What is an Invoice Payment? A Guide to Paying Vendors

Today’s businesses rely on efficiency, and the accounts payable department is no exception. But many AP departments are weighed down by manual, outdated processes that not only impede payment processing, but expose the entire company to fraud risk and put strategic vendor relationships at risk.

Adopting the right end-to-end AP platform, however, can significantly improve accounts payable efficiency, reduce processing costs, improve control over outgoing cash flow, mitigate fraud risk, and improve internal accounting controls. In this guide, we outline an invoice-to-pay process that can help businesses like yours facilitate payments and streamline operations.

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An Overview of Invoice Payments

An invoice payment is a payment rendered to the supplier for goods or services received. The invoice payment is one of the last parts of the end-to-end AP process. It occurs after invoice approval and payment authorization. Suppliers may receive payment in the form of a check, ACH payment, virtual card, or other method, described below.

What is Invoice-to-Pay?

An invoice is a request sent by a supplier for payments of goods or services. When goods or services are rendered, the supplier sends an invoice detailing what was provided along with how much is owed, how to send payment, and when it is due.

When your organization’s AP department receives an invoice, this kickstarts the end-to-end AP process in which the invoice must be entered into the AP system where it is approved and authorized before payment is rendered. This process is often described as the invoice-to-pay workflow.

What are the Steps in the Invoice Payment Process?

As described above, the complete invoice payment process starts with receiving the invoice and ultimately ends with payment. The 5 steps within the invoice payment process include:

  1. Invoice Capture
  2. Invoice Approval
  3. Payment Authorization
  4. Payment Execution
  5. AP Analytics

Let’s take a closer look.

1. Invoice Capture

First, the invoice is received. It may come via snail mail as hard copy, or it may be faxed or attached to an email. It may also be received via a website portal. Once received, it must be entered into the AP system. This may be done manually by typing in the details, or some platforms with invoice capture capabilities automatically capture and code invoices from the scanned image.

If you use AP automation, then any invoices received by email can be routed to a dedicated email address that triggers the capture process. Some platforms, like MineralTree also offer a PO Box service for customers where we receive, scan, and upload paper invoices on your behalf.

2. Invoice Approval

Once the invoice is in the system, the details and amounts must be checked and approved by the proper individuals. This may require coding for the right account, project, or cost center. If your business uses purchase orders, this may also involve PO matching. Manual means of invoice approval may require physically carrying an invoice from desk to desk to get signatures. Approval may also be handled via an email chain.

If your AP department uses automation, however, the approval process is simplified because approval requests are automatically routed to the right people along with the invoice and regular reminders if there is a delay.

3. Payment Authorization

Before payments can be made, they must be authorized. This is usually the job of a controller or CFO. Just as with invoice approval, the payment batch needs to make its way to this person for authorization. This can be done manually, via email, or with the help of AP automation.

Automation routes the payments, and supporting information, to the right person for authorization automatically. The payment approver gets a notification of the pending payments they can review, approve, or reject.

4. Payment Execution

The fourth and final step for many AP departments is rendering the payment itself. Depending on your AP department’s processes and supplier preferences, payment may be sent via check, ACH, virtual card, or another method.

It’s important to note that manual payment processing–which involves printing, signing, stuffing, and mailing checks–is more likely to lead to missed or delayed payment because of the extra time involved and the fact that physical items can get lost in the mail. This leads to vendor dissatisfaction as well as lost opportunities for early-pay discounts. Automating payments and using electronic forms of payment almost always means everything happens faster and with fewer errors.

5. AP Analytics

If you use an AP platform that aggregates and renders data in real time, you can add a 5th step to the process. The right analytics tools allow you to calculate key AP metrics automatically, such as invoice aging, the average cost per invoice, rate of error, and more. This information enables data-driven decision-making and helps identify ways to improve efficiency, save money, and increase accuracy.

