Quick Guide: How To File Accounts Payable Invoices
by The Ottimate Editorial Team
Maintaining accurate, up-to-date records is critical for finance teams. And if you’re wondering how to file accounts payable invoices — in a way that’s efficient and cost-effective — you’re in the right place.
Whether you’re preparing taxes, responding to an audit, or performing a month-end close, ensuring every invoice is organized and easily accessible is key to maintaining compliance and mitigating fraud.
But while it might seem like a straightforward task, recordkeeping can be a hassle for your team without efficient processes in place. In this quick guide, we’ll discuss how to file accounts payable invoices, including best practices for processing invoice data — so your financial records are accurate, organized, and easy to find.
How Long Should You Store Invoices?
The simple answer: It depends.
Guidance on how long to keep financial records varies based on your industry, affiliations, and where you conduct business.
For tax and regulatory purposes, it’s best to keep certain records on hand for a certain period of time, especially in the event of an Internal Revenue Service (IRS) audit. Per the IRS, the general rule is to keep invoices and supporting documentation for at least three years “to support an item of income, deduction, or credit shown on your tax return.”
The U.S. Chamber of Commerce recommends businesses keep all accounting records for at least seven years. To remain compliant with Payment Card Industry Data Security Standards (PCI DSS), you should retain audit logs for at least 12 months. Your company may also have its own document retention policy to fuel insights for sales forecasting or cash flow management.
No matter how long you keep invoices on file, the key is to store documents in a secure and accessible location — making auditing and compliance simple for your team.
How to File Digital vs. Paper Invoices
Now, let’s address the elephant in the room: paper invoices.
While many businesses have shifted to digital invoices, nearly half of all invoices (49.7%) are received through mail, fax, PDF, and email attachments. Storing paper-based invoices can make your job more difficult in several ways:
1. Accessibility
You may need to retrieve an invoice for a specific transaction. Too often, paper invoices are misfiled, displaced, or destroyed. Or they might be dispersed across multiple locations. In either case, paper invoices are typically harder to access — if they can be found at all.
2. Visibility
Paper invoices don’t typically leave a paper trail (pun intended). That means it may be harder to track financial transactions, including approvals and payments, and report on key metrics like invoice cycle time.
3. Space
Filing hundreds or thousands of paper invoices monthly will likely crowd your office. Over time, you may have to dedicate more space for additional filing cabinets, purchase additional storage, or move into a larger office space — solely because you have too much paper.
Digital invoices, on the other hand, help to alleviate many of the challenges associated with filing paper-based invoices. They can be scanned, uploaded, and stored electronically. But it’s not enough to just go paperless. You should also bring all your invoice data in one centralized, digital system for the best results.
How to File Accounts Payable Invoices Electronically (and Why)
What does it mean to “digitize” invoices?
To digitize your invoices, you’ll need an invoice automation tool that uses Optical Character Recognition (OCR) technology to scan paper invoices or extract data from PDF or Word files. The extracted data is converted into an electronic copy of the original invoice and stored in a digital repository.
But not all tools are created equal.
To start, some use basic technology to simply “read” and extract data from invoices while others deploy advanced technology — like artificial intelligence (AI) and machine learning — to extract line-item data with higher accuracy and less human intervention.
Also, some tools ensure digital invoices are accessible and searchable, and include a comprehensive audit trail detailing relevant transactions like approvals, communications, and more.
Here are several reasons to consider using an invoice automation system to digitize and store your invoices:
1. Digital Filing Cabinet
Digitizing your invoice data can eliminate paper and replace physical filing cabinets with a digital repository, serving as a filing cabinet “in the cloud.”
With a centralized database, invoices can be viewed and accessed from anywhere. In a hybrid and work-from-home environment, this gives your team flexibility to complete their tasks — whether it’s paying an invoice or closing the books — wherever they are. And if you have multiple locations, centralizing your operations gives remote staff access to a single repository with consistent data.
| Northstone Country Club once stored their paper AP documents in “massive legal files in filing cabinets.” Employees had to sort through the paperwork in each file to find specific documents. But with Ottimate, the club underwent a significant digital transformation. For Steve, CFO and Club Controller at Northstone, the digitized invoice records have provided “huge” time savings across the company. |
2. Streamlined Filing Process
Digitizing your invoices with an invoice automation tool can also improve your operational processes. Ottimate, for example, automatically stores a digital copy of each invoice in a searchable digital library and generates a full audit trail of approvals, exports, and payments tied to that invoice.
These records also include images of original invoices for future reference, allowing you to shred any paper invoices you have on hand. With a centralized repository, your team can be on the same page and resolve any issues more efficiently.
3. Simple Audit Preparation
One of the biggest benefits of efficient invoice filing is the ability to prepare your business for the unexpected, like an audit. Maybe you’re facing an external audit due to a merger or acquisition or at the request of a corporate franchise organization. Or you may undergo an audit from the IRS or a compliance organization.
First, an invoicing solution can help reduce the likelihood of an audit by ensuring data remains accurate and consistent. Automating general ledger (GL) coding, rather than requiring your team to code items by hand, can save your staff time and energy while minimizing errors.
Second, if you need to revisit certain records, an invoice automation tool makes it easy by automatically connecting associated records. The tool ensures that each digital invoice is linked to supporting documents, like receipts and purchase orders (POs), and relevant transactions. A digital system with this functionality makes it easy for your team to locate documents rather than hunting them down in filing cabinets.
By filing invoices in a digital filing system, you stay prepared for any internal or external examination of your AP data.
4. Searchable Data
Since invoicing tools extract invoice data at the point of capture, it’s easier to index every invoice accurately. Many solutions may offer document storage, but storing and indexing invoice information allows you to search large amounts of data to find specific records.
Depending on the tool’s functionality, you can search your “digital filing cabinet” by line item, date, vendor, total amounts, and other precise data points.
Steve Foster from Northstone Country Club gave a specific example detailing his experience with Ottimate’s invoicing software: “Now, you just open Ottimate, you find whatever you want, whenever you want it, wherever you are. If you’re on the beach, and somebody says, ‘Hey, did you buy a driver from Titleist on August 3?’, you just go look and see if you got it right.”
This example showcases the capacity of an end-to-end AP automation tool like Ottimate to help your company find whatever invoice data you need, wherever you are.
5. Useful Data Insights
Filing invoices in a way that’s efficient and accessible is essential to successful invoice processing. It can also unlock actionable insights to help you control costs.
For example, you can track inventory costs to help your business navigate challenges like rising inflation. When digitizing invoices, the tool captures centralized data on individual item costs. This data is especially beneficial if you have multiple locations, as the data can show overall pricing structures between locations and pricing per unit, allowing you to track variations in vendor pricing and ensure each location chooses the most cost-effective options.
When you can search and compare data across time, locations, and vendors, you gain access to insights that can be used to improve your financial health.
Choosing the Right Invoice Automation Solution to Store Invoices
Having the right invoice automation software to store your invoices is important.
Some AP solutions charge for storage access. And depending on the size of your organization and your invoice volume, the storage fees can rack up and become a burdensome cost. Others don’t charge for storage fees. Like with Ottimate, you can store documents for up to seven years at no additional cost, plus gain access to comprehensive audit trails that are easy to search and access.
In addition, the right invoicing solution can streamline the entire invoice lifecycle — from digitizing invoices to exporting invoice data to your accounting system. If you want to see how to file accounts payable invoices with Ottimate, plus discover how an automated invoicing process can work for your business, request a demo of Ottimate’s software today.