How to Set Up an Effective Invoice Approval Workflow

Blog - 06 Dec 2018

Traditionally, accounts payable processes have tended to be somewhat disorganized and inefficient, with several manual elements involved. This causes many issues for AP teams, with a disjointed invoice approval workflow a major contributing factor.

A recent report by PayStream Advisors listed the top accounts payable challenges by organization size, with manual routing of invoices for approval amongst the biggest issues for all concerned.

invoice approval workflow


Challenges with Traditional Invoice Approval Workflow

One of the biggest challenges with a traditional invoice approval workflow is the sheer amount of paper-based invoices involved.

The more paper-based invoices that need to go through a manual invoice approval workflow, the slower the overall process is likely to be. This can result in late payments which both negatively affect your organization’s cash flow but can also damage supplier relationships. If you don’t pay your invoices on time you may lose preferred status with certain suppliers who may also be unwilling to negotiate better contract terms when the conversation is had.

Additionally, when a payment is delayed and there is a lack of communication between the supplier and AP team of the supplier, the supplier may believe that the invoice has gone missing. In many cases, the same invoice can be sent again which could result in a duplicate payment. Without an automated matching tool, it is difficult for AP teams to spot such duplications, considering the number of invoices that they are dealing with.


Manual invoice approval processes clearly leave organizations exposed to many issues that can prove both costly and time-consuming. Having a well-planned invoice approval workflow in place will certainly improve things, however, when automated, your organization will truly begin to experience the benefits.

Elements of an Effective Invoice Approval Workflow

Once your organization has a solution in place to automate your invoice approval processes, there are a number of steps that should be factored into your invoice approval workflow in order to maximize its effectiveness.

1. Create Submission Portal

Work with your suppliers so that all invoices arrive into and are managed from one, centralized invoice submission portal within your chosen solution. The portal can be configured so that invoices are automatically routed to the relevant department based on information provided in the invoice.


2. Set Submission Requirements

Set strict guidelines for your suppliers to adhere to when it comes to submitting invoices. For example, they should include the invoice number, where to send the payment to and when the payment is due. If such requirements are met for invoice approval, it can move onto the next stage of the workflow. Without all requirements, the invoice should be sent back to the supplier.


3. Assign Approvers

With the criteria set out for both invoice submission and invoice approval, it’s vitally important that the most relevant people are then included in the approval process. If you decide that certain purchases or certain departments require multiple approval levels, make sure to define who is the person or party responsible for approving at each level.


4. Supporting Documentation for Approval

There should also be a responsibility on the part of approver to submit specific reasons for approving an invoice and allowing it to move onto the next stage of the workflow. This can be of great benefit when mistakes need to be corrected or records are being audited. Once supporting documentation is included, the invoice is placed in a payment queue, before being processed and sent to the supplier.


5. Set Due Dates

All invoices submitted for approval should have due dates attached to them in order to keep the invoice approval workflow working as efficiently as possible, preventing late payments and giving your organization the chance to maximize early payment discounts.


6. Automatic Alerts and Notifications

Alerts may include status updates to suppliers so they are aware of exactly where the invoice is. Notifications are also sent to designated approvers instantly when invoices are routed for approval so as to keep the invoice approval workflow moving.


 7. Record Activity

Another benefit of an automated invoice approval workflow is the ability to record every single step of the approval process. This can be useful for when mistakes are made so that they can be easily identified and edited. This information also proves valuable when analyzing and optimizing the performance of your accounts payable process.


Benefits of an Automated Invoice Approval Workflow

Once you have structured your invoice approval workflow with the necessary steps and stakeholders included, it is only a matter of time before your AP team and organizations as a whole will begin to notice the benefits.

Improved Cash Flow

According to PayStream Advisors, quicker approval of invoices was named as the biggest benefit achieved following the implementation of an automated invoice approval workflow.

invoice approval workflow

The quicker that invoices are approved the quicker that payments are made to suppliers. Having a good track record with suppliers can lead to many long-term benefits such as priority treatment, more favourable payment terms and discounts which will improve your organization’s cash flow. In a recent blog, we outlined the ways to optimize your cash flow management.


Streamlined Decision-Making

The same survey also listed increased employee productivity as a major benefit of an automated invoice approval workflow.

With a workflow, that records all activity, approvers can easily identify who made the purchase, what project or department the purchase is linked to and who the chosen supplier is. With all information provided, the decision-maker can simply approve or reject the invoice with little dialogue required. This allows all parties to work on more valuable aspects of their role, thus increasing employee productivity.

On a higher level, Financial Controllers and CFOs can use this information around invoice approval times to optimize the process and eventually reduce time and costs.


Automated Recurring Invoices

Similarly, for certain payments that are known in advance, as part of agreed payment terms with a certain supplier, or a purchase that has been budgeted for, approval is not always necessary. Recurring invoices can be automated so that employees have no need to intervene and can focus on other aspects of their roles. As a result, the invoice approval workflow is accelerated, and payments are made in a timely manner.


Invoice approval processes have, in the past, been both slow and disjointed, but it doesn’t have to remain this way. With a well-structured automated invoice approval workflow, your accounts payable team will no longer find themselves bogged down by large amounts of paper-based invoices and manually routing invoices for approval. Many improvements will also be seen in the areas of improved cash flow, increased employee productivity and lower processing costs, which will benefit your organization as a whole.


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Posted by

Killian McCarthy

Sales Director