Invoice approval processes should be a quick and painless procedure done by an Accounts Payable department.
In this digital age, wasting time, resources, and people with a paper-based, manual invoice approval process slows cash flow, jeopardises competitiveness. To mitigate this, many businesses are adopting invoice approval process automation.
When not all billing operations are automated, problems and bottlenecks arise.
A production bottleneck can significantly hinder a company’s ability to deliver a product or service. If there is a backlog, you end up putting in extra hours to work around the bottleneck. Bottlenecks can have an impact on product quality and cause late deliveries to clients.
How bottlenecks affect you and your business
It is common for invoices to go missing throughout the approval process and it can be like looking for a needle in a haystack. Late payments can hurt an organisation’s cash flow and vendor relations. When suppliers face lengthy payment delays, trust and relationships may quickly fall to pieces.
Invoicing workflow bottlenecks are when invoices have:
- Unclear formats
- Require additional information for statutory compliance
- Multiple currencies and are missing payee tax IDs
The invoice approval process
An invoice approval process is a set of actions that must be completed to clear the invoice. It serves as a checklist to verify that there are no errors.
Invoice approval involves reviewing and approving invoices before payment processing. As part of the accounts payable process. Businesses often have internal standards in place for supplier invoice approvals.
You don’t have to worry about anything. From securing invoice and payment approvals to monitoring accounts for sufficient cash and ensuring all suppliers are paid according to their preferred payment method. To reconcile payments, you also do not need to log into individual banking platforms. With AP automation, switching from one financial system to the next to access invoice data is a thing of the past. You don’t even need to consider which payments are due. When invoices are approaching their due dates and aren’t set up for automated payments, you’ll receive handy reminders.
Invoice Capture
When a supplier sends an invoice, all relevant transaction information should be sent to the recipient’s purchasing system. This comprises the original purchase order number (PO number), the invoice number, the invoice amount, the quantity and quality of items bought, the terms and conditions, and other information.
Invoice Validation/PO Matching
The invoice is then categorised. It includes identifying and linking associated purchasing documents like purchase orders, order receipts, purchase requests, and so on.
Exceptions and Corrections
When invoices fail the validation step because of inconsistencies or missing information, they should be sent to the appropriate workers who can fix errors and redirect them for approval.
Invoice Approval Routing
After invoices have been verified, they are routed to the relevant approvers depending on the information included in one of the purchase papers (such as PO number, requester name, department)
Payment Processing
It is considerably easier to avoid possible mistakes and interruptions when a structured invoice management procedure is in place. Approved Invoices are sent to accounts payable for processing and payment. Even the most efficient manual process is susceptible to avoidable errors that invoice automation can fix.
Dealing with late payments
Dealing with late payments can be difficult and awkward work for any small business owner. Businesses are forced to spend time and resources tracking down payments when they might be better spent on other elements of the business, such as marketing and customer service.
If you can increase the likelihood of getting invoices paid on time and easily recover nonpayment, your cash flow will have a higher chance of remaining healthy.
Use automated accounting software to monitor and track all invoices sent by your business. This will help determine when invoices are due, which clients are frequent late payers, and when to chase payments.
Set specific payment conditions, including due dates, when you will chase for payment, any interest you would charge, etc.