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Invoice approval is essential to the Accounts Payable (AP) procedure. Your invoice approval process will run smoother, and your suppliers will be paid sooner if you automate this procedure. Therefore, adding an automatic invoice validation system to your existing technology stack is a crucial part of your AP infrastructure.
As you’ll see in this article, you won’t get the full advantages of invoice workflow automation with merely invoice approval software.
What is the Invoice Approval Process?
The Accounts Payable process of approving bills should be smooth, efficient, and cost-effective. That is the method made possible by data-driven software solutions. However, as any AP teams or finance department stuck in the mud of manual invoice processing will testify, this is not always the case.
In this digital transformation era, paper-based, manual invoice approval processes stifle cash flow, puts the company in danger of falling behind the competition, and have a detrimental effect on the bottom line. As a result, many business processes are adopting and using invoice approval automation to do away with this wasteful inefficiency.
The term “invoice approval process” refers to the internal controls put in place by business processes to ensure that only approved invoices are paid. The procedure begins with the receipt of an invoice, which is then double-checked and, preferably, triple-checked against the original purchase order and receiving report to ensure correctness. The dates, the sum, and everything else must be identical.
The invoice approval workflow process is still stuck in email and paper handling for many companies—far too many in this digital transformation era. That’s a long delay between when an invoice is received, when the appropriate people look at it, and when an invoice approval (or inquiry) is sent back down the line.
Invoice Approval Process Workflow
If everything went according to plan, with regulatory compliance and in a timely manner, an expedited method of invoicing approval chain might look like this:
1. Invoice is Received First
In the first step of the AP approval process and strategic decision making, the invoice is received by the relevant personnel in the organization 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 order, and the order receipts. This step will also avoid the chances of any late payments.
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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 repair the issues. Then, the invoice may be submitted through the approval process once again.
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 the final permission for the invoice, the last thing that needs to be done is to send it to the department of finance and accounting so that they can process the payment and close the invoice.
The Difficulties Inherent in Using a Manual Method for the Approval of Invoices
A manual invoice approval workflow method may seem to be a decent starting point. However, this procedure can become very time-consuming very rapidly as the quantity of invoices increases, which, in turn, 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 Regards 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 invoice is 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.
Not to add, your workers’ time is better spent on other tasks than 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 procedure, 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 timeframe.
How to Improve Invoice Approval?
You may speed up the bill-paying process by streamlining the invoice approval process. But 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 Approvement
Free online invoice generation technologies have made invoice validation quick and automated. However, it is advisable to have a system where your designated approver personally can 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. There might be a delay in the approval process due to this. To prevent this, you may give your accounting 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 of 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 fails. Clearing payments of little sums this way is fast and doesn’t need long approval processes.
Benefits of Improving Approved Invoices
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 all the 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 AP department.
The impact that automated invoice processing may have on your company’s cash flow is impossible to overestimate. With automated 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.
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2. You Can Free Up Your Team Members’
By approving invoices electronically, your AP department personnel will save money and have more time for tasks other than regular paperwork: no more filing, data input, or invoice payment by hand. Of course, exception invoices will still need it.
When using automation tools for invoice approval workflows, you can often handle up to 90 percent of bills without human assistance. This implies that accounts payable workers will have enough time to handle invoices with exceptions promptly. In addition, your workers have access to the technologies that make auto-processing so effective when they handle exception invoices. By automating, you will improve workflow and accelerate processing.
3. Maintain Satisfied Vendors and Suppliers
Maintaining excellent supplier relationships, with vendors, contractors, and other parties to whom your firm owes the money is sound business practice. Rapid processing of invoices 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 invoice takes care of these processes. It is crucial in maintaining lower processing costs.
Manual Invoice Processing Vs. Automated Invoice Approval
The benefits of using invoice automation software instead of a manual invoice workflow are clear in light of the information presented above. The day-to-day perks of expediting the acceptance of invoices are obvious. Still, there are also strategic advantages of refusing paper-based processes to 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|
|One of the “low-hanging fruit” opportunities to improve the efficiency of accounts payable (AP) and businesses is implementing an automated invoice approval system.||In contrast to human invoice approval procedures, which may be sluggish, error-prone, and chaotic, invoice automation is the exact opposite.|
|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 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 approval workflow stage, small and medium-sized businesses still largely rely on manual processes. However, according to a recent survey, the percentage of SMEs using a manual approval procedure has 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 approval:
1. Human Error in the Transmission of Legal Papers May be Reduced to Zero
Minor incorrections 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 yourself 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 an invoice that has been fully authorized, 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. When Processes are Optimized, Money May Flow Quickly and Easily
When you decide to implement a simplified workflow, it will have an impact on all of the processes that are interdependent with it. As a result, the company’s cash flow is improved. 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 approvals, small businesses lose more than a quarter million dollars. In addition, if you are late with your payments, you will incur late penalties that can add up quickly.
You may prevent these charges by promptly paying your bills. In addition, customers that pay their bills promptly are often rewarded by their suppliers with special discounts and deals.
Invoices may be processed much more quickly and effectively if the approval process is automated from 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.