How to Make an Invoice Payment

In this modern era, there are many methods available for paying invoices. If your AP department relies on manual processes, you may primarily send payment via check. If you use AP automation tools, you may have many more options at your disposal. Primary payment options include the following:


These must be printed out and mailed to the recipient, which can lead to delays. 33% of companies are making more than 50% of their payments via check. However, checks do incur additional costs both for AP departments and your suppliers’ AR teams.

Virtual Cards:

These non-physical cards work similarly to credit card payments, but rely on a one-time use 16-digit code that authorizes only a specific payment amount, which makes them particularly secure.


ACH stands for Automated Clearing House and refers to electronic network transactions made by financial institutions. With this method, funds are transferred directly between banks.

MineralTree’s AP solution helps organizations choose the most efficient payment methods for each transaction. We also work with vendors on your behalf to find the right payment method for them, and we handle their onboarding. Our solution supports all payment types including checks, ACH, virtual cards, and even FX payments. In fact, our virtual card payment method even allows you to create a revenue stream from cashback rewards.

What are the Benefits of Automating Invoice Payments?

Automation is the way of the future. Businesses that continue to rely on manual processes will be quickly surpassed by those who adopt solutions that leave them more flexible and agile while improving efficiency. Among the benefits of automating your invoice-to-pay process are the following:

  • Cost savings
  • Time savings
  • Improved accuracy
  • Strengthened supplier relationships

Cost savings:

Only 13% of financial professionals estimated that their payment process costs them over $10 an invoice. However, as the American Productivity & Quality Center notes, invoices cost on average $12 to process. Invoice processing continues to silently eat away at the bottom line of most businesses.

Automation lends itself to more electronic payment options, which are less expensive to process than paper checks. The cost of processing a paper check costs about $5.00 per payment. This includes time costs such as collating these checks and hard costs such as stamps and envelopes. By using e-payments instead of paper checks, your company can easily save thousands of dollars annually.

Use of virtual cards also allows you to capture cash-back rewards, and processing payments faster means you can also snag early payment discounts.

Time savings:

Traditionally, AP teams spend vast amounts of time capturing, coding, and managing invoice approvals. Because the automation software does a lot of the repetitive work for you, your employees have time to spend on higher value tasks.

By using automation, you can streamline the process of manual tasks such as capturing, coding, and approving invoices and matching POs. In today’s hybrid work environment, having a system in place that does not rely on paper processes can also future-proof your business.

Improved accuracy:

Since most things are handled by machine, there is less room for human error, including typos, incorrect amounts, or invoices getting lost in the approval process. Improved accuracy also helps teams improve their relationships with their vendors and reduces time spent on managing invoices.

Improved ERP syncs:

The best automated AP processes include automatic, two-way syncing with the ERP system, further reducing error. MineralTree’s TotalAP supports direct integration with the world’s leading ERPs, such as Oracle (NetSuite, EBS, ERP Cloud, JDE, PeopleSoft); SAP; QuickBooks (Desktop, Online); Microsoft Dynamics (Business Central, Great Plains, Finance & Operations); and Sage (Intacct, 50, 100).

Enhanced security:

With less room for humans to intervene, and ample security controls in place, automation often reduces fraud and other security risks. Two-factor authentication, segregation of duties, and tokenization are all part of an automated AP process and add an extra level of protection to the invoice payment process.

Strengthened supplier relationships:

Most businesses surveyed (71%) note that supplier relationships became more important over the last year. For organizations related to healthcare, this number was even higher (75%).

You’ll keep your suppliers happier by ensuring their payments are processed efficiently. Many platforms also include a vendor self-service portal that provides visibility into the status of their invoices and payments, keeping them in the loop.

Final Thoughts

Manual AP processes are inefficient, expensive, and error-prone. Moreover, reliance on paper checks often leads to missing out on early-pay discounts, rebates, and other opportunities to save money. If you’re looking to improve your invoice-to-pay process, consider adopting
MineralTree’s TotalAP solution. Our solution automates your end-to-end AP process, from invoice capture through payment, while also providing KPIs and analytics tools to help your organization’s leaders make data-driven decisions.

Learn how MineralTree can help your organization adopt automation and streamline your invoice-to-pay processing today.

State of AP Report 2021 Download


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