Managing invoices is crucial regardless of the industry. Good invoice management establishes a good connection between a company and a supplier.
However, the question is how to accomplish good invoice management. Here comes the invoice approval process. This procedure enhances transparency, offers accuracy, and reduces errors, which are the major issues in manual processes.
But what steps and challenges are involved in this system? By reading this blog until the end, you can learn and become more familiar with it.
📌 Key Takeaways
- An invoice approval process helps catch errors and make sure a company only pays for what it actually ordered and received—it’s a critical step before payments go out.
- Manual invoice approvals are slow and risky, especially as the number of invoices grows. They can lead to mistakes, delays, and even fraud.
- Automation can save time and reduce errors, letting your team focus on more important tasks instead of chasing paperwork and fixing mistakes.
- Quick and accurate invoice approvals keep vendors happy, help maintain good business relationships, and improve your cash flow.
- Using software like Moon Invoice can streamline the whole process—from error-free submissions to faster payments—while saving money on delays and penalties.
What Is the Invoice Approval Process?
The invoice approval process is a systematic series of checks a company conducts on a supplier’s invoice before payment. This process ensures accuracy, prevents fraud, and maintains financial organization.
It includes verifying various factors such as quantity, price, purchase order, and calculation. The verification process is done before payment is made for the corresponding invoice.
Accounting departments in large companies perform the invoice approval process, while small companies have only a single or a few people to perform this action.
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Invoice Approval Workflow Process
The exact invoice approval process varies, and every industry has a different approach. If everything went according to plan, with regulatory compliance and promptness, an expedited method of invoicing approval chain might look like this:
1. Invoice is Received First
In the first step of the approval process and strategic decision-making, the relevant personnel receive the invoice. This is to avoid late payments.
2. Make Sure the Invoice is Correct
It is important to verify invoices in the first stage of the process. This step involves checking the invoice details against other papers about the transaction, such as the order request, the purchase orders, and the order receipts. This step will also avoid the chances of any late payments.
3. Specify Any Exemptions
Suppose the invoice does not pass the verification procedure because of missing information or differences. In that case, it has to be given to the appropriate individuals who can fix the issues. Then, the invoice may be submitted once again through the approval process.
4. Obtain Any Required Clearances
After the invoice has been properly checked and validated to ensure that it is accurate and does not include any errors, it can be sent to the appropriate individuals for approval. This process also helps get rid of any duplicate payments and errors. Get approvals for any early payment discounts offered by the needed departments.
5. Invoice Payment
After receiving final permission for the invoice, the last thing that needs to be done is to send it to the Department of Finance and Accounting. This enables them to process the payment and close the invoice.
🧐DID YOU KNOW?
Businesses that automate their invoice processes can reduce invoice processing costs by up to 80%.
According to Ardent Partners’ State of ePayables report, automation significantly cuts down on manual labor, speeds up approvals, and reduces errors—ultimately improving both efficiency and supplier satisfaction.
Challenges in the Manual Invoice Approval Process
A manual invoice approval workflow method is a decent starting point. However, this procedure can become very time-consuming very rapidly as the quantity of invoices increases, which may make it challenging for your staff to stay up and process bills on time.
Some of the numerous problems with the manual invoice approval process are as follows.
1. Slow Approval Process
Manual invoice approvals are time-consuming and may lead to wasted time and delays in payments that can, in turn, harm the existing successful relationships with your suppliers. After all, suppliers might become irritated when they have to wait extended periods to get paid, even if they deliver items or services on schedule. Manual processes are also slow due to the chances of duplicate payments and mistakes when you make an invoice.
2. Precariousness with Regard to Fraud
One of the most difficult problems that accounting departments encounter is fraudulent billing. From invoices that don’t match the spending to manually manipulating invoices, fraud is a huge concern when your firm is pursuing a manual invoice review procedure.
3. Errors Caused by Hand-entered Data
Regardless of how trustworthy your team members may be, mistakes made by humans when they make an invoice are common. Overpayment or underpayment of bills is only one of many ways in which discrepancies may put a firm in the red in the long run.
In addition, your workers’ time is better spent on other tasks than manual data entry, which is why it’s important to find an alternative to manual data entry.
4. Lack of Exposure
If your company is still using a manual invoice approval workflow, keeping track of where things are with individual invoices might be a hassle. As a result, it might not be easy to provide suppliers and contractors with a firm payment-clearing time frame.
How to Improve Invoice Approval?
