Procurement Glossary
Incoming invoices: definition, processing and control in Procurement
November 19, 2025
The incoming invoice is a central document in the procurement process and forms the basis for the proper handling of supplier relationships. It documents the services rendered or goods delivered and triggers the payment process. Efficient processing of incoming invoices makes a significant contribution to liquidity management and compliance. Find out below what constitutes an incoming invoice, what processing methods exist and how modern technologies optimize the process.
Key Facts
- Incoming invoices are legally binding documents that must contain all mandatory information in accordance with the German VAT Act (UStG)
- The average processing time for manual processing is between 5-15 days
- Automated invoice processing can reduce costs by up to 80%
- Incorrect invoices account for an average of 25% of processing time
- Digital workflows enable real-time tracking and improved compliance
Contents
Definition: Incoming invoice
An incoming invoice is a formal request for payment from a supplier for services rendered or goods delivered.
Essential components and mandatory information
Every proper incoming invoice must contain certain minimum details:
- Complete addresses of invoice issuer and recipient
- Unique invoice number and invoice date
- Description of the service or goods with quantities
- Net and gross amounts and VAT statement
- Delivery date or performance period
Incoming invoice vs. outgoing invoice
While the incoming invoice represents a payment obligation from the buyer's perspective, the outgoing invoice is the corresponding receivable of the seller. Both documents represent the same transaction from different perspectives.
Importance of the incoming invoice in Procurement
In the purchasing process, the incoming invoice marks the end of the procurement transaction. It serves as the basis for cost control, budget monitoring and tax documentation. Proper processing ensures compliance with payment terms and discount periods.
Methods and procedure for incoming invoices
The processing of incoming invoices follows structured processes that vary depending on the size of the organization and the degree of digitization.
Traditional manual processing
During manual processing, each invoice passes through several checking stations. First of all, the formal incoming goods check is carried out to ensure completeness and legibility. Then the factual accuracy is checked by comparing it with purchase orders and delivery bills.
Digital invoice processing
Modern systems use OCR technology (Optical Character Recognition) for automatic data extraction. The captured information is automatically compared with master data and orders. Approval workflows forward the invoices electronically to the relevant cost centers.
Three-way match
This proven control method compares three documents with each other:
- Purchase Order
- Goods receipt confirmation
- Incoming invoice
Payment is only released automatically if there is a complete match.
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Important KPIs for incoming invoices
Key figures for invoice processing enable the continuous optimization of processes and costs.
Processing time and throughput speed
The average processing time from receipt to approval is a key indicator of process efficiency. Target values are less than 3 days for automated processes. The measurement is carried out separately for invoice types and amounts.
Error rates and post-processing effort
The proportion of incorrect or incomplete invoices shows optimization potential for suppliers. Typical target values are below 5% complaint rate. The post-processing time per invoice should be continuously reduced.
Cost efficiency of invoice processing
The processing costs per invoice include personnel, system and infrastructure costs. Benchmarks show values between 2-15 euros per invoice, depending on the degree of automation. A regular benchmarking analysis identifies opportunities for improvement.
Risk factors and controls for incoming invoices
The processing of incoming invoices involves various risks that must be minimized by means of suitable control mechanisms.
Compliance and tax risks
Incomplete or incorrect invoices can lead to tax disadvantages. Missing mandatory information jeopardizes the input tax deduction. A systematic incoming goods inspection and compliance-compliant processes are therefore essential.
Fraud and duplicate risks
Duplicate payments due to multiple submitted invoices or forged documents pose considerable financial risks. Automated duplicate checks and the dual control principle for critical amounts offer effective protection.
Liquidity and cash flow risks
Delayed invoice processing can lead to missed discount deadlines or reminder fees. At the same time, payments that are made too early affect liquidity planning. Efficient terms management optimizes the timing of payments.
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Practical example
A medium-sized production company implements a digital invoice management system. Every month, 2,500 incoming invoices are received, which were previously processed manually. Following the introduction of the system, 80% of the invoices are automatically recognized and processed. The average processing time drops from 8 to 2 days, while processing costs are reduced by 60%.
- Automatic OCR recognition for standard invoices
- Electronic approval workflow with mobile approval
- Integration into the ERP system for seamless booking
Current developments and effects
Digitization is fundamentally changing invoice processing and opening up new opportunities to increase efficiency.
Artificial intelligence in invoice processing
AI-based systems not only recognize text content, but also learn from editing patterns. They can identify anomalies, recognize duplicates and even detect attempted fraud. AI in Procurement enables continuous improvement in recognition accuracy.
E-invoicing and structured data formats
Electronic invoices in XML format (such as XRechnung or ZUGFeRD) contain structured data that can be processed without media discontinuity. This significantly reduces error rates and speeds up processing.
Integration in supply chain management
Modern systems link invoice data directly with supply chain visibility solutions. This enables end-to-end transparency from order to payment and improves the predictability of cash flows.
Conclusion
The incoming invoice is a critical element in the procurement process that has a significant impact on liquidity, compliance and cost efficiency. Modern digital solutions offer enormous potential for process optimization and cost reduction. Companies that invest in automated invoice processing achieve measurable benefits through reduced processing times and improved data quality. A strategic approach to invoice management strengthens the entire procurement organization in the long term.
FAQ
What happens in the event of incorrect incoming invoices?
Incorrect invoices will be returned to the supplier with a specific complaint. Payment is suspended until corrections are made. Frequent errors include incomplete addresses, missing invoice numbers or incorrect VAT statements. Systematic supplier training reduces error rates in the long term.
How long do incoming invoices have to be kept?
Incoming invoices are subject to a statutory retention period of 10 years. Archiving must be audit-proof and legible at all times. Electronic archives must comply with GoBD requirements and be protected against manipulation.
What are the advantages of electronic invoicing?
E-invoices reduce processing times by up to 70% and eliminate media disruptions. Structured data formats enable automatic bookings and significantly reduce error rates. In addition, postage and paper costs are eliminated, which brings both economic and ecological benefits.
How is the input tax deduction for incoming invoices ensured?
All legally required information must be provided in full for input tax deduction. This includes correct VAT identification numbers, clear descriptions of services and correct tax statements. A systematic incoming goods inspection prevents the loss of input tax claims.
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