Automated Invoice Approval Workflow: Why you need it

When it comes to adopting an automated invoice approval workflow, there’s a lot of ground that needs to be covered. Before delving into why you should consider an automated invoice approval workflow, let’s talk about the traditional invoice approval workflow.

The Basics of Invoice Approval Workflow

Invoice approval consists of executing a complicated series of steps that can be cumbersome. The invoice approval workflow refers to the codified steps followed by AP personnel in the P2P (procure-to-payment), maximizing the cost-effectiveness and efficiency of paying invoices.

Invoice approval workflow: Typical steps followed

The typical steps of the invoice approval process are:

1. Upon the arrival of an invoice (including paper invoices), it is captured and then inputted into the company’s accounting system.
2. The invoice gets grouped with corresponding receipt reports and purchase orders through three-way matching.
3. Invoice inaccuracies and exceptions are identified and separated by AP personnel.
4. The invoice is then sent to the controller or CFO or the internal CPA for approval for invoice payment.
5. The invoice is then in the payment queue.

However, it’s not just these steps as mentioned above that constitute the complete cycle AP process. There is a lot more to be done beyond the five steps. Also, the approval process varies from organization to organization.

The drawbacks of traditional invoice approval workflow

• The invoice approval process is cumbersome.

One of the most significant drawbacks of the traditional invoice approval workflow is that the process is highly time-consuming. An IOFM (Institute of Finance and Management) survey showed that 84% of AP personnel’s time is spent executing manual AP functions. Therefore, delayed payments due to the excessive time spent manually processing invoices is a major obstacle to productivity and profitability. The biggest motivators for investing in an automated invoice approval workflow are the time-saving and productivity benefits of the process.

• Risk of fraud and duplicate payments

Human error is another significant aspect of manually processing invoices. Two of the most common errors in traditional invoice approval workflow are duplicate payments and fraud. Delayed payment of invoices can often lead to vendors sending the same invoice twice, ultimately leading to double payments. Without using technologies like automated AP software, the same invoice is at the risk of being processed more than once.

• Lack of transparency and control

Transparency issues are unavoidable with paper-based or manual invoice processing. It’s challenging to ascertain the position of an invoice in a pipeline. Other common transparency issues include not knowing who has to approve the invoice or whether the invoice is a priority. Therefore, lack of control is an unavoidable consequence. These issues are easily avoidable with automated AP processes.

The bright side: Gain with automated invoice approval workflow

• Appropriate utilization of invoice data for identifying payment delays
• Reminders and notifications for invoice approvals
• Automated AP processes significantly cut down upon invoice processing time
• Organizations can avoid fraud and duplicate payments by investing in an automated invoice approval workflow.
• Scanning paper invoices with Invoice automation software enables transferring required values to accounting or other systems.
• Invoices can get downloaded automatically with modern AP software.

Apart from the benefits mentioned above, there are other advantages of automating invoice approval workflow. Many organizations were effective in their invoicing processes during the pandemic due to invoice automation.

The Levvel report 2021 states – “The last year has proven the value of prioritizing technology in business, and organizations that do so are able to stay flexible and prepared for unforeseen challenges. The COVID-19 pandemic has brought a number of such hiccups, with supply chain outages, shutdowns, and travel restrictions pushing organizations to the brink and testing business continuity. Fortunately, when many organizations went full remote, many using an AP automation tool were able to carry on relatively uninterrupted. But this requires choosing a software that is modern, full-featured, and well-suited for the organization.” 

We would encourage you to explore more on automating invoice management with GetMyInvoices.

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