How to Set Up an Effective Automated Invoice Approval Workflow

Blog - 11 Dec 2020

Manual accounts payable processes tend to be disorganized and inefficient, for a variety of reasons.

According to Levvel Research’s 2020 Payables Insight Report, the manual routing of invoices for approval ranks as one of the biggest pain points within manual accounts payable processes.

 

invoice approval workflow

 

AP teams that have yet to make the switch to automation will be all too familiar with the struggles that manual invoice approval brings. Missing invoices, unanswered emails and payment delays are just some of the challenges that manual invoice approval brings.

In this blog, we will take a closer look at the challenges for AP teams with manual invoice approval before outlining the elements of an effective automated invoice approval workflow that you need to consider when researching solutions to automate your AP processes.

 

Challenges with Manual Invoice Approval

As mentioned, one of the biggest challenges with manual invoice approval is the sheer number of paper-based invoices involved. With most AP teams now working remotely, the need to print, sign and scan large amounts of invoices at each stage of the approval workflow will have become near impossible to manage.

The more paper-based invoices that need to be sent for approval, 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 vendor relations. If you do not pay your invoices on time you may lose preferred status with certain vendors making the improvement of terms with these vendors at negotiation stage practically impossible.

Additionally, when a payment is delayed and there is a lack of communication as to the reason, the vendor may conclude that the invoice has gone missing. In some cases, the same invoice will be sent again, potentially resulting in a duplicate payment being made. In a manual environment, AP teams may struggle to spot such duplications, considering the sheer 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. Organizations need to embrace technology and look to automate their AP process.  When choosing an AP solution, there are some important features that will enable you to maximize the effectiveness of an automated invoice approval workflow.

 

Elements of an Effective Invoice Approval Workflow

 

1. Centralized Mailbox

Having a centralized mailbox into which all vendor invoices arrive, will be important in the success of any automated invoice approval workflow. With your invoices arriving from all of your vendors into the one place, the portal can then be configured so that invoices are routed to the relevant approver based on information provided in the invoice, such as product, department or amount.

 

2. Submission Requirements

Strict rules should be set for your vendors to adhere to when submitting invoices. For example, invoice number, PO number, where to send the payment to and payment terms should always be included. If key information is missing, the invoice may need to be queried and even sent back to the vendor, adding a delay to the payment being made.

 

3. Set Due Dates

All invoices submitted for approval should include payment terms that detail when the payment is due, in order to keep the invoice approval workflow functioning as efficiently as possible, preventing late payments and giving your organization the chance to maximize early payment discounts.

 

4. Assigned Approvers

With the criteria set out for both invoice submission and invoice approval, it is 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 the responsible person or party is for approving at each level. An automated approval workflow will then ensure that as an invoice is approved at one level, it will automatically be routed to the next approver within the chain before it is declared ready for payment. Even if someone within the workflow is absent for a period, the workflow can be configured to re-route the invoice to another assigned approver so that any delays are prevented.

 

5. Automatic Notifications and Reminders

An important feature of an automated invoice approval workflow is automatic notifications and reminders. When an invoice is routed to a designated approver, they will immediately be sent a notification asking them to action the invoice. They can then approve the invoice via email or log into the AP system and do so there. This ensures that the invoice approval workflow is kept moving. If the invoice is not actioned immediately, reminders will be sent at configurable intervals in order to reduce any further delays to the process.

 

6. Record Activity

With each step of the approval process logged, you are provided with a full audit trail that reduces the time taken to conduct internal audits and investigations. This also ensures regulatory compliance requirements are met.

 

Conclusion

Invoice approval processes in the past have been both slow and disjointed, but it does not have to remain this way. According to a recent report by Levvel Research, some of the biggest benefits seen by organizations since automating their approval process through an AP solution include quicker approval of invoices, increased employee productivity and lower processing costs. By making the switch to automation, you too can transform your approval process and begin to experience these benefits and more.

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Posted by

James Duffy

P2P Insights Manager

Posted by

James Duffy

P2P Insights Manager