Picture this: stacks of invoices teetering on your desk, a seemingly endless to-do list, and the creeping frustration of manual data entry errors. Now imagine these tasks multiplying as your business scales.
But it doesn’t have to be that way! Ready to dive into the depths of invoice approval workflow and emerge with tools that arm you to conquer these inefficiencies? Let’s begin.
Here’s what we cover in this article:
The Traditional Invoice Approval Workflow: Step By Step
Why Should You Automate the nvoice Approval Process?
How to Harness the Latest Technology
Elevating Your Invoice Management Game
Let’s break down the invoice approval workflow in detail. Below is a typical example. It involves receiving the invoice, ensuring its accuracy, obtaining approval and authorization, processing payment, and maintaining records.
The invoice approval workflow begins when your company receives an invoice from its supplier. This could be delivered through mail, email, or EDI and is usually sent to the accounts payable team.
Invoice receipt is the critical first step in the invoice approval workflow. But it also presents an inherent risk. Invoices sent by mail can be damaged, misplaced, or lost. Emails can be blocked or missed. And any breakdown in communication at this stage can have dire consequences for your business and customers.
To mitigate these risks, you need to use a centralized and digitized system for receiving invoices. This ensures prompt acknowledgment of receipt and immediate logging into the system. Reliance on physical copies and delays in entry can create bottlenecks.
After invoice receipt, the next step in the workflow is verification. This is where the accounts payable (AP) team (and sometimes the procurement team) check the invoice for accuracy, verifying information like supplier name, goods or services, dates, amounts, and other details.
The potential risk in verifying and cross-checking invoices manually is that inaccuracies can be missed. This can lead to overpayment for goods or goods not being received. Tiny discrepancies, often ignored, can compound over time, turning minor issues into major bottlenecks.
Next up is the matching process, where the accounts payable team, procurement team, and receiving department work together to match the invoice with the corresponding purchase order and the goods receipt note (GRN) (3-way matching.)
This step guarantees what was ordered, received, and billed for– “matches.” If matching is skipped or performed manually without cross-verification, your company could end up forking out for unreceived goods or experience processing delays that kill productivity on all sides.
This is the crucial stage in the invoice approval workflow, where the invoice receives the green light before payment can be released. It often involves multiple department heads and managers, the accounts payable team, and the finance department.
Some companies have an “approval hierarchy” that requires single approval; others need multiple approvals, particularly for larger amounts.
Disjointed approvals can cause delays and even potential for fraudulent activity. A clearly-defined approval process, with limits for different levels of management, can expedite, standardize, and streamline the process.
Upon approval, the process moves to payment. As we all know, payment terms depend on the agreement with the supplier. Some invoices need to be paid immediately, whereas others may have terms of 30, 60, or even 90 days.
Risks at this stage include late payments, double payments, and cash flow shortages. Missing a due date can cause irreparable damage to supplier relationships, so it’s vital to implement checks and balances to ensure this doesn’t occur. A robust payment calendar with automatic reminders can prevent human error and optimize cash flow.
The end-to-end invoice approval workflow continues beyond payment to record keeping. This is where invoice information is meticulously recorded in your company’s accounting system to ensure detailed expense tracking and financial reporting.
Inaccurate records can lead to non-compliance, fines, and reputational damage. They can also cause accounting errors that take excessive time to rectify and suck the life out of your accounting department. A digitized and centralized system helps maintain consistency.
As mentioned, the invoice approval workflow has multiple steps, each with possible error vulnerabilities. Companies need an integrated automation solution for this process, which removes human intervention and eliminates mistakes.
Automation saves time, improves transparency and compliance, and makes your business more agile. Let’s delve into the benefits.
Speed and Efficiency: Automation enables rapid processing and approval of invoices, allowing teams to handle more documents efficiently without the hassle of manual data entry, chasing approvals, or filing paperwork. This liberates employees to concentrate on high-value tasks.
Accuracy: With automation, invoices undergo a systematic process of capture, approval, routing, storage, and archiving based on pre-set rules, ensuring impeccable accuracy.
Cost Reduction: Manual invoice processing typically costs between $15 to $40 per invoice. Automation slashes these expenses.
Visibility and Control: A centralized platform equipped with an intuitive dashboard grants stakeholders comprehensive oversight of the approval process, fostering transparency and accountability.
Relationship Building: Automation ensures prompt payments and swift response times, cultivating trust and reinforcing relationships with partners and employees.
Employee Retention: By alleviating the burden of manual invoice approvals, automation empowers employees to dedicate their efforts to strategically significant tasks, which can enhance job satisfaction and retention.
Scalability: Automation facilitates the seamless scaling of invoice processing volumes without straining the team or necessitating additional personnel.
Compliance: Automation software is ingrained with rules that ensure adherence to local regulations across diverse regions, irrespective of the company’s operational scale.
To experience these benefits, you need the right software that leverages state-of-the-art technologies. Look for a solution with the following features.
A comprehensive solution, like DocStar, infuses these technologies into every aspect of the AP and invoice approval process, from invoice receipts, matching, approvals, payment processing, and archiving.
Every modern business leader is acutely aware of the stakes involved in invoice approval workflows. The thought of freeing up mental space and time by eliminating repetitive tasks and errors is not just appealing; it’s essential.
Imagine the potential unlocked when your accounts payable process is devoid of roadblocks. Think of the agility and precision that can be brought to the table and the competitive edge this affords your business.
This is where DocStar enters the equation. Equipped with cutting-edge technology, DocStar offers an end-to-end automation solution for invoice approvals that can digitally transform your business. For more information, get in touch. We’d love to hear from you.
