How to pay an invoice in 6 steps (with best practices)

After ordering supplies or scheduling a service, you might think the transaction is complete. But there’s one more critical step—paying the invoice.

Paying invoices is simple in theory, but missing a step can lead to errors, late fees, or strained vendor relationships. Without a clear system, you’re more likely to make mistakes. Here’s how to streamline your invoice payment process and avoid common mistakes.

What is an invoice payment?

Businesses typically pay in one of two ways:

• Immediate payment: Some purchases require upfront payment via cash or a corporate credit card. These do not involve invoices.
• Delayed payment: A vendor sends an invoice after delivering goods or services, and payment is made based on the agreed-upon terms. This is an invoice payment.

In scenario one, you make that payment immediately. In scenario 2, your payment is delayed.

Benefits of invoice payments

In the second scenario of deferring payments through invoicing, this is often preferred by businesses as it gives them greater flexibility in managing cash flow. Here’s why many companies prefer this approach:

• Use goods before payment is due: Businesses can access products or services without immediate payment.
• Short-term credit: An invoice acts as interest-free credit from a vendor, helping preserve working capital.
• Better cash flow management: Paying based on a schedule allows businesses to align expenses with their cash cycle.

But while invoice payments offer advantages, they also introduce potential risks.

Common challenges with invoice payments

Delaying payment through invoicing extends your deadline, but the payment still needs to be made. If purchases aren’t tracked properly, cash flow can become an issue when multiple invoices come due at once.

Lost or miscategorized invoices can also lead to missed or late payments. This may result in interest charges and strain relationships with vendors.

How to pay an invoice in 6 effective steps (with best practices)

To ensure invoices are paid on time and processed correctly, follow these six steps:

1. Match invoices and purchase orders

Before making a payment, verify that the invoice details match the corresponding purchase order. If there’s a discrepancy, investigate the issue before proceeding. This process, known as 2-way matching, can be done manually or automated with AP software.

Best practice: Standardize your invoice review process by creating a matching checklist for your accounts payable team.

2. Take a close look at the invoice due date

The invoice should include a due date. If it doesn’t, refer to your vendor agreement. A common payment term is net 30, meaning payment is due 30 days from the invoice date.

Best practice: Track all invoice due dates using an AP calendar or automated reminders. Prioritize payments based on urgency—pay early if discounts are available, but avoid early payments if it strains cash flow.

3. Choose your payment method

There are multiple ways to pay invoices, each with its own advantages. Options include:

A breakdown of these payment methods is covered later.

Best practice: Choose payment methods based on vendor preferences, transaction security, and processing costs. ACH payments and bill pay services are best for scheduled invoices, while credit cards offer flexibility and potential rewards.

4. Schedule your payment

Most businesses use accounting software to schedule invoice payments. When initiating a payment, the software drafts a journal entry that records the transaction based on the selected payment date. Key details include:

• Vendor: The recipient of the payment, stored in accounting records.
• Account: The category for the expense (supplies, inventory, service expense, or an asset account).
• Amount: If a 2-way match has been completed, the amount should be accurate.
• Date: The due date is the payment date you want to schedule.

Best practice: Automate scheduled payments through your AP software or banking system to avoid missed deadlines. This includes setting up multi-level approval workflows to prevent unauthorized transactions.

5. Complete the payment

Payments may be processed automatically on the scheduled date. If making a manual payment, double-check the recipient details and payment amount before finalizing the transaction. A corresponding journal entry will need to be recorded manually.

Best practice: Before approving a payment, run a final verification check to ensure accuracy. For manual payments, store proof of payment (such as bank confirmations or check images) in a central AP system.

6. Collect payment confirmations

Keep payment confirmations from vendors as proof of payment. If a vendor raises questions about an outstanding invoice, having these records ensures there’s documentation to verify payment.

Best practice: Make sure to store all payment confirmations, invoices, and approval records in a centralized tracking system that can log each payment’s status and automatically reconcile payments with bank statements.

Which invoice payment method should your business use?

With multiple ways to pay invoices, choosing the right method depends on factors like security, convenience, and record-keeping. Here’s a breakdown of the most common payment options.

1. Cash

Paying with cash may seem straightforward, but logistics can make it impractical. While mailing cash is legal, it’s not recommended due to security risks. Payments over $500 must be sent via Registered Mail, adding extra cost. Handing cash to a vendor in person provides no payment record, making it difficult to track transactions.

2. Check

Checks remain a widely accepted payment method. They authorize a bank to transfer funds from your account and provide a clear payment record. However, they carry risks, including forgery and the exposure of sensitive banking information.

Despite these concerns, checks are a reliable option for businesses that need to document payments.

3. Credit card, debit card, or charge card

Cards offer a secure and convenient way to pay invoices. The most common types include:

• Debit cards: Withdraw funds directly from a checking account
• Credit cards: Allow purchases on credit, often with rewards or cashback benefits
• Charge cards: Require full payment of the balance each statement period

While some cards charge fees, they can be offset by perks like cashback bonuses. Businesses using charge cards should ensure they can pay the balance in full each cycle to avoid penalties.

4. Bill pay

Bill pay services allow businesses to make payments directly from their bank accounts. Payments can be scheduled in advance, and banks either process them electronically or issue checks on behalf of the payer. This method simplifies recurring payments and provides clear tracking.

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5. ACH debit or ACH credit

ACH transfers move funds electronically between bank accounts.

• ACH debit: The recipient’s bank pulls money from the payer’s account.
• ACH credit: The payer’s bank pushes funds to the recipient’s account.

Both methods are common for invoice payments, but the availability depends on the vendor’s preferred payment methods.

6. Cash transfer apps

Peer-to-peer (P2P) payment apps like Zelle, PayPal, Venmo, and Apple Pay offer another way to send money electronically. These apps use similar technology as ACH transfers but are less commonly used for B2B transactions due to security concerns.

While convenient, they may lack the fraud protections and payment tracking features businesses need.

Why using invoice management software to manage and pay invoices matters

Invoice management software streamlines the entire invoice-to-pay cycle—capturing, processing, approving, and paying invoices with minimal manual intervention. Businesses that rely on spreadsheets or disconnected systems risk errors, inefficiencies, and missed payments.

A strong invoice management solution can easily simplify accounts payable with:

• Invoice capture: Uses OCR (optical character recognition) to extract and record invoice details.
• Invoice processing: Conducts 2-way or 3-way matching to verify accuracy before approval.
• Approval workflow: Routes invoices to the appropriate approver for sign-off.
• Automated billing: Processes payments automatically once approved.
• Reminders: Notifies users of upcoming due dates and scheduled withdrawals.
• Reporting: Generates real-time reports and analytics to improve financial decision-making.

Using the right tools ensures invoices are paid accurately and on time while reducing administrative workload.

Simplify invoice management with Ramp Bill Pay

Managing invoices and bills isn’t just about avoiding late payments—it’s about building a system that drives efficiency and supports long-term growth. Ramp Bill Pay makes that possible by combining automation with ease of use to streamline your processes.

Ramp Bill Pay takes care of repetitive tasks like invoice tracking, coding, and approvals, giving your team more time to focus on strategic priorities. With our platform, businesses benefit from:

• Time savings: Automation minimizes the manual work involved in processing bills and invoices.
• Greater visibility: Real-time cash flow insights and payment tracking enable smarter financial decisions.
• Fewer errors: Built-in checks and automated workflows help ensure accuracy in payments and records.

By simplifying invoice and bill management, your team can focus on what truly moves the business forward.

Try Ramp's invoice management software for simple, effective invoice automation.