A paper-based invoice approval process takes almost 25 days to process a single invoice. And this comes out as no surprise. The process requires humans tracking down documents, verifying data, and obtaining in-person approvals. Not only does this bog down the process, but it also increases the risk of human error.
Businesses often overlook their invoice approval efficiency. But optimizing your invoice clearing process can go a long way in helping you develop meaningful relationships with vendors.
Here’s a quick guide to help you improve your invoice approval process.
What is Invoice Approval?
Invoice approval refers to the process of reviewing and approving vendor or supplier invoices before counting them as company costs and sending them for payment.
Organizations and companies have set internal rules for invoice approval. These include guidelines for who is authorized to approve costs, what type of costs, and up to what limit.
What to Check before Approving an Invoice?
As a small business owner, you need a clear invoice approval process in place. Here are a few things to look out for in an invoice before approving it.
Verify all the details on the invoice to ensure they are precise. Take a look at the products and services billed and double-check them with the contract or agreement. Also, look over the amount charged and make sure it’s the same as what was discussed earlier with the supplier.
Compare the invoice with the previous invoice to make sure there’s no overlap in dates. If you find an overlap, contact your supplier to confirm they’re not charging you twice.
Invoice Due Date
Check the invoice due date and make an entry accordingly in your invoice payment processing system. Besides, some vendors even opt to offer discounts for early payments. See if such offers apply, and if they do, schedule an early payment to save money.
Don’t forget to check the vendor details and cross-check them with what you have in your system. Review the vendor name and tax ID number. Also, reevaluate the vendor’s payment methods and how you plan to pay the invoice.
Last, you need a payment date. Ensure that you schedule the payment in your invoice management system before the due date. This way, you’ll not face any penalties in case any issues arise.
Easy Ways to Improve Invoice Approvals
Improving the invoice approval process simply means you’ll be able to pay your bills faster. But hurriedly clearing invoices without proper validation can lead to extra costs and losses. So, it’s essential to have an approval process in place that’s fast and also accurate.
Here are a few tips to make your invoice approval process more efficient.
Approve Purchase Orders
Approving purchase orders and then invoices are intimidating, recurring, and time-consuming. Consider approving purchase orders only, so your invoice management team can easily clear invoices without any discrepancies.
Set a Threshold
Setting a threshold can make your invoice clearing process more efficient. This way, you can clear payments of small amounts easily without the need for lengthy approvals.
Perform In-Person Approvals
Free online invoice generator systems have made the invoice approval process fast and automatic. However, it’s recommended to have a framework in place where your accounts team manually goes over major invoices. You can schedule daily or weekly invoice approval meetings where invoices above a certain cost threshold will be discussed, reviewed and approved in-person.
Don’t Overlook Negative Approvals
Sometimes, invoice approval requests could get swamped under inboxes and other approval requests. This might slow down the approval process. To avoid this, you can allow your accounts team to clear invoices if they don’t hear back from the approver in a specific amount of time, usually 2-3 business days.
Automate the Approval Process
Manual approval takes too long. As of 2017, small businesses were losing about $3 trillion per year due to late payments.
Several invoice payment processing systems like Moon Invoice allow you to automate the approval process. By implementing such solutions, you can make your invoice approval process faster, more accurate, and efficient.
Why Improve your Invoice Approval Process?
The next big question that arises is why a business should consider optimizing its invoice approval process. Well, avoiding late fees could be a reason, but that’s not all.
Processing a single invoice manually costs around $13, which translates to about $300,000 a year. Automating this process can reduce these expenses by 29%.
Here are a few benefits of improving your invoice approval process.
Enhanced Decision Making
Simplifying and automating invoice management streamlines the decision-making process for your accounts team. By cutting down the manual labor required to approve invoices, you can empower your accounts team to engage in core tasks.
Improved Relationship with Vendors
Healthy relationships are the cornerstone of running a successful business. And when it comes to business, there’s no better way to develop good relationships than paying your bills on time.
When you clear your invoices on time, the supplier may prioritize your orders, knowing that you’re reliable and important. Your orders can, therefore, be processed quickly. Also, the vendor may take a step further and provide you with discounts to appreciate your punctuality.
And of course, it helps you save money. As discussed, businesses lose more than a quarter-million dollars because of delayed invoice approvals. If you pay your bills late, you’ll get hit by late fees, which can pile up over time.
By clearing invoices on time, you can avoid these extra costs. Also, many vendors provide offers and discounts to clients who pay their invoices on time.
Automating your invoice approval process is the easiest way to clear your invoices quickly and more efficiently. In fact, 52% of companies were using an automated invoice payment processing system in 2018.
If you want to streamline your invoice management process, Moon Invoice can help.
Check out Moon Invoice now!