Invoice processing is an accounts payable function that handles the invoice life cycle consisting of invoice receipt, invoice approval or rejection, invoice payment, and the invoice archive processes.

Here are the invoice processing steps:

Capture. Vendor invoices are received by fax, mail, email, or captured by an accounts payable system.

Register. Invoices are prepared for approval by coding and updating the invoice data.

Dispatch. Authorized approvers are sent invoices for a payment decision.

Approval/Rejection. Approvers will either approve or reject the dispatched invoice for payment.

Payment. The approved invoices are then processed for payment.

Archive. Paid invoices are stored either in a file cabinet or online system with invoice processing history for later reference or audits.

Invoice processing software in comparison to manual paper process is a digital technology and is used by accounts payable to electronically handle vendor invoices from receipt to archive.

Automated invoice processing or invoice processing automation uses software to automatically perform steps in the invoice lifecycle such as data capture, and dispatch for approval. Note that invoice processing software can either be automated or manually performed by accounts payable on a computer.

An invoice is not a receipt and the key difference between the two is that an invoice is issued before payment as a way of requesting compensation for goods or services, while receipts are issued after payment as proof of the transaction. An invoice tracks the sale of a business's goods or services.