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How to Make or Break Your Invoice Approval Process

June 5, 2018
business man hands holding pen writing on papers

The dreaded antiquated approvals process. It’s filled with a seemingly never-ending paper trail and many hours spent handling each approval with care. The biggest fear for most finance departments is letting one quick “go-ahead” lead to an invoice that shouldn’t be paid. But that’s what often happens with manual approval workflows that offer little control and visibility. 

Keep Clear Control of the Approval Cycle

How many of your late payments are actually due to your invoice approval process? When invoices stay with approvers for longer than expected, it stalls the payment process and results in a delayed payment. Most likely, a lack of visibility into your invoice approval process contributes to the problem.

Accountants often have to guess where an electronic bill is in the approval process and double-check to see if it has crossed the right approvers. This scattered, manual process is proven to be inefficient and expensive in the long run. Having visibility into your approval workflow is critical for a few reasons:

  • Your finance department has improved accountability by knowing who’s had the invoice and for how long.
  • You’ll have a clear picture of the invoice approval process from start to finish to reasonably eliminate any unnecessary steps.
  • You’re able to uncover any gaps that could lead to fraud or compliance issues if not checked by the right approver.

Financial Director points out that regardless of the invoice approval or routing method, finance departments should strive to gain as much visibility into the payable as possible.

“Manual transaction routing and approval, or automated processes that provide limited business context data, cause significant transaction processing inefficiencies. For example, how do you approve a purchase invoice if all you get is a date, amount, and invoice number?”

Think about where all of your invoices are stored. Do they live in the cloud or in a shared folder? Are they tucked away in filing cabinets? Regardless of how they’re received, your invoices should live in one paperless platform for approvers to easily route and review.

Most businesses have an extensive invoice approval process. It’s not as simple as just passing the invoice to one manager for review, then send the payment. Often, manual invoice approval processes lead to lost invoices and late payments due to paper getting lost in the shuffle.

A centralized, cloud-based invoice approval process creates control and visibility into the payment from start to finish. Surprisingly, according to PayStream Advisors, only 51% of businesses have a centralized hub to manage invoices easily.

It takes more than having basic invoice details to approve an invoice accurately. If your business lacks full visibility into each payable, there’s a chance your approvers could be approving a fraudulent invoice. With AP automation, there’s less chance of bogus invoices being approved. Once the invoice enters the system, it is controlled from start to finish without breaking your business’ rules, and all information is securely stored in the cloud-based solution.

Easy and Efficient Invoice Approval Routing

Let’s face it, approvers are out of the office sometimes. Unfortunately, it may be when you need them the most—to approve an invoice in order to pay a vendor on time. When approvers are out, what processes are in place to keep the payment process in motion?

Most finance departments that stick to manual approval routing lack flexibility and easy rerouting. Imagine handing an invoice to an approver who is going on vacation and doesn’t have time to approve it before leaving. Your staff is then running around to find the next best person instead of trusting automated routing.

According to a recent PayStream Advisors report, manual invoice approval routing is one of the top pain points for businesses when managing the approval workflow. Their research shows that businesses that implement automated solutions such as e-invoicing, see big improvements in their invoice approval process.

E-Invoicing gives approvers flexibility a number of ways. If your approver is working remotely, they can approve or dispute the invoice from anywhere with an Internet connection. If your approver is on vacation, the invoice will automatically be rerouted to the next appointed approver to reduce wait time and risking late payment. And if your business receives recurring invoices from vendors, automated approvals can be set up to expedite payment without overlooking the invoice details.

Be Your Business’ ‘Invoice Investigator’

Manually matching the right printed purchase orders with invoices is a critical but daunting task, especially when searching through piles of paper. If the purchase order does not match the invoice, you’re forced to backtrack. You must contact the vendor, find the right invoice or purchase order, and manually enter the invoice data again.

Of course, with a manual approval workflow, the extra work is necessary because you must verify that you pay only for what was originally requested from the purchase order. This validation also makes it easier for auditors to later review invoices and purchase orders without searching through separate filing cabinets and computer files.

Overlooking a few small details could lead to paying scammers or overpaying. A recent article identifies a few other items approvers should check.

  • Was the work completed satisfactorily? Should payment be held until the service issues are resolved?
  • Does all the vendor information on the invoice and purchase order match your records? Tax ID, contact information, and vendor name as it appears on the W-9.
  • Does the invoice match the work completed or goods delivered? Not including past or incomplete services.
  • Does the completed delivery or service meet the contract or agreed upon terms? Time frame, rates, etc.

These are just a few of the questions that approvers should ask before pushing the invoice forward in the payment process. Whether your invoice approval process is manual or automated, each approver must have a list of guidelines or questions that must be answered to avoid overlooking any details that could result in paying for an unsatisfactory or incomplete service.

Automated or Antiquated Approval Workflows

As your business grows, it’s likely you’ll add more vendors for goods and services. But as you process more vendor payments, the invoice approval process can become increasingly complex. Manually checking for every detail can be exhausting and time-consuming.

The most significant determining factor of your AP success is the decision to stick with antiquated invoice approval processes or adopting automation. If your finance department is manually handling the approval workflow, it’s a safe bet your accounts payable process is on a downward spiral.

Companies that use manual processes have to juggle multiple invoice receipt methods, ranging from email to snail mail. Accountants are then tasked with manually entering this information into the accounting or ERP system, keeping track of the original invoice, and sending it to the right approver. They’re then responsible for moving the invoice along in the approval process by following up with approvers with reminders, providing vendor updates, and making sure the invoice is approved by all the right managers. Manual invoice approval processes present a lot of problems including late payments, lost invoices, and limited visibility into payables.

On the other hand, invoice automation software is the new norm for savvy finance departments. Invoice approval automation provides simple solutions to all the above problems. After invoices are entered into your company’s accounting or ERP system, they are automatically routed for approval electronically. From there, your usual manual invoice approval steps can be automated to match your business’ preferred approval process. Say goodbye to keeping track of paper and chasing approvers for each of the dozens of invoices processed monthly.

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