Why incoming invoices are a good place to start
Processing incoming invoices is a recurring, clearly defined process in almost every company. Invoices arrive by email, as PDFs and occasionally still on paper. Someone records them, checks them, assigns them, obtains approvals and passes them on to accounting. Many of these steps follow fixed rules.
That gives incoming invoices all the hallmarks of a good starting point: they occur frequently, the result is easy to check, and the data is usually already digital.
Note: this article describes technical processes. It does not replace advice from a tax adviser. How you organise your bookkeeping in detail is something you should agree with your tax adviser.
The five steps of automated invoice processing
- Read: supplier, invoice number, line items, amounts and tax rates are recognised.
- Check: matching against purchase order and delivery note, with discrepancies flagged.
- Pre-code: account and cost centre are proposed based on your previous postings.
- Approve: above your threshold, the invoice goes to a person with an explanation.
- Hand over: the document and the posting proposal land in DATEV, the accounting software used by most German tax advisers, or in your own accounting system.
The end result is a posted document with an audit trail. Every step is traceable, and decisions on unusual cases remain with people.
Mandatory details and e-invoicing
Checking mandatory details
To deduct input VAT in Germany, an invoice must contain certain details set out in Section 14 of the German VAT Act (UStG). An automated process can check whether these details are present and flag invoices with gaps before they are posted. Typically they include:
- Name and address of the supplier and the recipient
- Tax number or VAT identification number
- Invoice date and a sequential invoice number
- Quantity and type of goods or services, and the date of supply
- Net amount, tax rate and tax amount, or a note on a tax exemption
B2B e-invoicing
Since 1 January 2025, businesses in Germany must be able to receive and process e-invoices in business-to-business transactions, for example in the XRechnung or ZUGFeRD formats. Transitional periods apply to issuing them. An e-invoice contains structured data that can be imported directly. This makes automation easier, but it does not replace checking: a structured invoice can still contain wrong quantities or prices. A good process handles both, e-invoices and conventional PDFs.
Three-way matching and duplicates
The most important check is matching the purchase order, delivery note and invoice. If quantity, price and supplier agree, the invoice can proceed. If something differs, the discrepancy is flagged with an explanation, for example a partial delivery or a higher unit price.
Checking for duplicates is just as important. Invoices sometimes arrive twice, by email and by post, or as a reminder with the same number. An automated process recognises invoice numbers that have already been recorded and compares amount and supplier, so nothing gets paid twice.
Bank details belong in the check too. If the account number of a known supplier changes, that should always reach a person, as changed bank details are a well-known pattern in fraud attempts.
Setting approval thresholds
Not every invoice needs the same attention. Thresholds let you decide what runs through automatically and what goes for approval. Possible rules, to be understood as examples:
- Invoices from known suppliers with a matching purchase order run through automatically up to a set amount.
- Invoices without a purchase order reference go to the responsible cost centre.
- New suppliers are always checked by a person.
- Discrepancies above a set percentage go to procurement.
You set the thresholds yourself and can adjust them at any time. At the start, it is advisable to err on the side of caution.
German bookkeeping rules (GoBD), archiving and traceability
In Germany, bookkeeping is governed by the principles for the proper keeping and storage of books, records and documents in electronic form, known as the GoBD. Among other things, they require documents to be stored in an unalterable form and processing steps to be traceable. Automated invoice processing should therefore log every step: what was recognised, how each check turned out and who approved what.
The archiving itself is usually handled by your existing system, such as DATEV or a document management system. The automation delivers the document and the log there; it does not replace the archive. Whether your process documentation needs to be updated is best clarified with your tax adviser.
The role of your tax adviser
Many small and mid-sized businesses work closely with a tax adviser, often via DATEV. Automated invoice processing does not change that; it improves what you hand over: documents arrive complete, pre-coded and with an audit trail. Involve your tax adviser early, for example on which accounts and cost centres should be proposed and in what form the data should be handed over.
Conclusion
Automated invoice processing reads invoices, checks mandatory details, matches them against purchase orders and delivery notes, proposes how to code them and only passes the exceptions on to people. With clear thresholds, a clean audit trail and your tax adviser on board, a tedious daily chore becomes a controlled process.