Invoice approval workflows can be a time-consuming, frustrating, and human error-prone process in a manual system.
AP automation software, integrated with your ERP system or accounting software, provides massive productivity gains and adds financial controls and supplier validation. The approval software component provides automated invoice approval while reducing invoice payment errors and fraud risks.
What is an invoice approval workflow and what steps are involved? Learn about these AP processes, challenges, and best practices for a more efficient workflow.
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What is Invoice Approval Workflow?
Invoice approval workflow is a series of steps required in accounts payable before paying a supplier invoice. It includes verification of the supplier and quantities received, line items, prices, and calculations in an invoice, 3-way matching with a purchase order and receiving report, exception handling, and documents review and approvals by designated approver(s) before invoice payment.
Typical Steps in an Invoice Approval Workflow
Typical steps in an invoice approval workflow are:
- Receive and enter invoices into the accounts payable system.
- Validate supplier and review invoice details.
- Match invoices with supporting documents.
- Route invoices to approvers for review and authorization.
- Begin the invoice scheduling and payment process.
The invoice approval workflow is relevant to the entire business invoice-to-pay process. Invoice-to-pay spans from receiving an invoice from a shipment of goods that may be related to a purchase order to determining the receipt of the ordered items and the approved invoice status before paying the invoice.
Invoice supporting documents include purchase orders (POs) created by procurement for 2-way matching and also receiving reports for 3-way matching. In an old-school, paper-based manual system, the accounts payable team spends a large amount of time finding and matching needed documents with invoices. These documents and the matching process are digital in an automated payables system to significantly reduce payables processing time with automatic invoice matching.
The invoice approval workflow may require extra steps to follow up with approvers. In an automated system, the process is efficient. In a manual system, it’s time-consuming to get approvals (adding many accounts payable staff hours) and frustrating.
In this article, we explain how Tipalti invoice workflow automation helps your business avoid accounts payable problems and frustrations for the AP department, saving time and money and improving employee morale.
Biggest Obstacles in Invoice Approval Workflows
The biggest obstacles in invoice approval workflows using a manual invoice approval process are:
- Not having enough accounts payable hours to catch up with workflow demands, including manual data entry
- Waiting to receive supporting documents and losing paper documents
- Not detecting invoice fraud or errors and making duplicate payments from a follow-up copy of the invoice
- Making late payments or not earning lucrative early payment discounts
- Needing to follow up with approvers
- Constantly receiving payment status inquiries from suppliers
How can your business automate its invoice approval workflow?
Download our eBook, “The Ultimate Accounts Payable Survival Guide,” to learn how your business can add efficiency to its accounts payable processes.
Use AP automation software with self-service supplier onboarding, tax compliance features, supplier verification, automated invoice approval workflow, and strong financial controls.
How Can Automation Optimize the Invoice Approval Workflow?
Automation provides a razor-sharp automated invoice approval workflow to help your business shave time and cost off its end-to-end payables business processes, remove bottlenecks, provide an audit trail, and reduce AP team hiring needs.
The most time-consuming aspects of invoice approval workflow in a manual system are:
- Finding and filing paper documents for invoice matching and requesting missing or lost documents
- Physically routing matched documents to the approver and following up by messaging the approver when approval delays occur
- Following up with vendors on reissuing invoices with exceptions for discrepancies
- Manually keying paper invoices into the system
- Answering endless phone calls and emails from suppliers when their bills aren’t paid on time
AP automation software optimizes the invoice approval workflow by using thousands of algorithmic rules and several reliable online databases to validate the legitimacy of vendors. These automated steps reduce the fraud risk of paying invoices from suppliers that aren’t real but want to trick you into transferring your hard-earned business cash to their accounts. As the CFO or a finance or accounting team member, you need to protect your business’s cash flow.
Self-service supplier onboarding:
- Makes information more accurate before and at approval time
- Collects W-9 or W-8 IRS forms for preparing 1099 forms for tax compliance
- Improves vendor management and communication
- Offers a repository for invoices and supporting documents like POs and contracts to improve invoice management
- Determines a supplier’s preferred payment method
- Shifts much of the onboarding workload from the payables team to payees
Payables automation converts paper invoices to a digital format for invoice data with OCR scanning and offers other methods like uploading into an online supplier portal and emailing invoices for system capture. Optical character recognition captures the invoice number, PO number, supplier name, contact information, line items, and invoice amount.
The entire invoice approval process is automated. Approval workflow includes routing matched electronic supplier invoices and supporting documents to designated approvers for reviewing and approval with the click of a button. The system will also send automatic reminder notifications to designated approvers when approval delays occur.
The AP automation system alerts suppliers when invoices are pending and in process for payment with scheduled payment run batches, and when paid.
Tipalti’s Invoice Automation for Your Invoice Workflow
Tipalti invoice flow with approval automation adds approval routing efficiency, financial controls, and automated communications to the accounts payable workflow. Tipalti’s AP automation and global payments software, integrated with your ERP or accounting system, provides digitization and invoice processing automation throughout the entire payables cycle.
Tipalti’s payables automation includes enterprise-level data encryption for added security. Automated payables bookkeeping syncs with your ERP or accounting system in real-time. With speedier processing by AP automation software, your payables balance will be more accurate in the financial statements without requiring as many accruals for unrecorded payables.
Tipalti cuts the end-to-end invoice processing cost currently incurred by your business if it’s using manual processes. The average cost of processing an invoice manually is $12, which adds up as the volume of invoices increases with business growth. Use the Tipalti invoice processing payment calculator to find out how much you may be able to save from automated invoice processing.
Tipalti invoice automation and global payments software take it a step further with real-time automated global payment reconciliation (with multiple payment methods and many currencies). The payments reconciliation feature in Tipalti can help reduce your company’s monthly accounting close time by 25%.
Invoice Approval Workflow FAQs
A few frequently asked questions (FAQs) and answers about the invoice approval process follow.
How do I set up an invoice approval workflow?
Invoice approval workflow is much more efficient using automated invoice approval instead of a manual system. AP automation software uses best practices to determine the invoice approval workflow process and necessary company-related information to enter into the software.
When implementing payables automation software for invoice approval workflow, designate the authorized invoice approvers, including their online contact information, and provide other information that will be required for automated invoice approval processing per the set-up instructions.
How do you approve an invoice?
In the AP invoice approval process, you must be authorized by your company as an approver. Approve a business invoice by reviewing the supplier and invoice for validity, ensuring a reasonable business purpose for the expenditure, and comparing the invoice with matched supporting documents, including a related purchase order and receiving report.
Who approves invoices?
Designated supervisors and managers with budgetary control or small business owners approve invoices. For invoices over a stated amount, company policy may need a second approval signature. That second approver would hold a higher-level company position.
Summing It Up
A manual invoice approval process (relying on manual invoice processing) is too slow and expensive. Manual processing is still used by some established companies. They’re not yet understanding and embracing the immense benefits of digital transformation. But they’re expected to implement AP automation to reap those benefits soon.
For a razor-sharp invoice automation workflow, your finance department must use an end-to-end AP automation solution for invoice processing that’s designed with best practices, saves 80% of the workload, cuts costs, and adds financial controls. Your company can increase its chances of identifying fraudulent suppliers and flag and reduce invoice overpayments. To realize the possibilities of AP automation efficiency, read “The Holy Grail of Accounts Payable” white paper.