Streamlining the invoice approval process may speed up the bill-paying process. However, rapid payment processing without sufficient validation might lead to unnecessary expenditures and losses. Therefore, it is crucial to establish a quick and precise approval procedure.
You may speed up the time it takes to approve invoices with the help of the following steps.
1. Initiate In-person Approval
Free online invoice generators have made invoice validation quick and automated. However, it is advisable to have a system where your designated approver can personally receive invoices and review major bills.
You may organize daily or weekly invoice approval meetings for necessary approvals, where invoices over a specific cost threshold will be discussed, examined, and approved.
2. Don’t Ignore Negative Approvals
Invoice approval requests may get lost in other approval requests and inboxes, causing a delay in the approval process.
To prevent this, you may give your AP teams and finance department the authority to approve bills without further approval from the approver once a certain length of time has passed (often two or three working days).
3. Get on Board with the Idea of Approving Purchase Orders
Approving purchase requests for orders and later invoicing are frightening, recurrent, and time-consuming. If there are no anomalies in your bills, your invoice management staff will be able to process them swiftly.
4. Limit Yourself
Setting a threshold may make your invoice-clearing procedure more efficient and avoid any invoice failures. Clearing payments of small sums this way is fast and doesn’t need long approval processes.
💡Pro Tip:
Set a dollar threshold for approvals.
For smaller invoices, create rules to auto-approve payments below a certain amount (like $100 or $200). This reduces unnecessary bottlenecks and helps your finance team focus on high-value transactions that require deeper review.
Benefits of Automated Invoicing Approvals
1. Enhance Cash Flow
Accounts payable automation expedites the processing of invoices and provides up-to-date information on the location of funds. Automation systems provide access to more accurate and comprehensive reports and information than paper-based systems. Moreover, this information is updated in real time. You will always be able to log in and see the actual status of the accounts payable (AP) department.
The impact that automated invoice processing may have on your company’s cash flow is impossible to overestimate. With automated invoice approval workflows, the cash flow information you get is more accurate, comprehensive, and accessible. In addition to simplifying audits, data that is simpler to view and utilize facilitates their execution.
2. You Can Free Up Your Team Members
An automated invoice approval workflow will help your team members free up time for other work. The automation concept keeps your team free from performing manual work. That means the load on the team will be reduced to a satisfactory limit, and ultimately, productivity will increase.
Moreover, the chances of errors are minimal. The incorporation of automation refines and accelerates the process and helps to complete the task on time.
3. Maintain Satisfied Vendors and Suppliers
Maintaining excellent supplier relationships with vendors, contractors, and other parties to whom your firm owes money is sound business practice. Rapid invoice processing expedites payment, which is always advantageous for relationship building.
Depending on your sector, the reliability of your order-fulfilling providers may either make or ruin your firm. It is preferable to keep them satisfied. Supplier invoices take care of these processes. They are crucial in maintaining lower processing costs.
Manual Invoice Processing Vs. Automated Invoice Approval
The information presented above clearly demonstrates the benefits of using invoice automation software instead of manual invoice approval processes. The day-to-day perks of expediting invoice acceptance are also obvious.
Still, there are also strategic advantages to refusing paper-based processes for small businesses, such as increased efficiency, improved cash flow, reduced human errors or potential errors, better supplier relationship management, lower costs, and a possible competitive edge.
| Manual Invoice Processing | Automated Invoice Approval |
|---|---|
| Manual invoicing processing may be sluggish, error-prone, and chaotic because of human involvement. | Automated invoice approval is a low-hanging fruit opportunity that improves the efficiency of accounts payable (AP) through automation. |
| Industry experts claim that many businesses still handle over 90% of their invoices manually, even though doing so is inefficient and error-prone. As a result, the excessive use of paper, mail, and faxes is not only a major slowdown for accounts payable (AP) but also has far-reaching consequences for the business. | Levvel Research’s 2020 Payables Insight Report found that although large and medium-sized businesses have mostly automated the invoice approval workflow stage, small and medium-sized businesses still largely rely on manual processes. However, according to a survey, the percentage of SMEs using a manual invoice approval procedure dropped by roughly 10% between 2019 and 2020. |
| Paper-based invoicing may add time to the process and increase the likelihood of papers becoming lost or misplaced when they are transferred from the mailroom or recipient to the appropriate department or individual. | Automated technologies make the accounts payable process more manageable and increase accountability, transparency, and accessibility. Standard benefits of AP automation include improved insight into the supply chain, faster invoice processing, and elimination of delays caused by approval processes. |
How Moon Invoice Can Help Automate the Invoice Approval Process?
