered here.

Pro forma invoice

A pro forma invoice is in the nature of a preliminary invoice that is meant to mirror the actual invoice when it is raised later. It is a way of confirming what the real or actual invoice, when raised, will look like. It is also a way of confirming that the supply should be of the goods and services contained therein.

Commercial invoice

A commercial invoice is a document used for customs declaration in the sale of goods that are exported across international borders.

Timesheet invoice

Instead of billing for material or goods or services supplied, a timesheet invoice bills a client based on the number of hours of support or service provided by identified personnel or types of personnel. Many services, such as consulting services, are invoiced through timesheet invoices.

Retainer invoice

In many cases, an advance amount needs to be deposited before the product or service, or any part thereof, is delivered to the buyer. The invoice issued in such a case is known as a retainer invoice and the amount collected is deducted from the final invoice that is sent for settlement of any outstanding dues.

Recurring invoice

As the name suggests, many services are purchased in the form of a subscription for which periodically a payment is made. These are known as recurring invoices. As an example, if a company buys a paid Zoom subscription, it may need to pay for the service on a yearly or monthly basis, depending on what it chooses.

Credit invoice

This is a type of a reverse invoice and used when a supplier needs to give money back to the client. It could be because of faulty products that have been returned or some other reason like an accounting error. The values shown on this invoice will be in the negative.

Interim invoice

There are occasions when the contract terms provide for intermittent payments based on certain milestones being achieved. These interim invoices enable the supplier to better manage its cash flows through periodic recovery of dues.
oWorkers works closely with communities around its three global delivery centers. A by-product of these efforts is a steady stream of walk-in applicants at our centers which gives us the flexibility of choice for all our client projects. It also keeps hiring costs low as we rarely need to advertise for talent.

Invoice processing flowchart – key steps

The receipt of an invoice initiates the process which ends with money being paid out, or a settlement being done in some other manner, for it. As it results in money, a key resource for any organization, being paid out, it needs to be monitored for ensuring that the money is being paid correctly and for furthering the goals of the organization.

Verification to ensure the basics are right

Resolution of issues upfront can prevent a lot of downstream issues from happening. Though true for all processes, it is applicable to the processing of invoices even more so, since successful suppliers typically deal with multiple clients and orders simultaneously and issue a large number of invoices. As one of the most basic checks, since the method of communication of invoices is usually offline, there can be issues even in sending to the right party.
While that may be a rare occurrence, it is good to validate the basic details on an invoice. These usually are:

• Date
• Name of the client
• Specification of goods or services supplied
• Rate charged
• Calculation of taxes and statutory levies
• The Purchase Order number, if applicable, or other reference to the order
• Tax ID of the buyer and seller
• Payment details – how is the payment to be made
• Payment terms
• Other relevant details

This is an important step as the invoice, after verification, is likely to be keyed into the invoice processing system used by the company, and errors, if any, if not caught now, are likely to persist throughout the journey, causing a lot more rework the later it gets caught.
It is also a good practice for a buyer to let the seller know early in the event of any discrepancies as that gives the seller an opportunity to recover and represent without losing much time. It is a gesture of respect for the buyer to do so.
Cyclicality in volumes is a common business occurrence. Clients of oWorkers are not immune to business cycles, even though an invoice processing flowchart may not make a mention of it. Handling business cycles becomes an independent process. Working with oWorkers obviates the need for clients to maintain an unproductive, expensive bench. oWorkers is able to hire almost a hundred additional people with a notice of 48 hours. This is a huge cost saving for clients.

Creating an entry in the system

This is the stage at which the digital journey of an invoice would typically begin. Most companies today use software that has a built-in workflow that is defined at the time of implementation. Thereafter, each time an invoice needs to be processed, once it is input into the system that has already been set up with rules, it takes over and guides the invoice the rest of the way.
This is not to say that there is no manual processing. There certainly is. The level of automation of support processes keeps going up with the size and scale of the organization. Smaller organizations may not find it worthwhile to invest in systems for some support systems such as invoice processing and may choose to carry out the transaction manually. And since the stacking of organizations by size forms a typical pyramid, with the smaller ones at the bottom, there are likely to be a huge number of small businesses that process invoices manually.
Some companies also choose to engage outsourcing service providers for this work. Not only does this save them from doing work that is not part of their core competence, it also often results in a digitization of the process with the help of the software/ platform used by the provider. If that is the approach preferred by the client, then this would probably be the step at which the processing partner would get involved in the transaction.
With a view to the future and possible need for retrieval at some stage, even though a paper invoice has been received and should be retained, most companies will probably obtain an image of the invoice which will go into the digital files. This might be easier to retrieve than a hard copy.
With its deep links with technology companies, nurtured over many years, oWorkers is able to access the latest technologies, even for the processing of client transactions, with the help of its deep linkages with technology companies, many of whom being clients of oWorkers.

Authorization

Judicious use of resources is what all companies seek to do. This does not mean that money should not be spent, but that it should be spent wisely. If a business does not spend money, it will not be able to procure materials and services needed to run the business and will probably not be able to create any opportunity for generating revenue.
Judicious use of resources has an implication which will reflect on any invoice processing flowchart.
How?
By creating an authorization step before payment can be released.
What does that do?
It ensures that the release of money is for a rightful purpose. It ensures that goods and/ or services the invoice covers have actually been received. What the authorization process may also be able to do is validate whether the purchases have been useful for the company or not. However, in case they were not, it cannot be the reason for not refusing payment. The vendor only has responsibility for ensuring that supplied items meet the committed specifications. That part ought to have been checked by the department raising the requirement before the order was placed.
Delivery centers of oWorkers are equipped to operate on a 24×7 schedule when required. This mirrors digital systems that have the capability of being ‘always on.’ Our teams will be available when you need them.

Payment

Once approvals have been received, payment is usually a formality.
It is the responsibility of the accounts payable department to ensure that payment is released at the most appropriate time.
What does that mean?
What it means is that with modern payment systems, beyond a payee set up that needs to be done once, it is usually a question of filling in the amount that needs to be paid, and pressing a button, or two buttons in case a second level of payment release is required. And the payment gets delivered quite fast, in many cases almost instantly.
The gap that used to exist between the issuance of a cheque and the time it got presented and hit the bank account, is a piece of history. That delay provided funds to the payer for a few additional days and also created some excitement for the accounts team in managing the bank account so that there was enough money in it to honor cheques being presented, which was unpredictable.
Hence, the accounts team needs to ensure that the payment is issued as late as permitted under the terms agreed without incurring a penalty.
Operating from super secure facilities & protocols, oWorkers is ISO certified (27001:2013 & 9001:2015) as well as GDPR compliant.

The oWorkers advantage

Most clients from Western Europe and the US have often claimed savings that reach up to 80%, after outsourcing to oWorkers. Clients also find our model of offering a choice of billing options interesting and unique. Everything considered, oWorkers provides better value.