The whole process benefits from using invoice approval software. The add-on enables you to submit proper invoices in one go. See how your company may profit from the new standard of electronic invoice approvals:
1. Human Error May be Reduced to Zero
Minor corrections on your side might lead to huge miscommunications between organizations and customers. In addition, it’s causing problems for your company as a whole. Even a single rejection can cause delays in processing and payments.
As an organization, you cannot allow this to happen to you each time. So it is when you help yourself with online invoicing software.
2. No Billable Amount Must Go Unbilled
By approving invoices electronically, you can be certain that no chargeable amounts will be missed. They will be able to add and review each additional service/product.
Each time you deliver a fully authorized invoice, you strengthen your position, as your customers can’t dispute any of the charges. This version sounds much more official.
3. Save Time Spent on Overwriting Invoices
You can’t spend indefinite amounts of time revising the same bill. Everything else you’re trying to do for your company, including your reputation, is suffering. If your invoices are always precise, your cash flow will improve.
Money is being sent to you faster, and the rest of the procedures are moving along quickly, too. Relying on electronic invoice validation software improves your company’s credibility, brand recognition, and lines of contact with customers.
4. Money May Flow Quickly with Optimized Processes
When you decide to implement simplified invoice approval workflows, it will impact all of the processes that are interdependent with them.
As a result, the company’s cash flow improves. In addition, accounts receivable, payable, and costs may all be managed with less effort.
5. It Saves Money
Not to mention the obvious financial benefits. Because of delayed invoice approval, small businesses lose more than a quarter of a million dollars. In addition, if you are late with your payments, you will incur late penalties that can add up quickly.
Promptly paying your bills may prevent these charges. In addition, suppliers often reward customers who pay their bills promptly with special discounts and deals.
Common Invoice Approval Mistakes to Avoid
Even with a well-defined process, invoice approval can run into snags if certain mistakes aren’t addressed. These errors can lead to delayed payments, strained vendor relationships, and financial inaccuracies. Here are the most common mistakes businesses should watch out for:
1. Skipping Invoice Verification
One of the biggest mistakes is approving an invoice without thoroughly checking its details. Failing to verify the invoice against purchase orders, delivery receipts, or contract terms can lead to overpayments, duplicate payments, or payments for services not rendered.
Tip: Always match the invoice with supporting documents before moving to the approval stage.
2. Approving Invoices with Missing Information
Sometimes, invoices might lack key details like tax breakdowns, payment terms, due dates, or even invoice numbers. Approving such incomplete invoices can cause confusion and make tracking difficult later.
Tip: Set a checklist of required fields before approving any invoice.
3. Delays in the Approval Chain
Manual or poorly organized workflows often cause invoices to get stuck in someone’s inbox or wait indefinitely for sign-off. This results in missed due dates, late fees, and unhappy vendors.
Tip: Use automated reminders or approval workflows to ensure invoices don’t fall through the cracks.
4. Not Monitoring Duplicate Invoices
When multiple departments handle approvals, there’s a higher chance of paying the same invoice twice. This can be due to poor communication or lack of a centralized system.
Tip: Implement software that flags duplicate entries and checks invoice numbers across the system.
5. Lack of Role Clarity
If it’s unclear who is responsible for each step of invoice approval, it creates confusion and bottlenecks. It may also result in unauthorized approvals or skipped steps.
Tip: Define roles clearly in the approval workflow and ensure accountability at every level.
6. Not Leveraging Automation
Some companies still rely on email and paper for invoice approvals, which is time-consuming and error-prone. Manual processes increase the chances of human error and inefficiency.
Tip: Use automated invoice approval tools like Moon Invoice to streamline workflows and reduce manual tasks.
Still Approving Invoices Manually?
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In Conclusion
If the invoice approval system is automated, invoices may be processed more quickly and effectively, eliminating the manual handling of other documents. More than half of businesses use an automated system to ensure timely invoice approval.
Moon Invoice may help you handle your invoices more efficiently. Try out Moon Invoice to speed up your organization’s invoicing procedure.
Frequently Asked Questions
Who Is Responsible for Approving Invoices?
How Long Does it Take to Approve an Invoice?
Do Invoices Need To Be Approved?
What Should I Look for When Approving Invoices?
What Is a Pre-Approved Invoice?
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
