How Invoice Approval Workflow Unlocks Operational Efficiencies

Accounts payable teams juggle several responsibilities – receiving invoices, sending them for approval, dealing with vendors, preparing reports, and a million other ad hoc tasks.

An AP staff member needs to enter information into the software, validate invoice details, and route the invoice for approval over email or in person. These steps happen every time your company receives a supplier invoice.

With all these tasks, your AP team could easily lose hours sending follow-ups for unactioned invoices, calling vendors to verify details, and tracking invoices manually to make sure all invoices are moving along the workflow.

Unfortunately, a manual process doesn’t just make the workload harder, it’s also unsustainable. A resignation could cripple the operations of the entire AP team. Allowing your employees to take time off might cause processing delays, late payments, multiple follow-ups from vendors, and a stressful time for everyone.

But it doesn’t have to be this way.

How Do Manual Invoice Approval Workflows Work?   

Each company’s invoice approval workflow is unique. Businesses with a manual AP process often have written policies indicating the steps that employees must follow when they receive an invoice. Supervisors and managers to new employees as a guide on what needs to be done.

Smaller companies, however, may not have a written guide or policy. Employees pass on the knowledge to another employee during the training period. In many companies, there’s a senior specialist who becomes the unofficial knowledgebase of the steps needed when processing an invoice. Information passed on from these employees may include special rules applicable to certain vendors, thresholds for specific company expenses, and authorized approvers based on the amount of the supplier invoice.

Whether a written policy exists or not, it takes time for employees to learn the ropes – leaving the business vulnerable when someone tenders an immediate resignation. A mass resignation could mean having no dependable employee in your Accounts Payable team.

Let’s take a closer look at the typical steps companies follow to process invoices.

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Manual Invoice Approval Process in 5 Steps

Here’s a closer look at the manual invoice approval processes AP teams follow.

Step 1: Invoice Received    

A vendor sends an invoice by mail or e-mail. Regardless of the format, the AP team needs to capture information from the invoice received. The AP team usually performs an initial validation – check the company name on the invoice, the vendor, and the address or account number to make sure the invoice is valid.

Step 2: Capture Invoice Data

Enter information from the invoice to an accounting program, ERP, or any other relevant system. Manual data entry happens in this step.

Step 3: Matching

Perform matching against purchase orders and/or delivery receipts to check for inaccuracies or exceptions.

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Step 4: Invoice Approval

Companies have different policies when it comes to approving invoices. Some businesses require multiple approvers when the cost exceeds a certain amount, others may have a different policy. The approver reviews the invoice for payment.

Step 5: Endorse for Payment

Approved invoices go back to the Accounts Payable department and are now ready for payment and then filing.

Invoice processing speed varies. Approvers usually approve recurring invoices like rent payments, utilities, and tax payments faster. However, other invoices can stay in the “for approval” queue for a long time. AP departments often have back-and-forth communication and phone calls with approvers and vendors when there are questions about invoice details.

Accumulated time spent reconciling amounts, sending follow-ups, and handling vendor inquiries takes up hours, especially for AP teams handling large volumes of invoices. Automation changes all these by introducing technology.

Envoice transforms the invoice approval workflow by automating manual tasks – getting your invoices processed in record time and keeping your data safely stored in one place.  Sign up for a free trial and experience how easy it is for yourself.

How Invoice Approval Automation Transforms AP

How does automated invoice approval vary from a manual or paper-based approval process?

Automation changes the approval workflow but actual steps could vary depending on the software solution. Here’s a general overview of how automation can change how you process invoices.

Step #1. Automatic Data Extraction and Validation

Invoice automation takes care of Steps 1 to 3 above – with minimal intervention from the AP staff. When an invoice arrives, the finance department can scan the invoice using an app linked to the AP automation software or send it to a dedicated address.

AP automation software relies on rules customized to ensure compliance with company policies. The software uses these coded policies as the standard for flagging invoices for review. Automatic checks include running a script to look for duplicate payments or unusual transactions. All these steps happen in seconds.

Step #2: Review Automatically Generated Invoice Data

After converting the invoice to an electronic format, some AP teams review the information and automatic coding performed by the AP software solution. As companies become more confident in the software’s ability, the AP team may stop reviewing all invoices. 

Step #3: Route Invoices for Approval

After reviewing the information, the AP team can send the invoice to a designated approver. Companies can also identify a sub-approver who can take over invoice reviews if the designated approver is out. Approvers receive notifications and reminders if there’s an invoice in their queue.

All communication related to an invoice happens within the expense management platform. Approvers, auditors, managers, and reviewers have all relevant information about the invoice in the app. There’s no need to look for a printed document or search for archived emails or cloud drives for supporting information.

Step #4. Receive Approval Notification and Payment Endorsement

AP teams receive notifications related to approved invoices. After receiving the approval, they can forward the invoice to the department or personnel who handles cash disbursements.

With automation, your AP team can focus on reviewing information and reaching out to vendors to solve issues rather than on data entry and routing invoices for approval. As a result, your team can do more without the long hours.

Losing an employee will still hurt AP departments even if you have automation in place, but it will be easier. Training new employees to work with standard procedures coded into the approval workflows goes much faster than letting them remember several years of AP knowledge in a few weeks. Future employees will rely less on senior staff members and more on SOPs to perform their duties.

Fix a Broken Process, Automate Invoice Approval Workflows

Automation simplifies the steps your AP team needs to follow every time you receive an invoice. Intelligent tools perform tasks that would have taken several minutes in a second or less. Aside from speed, modernizing AP technologies allow businesses to gain a competitive advantage by unlocking these benefits.

Eliminate Human Errors and Manual Routing

For 61% of large companies and 60% of small ones, reducing errors and managing exceptions is the driving force behind automating the account payables function. Replacing people with machines leads to almost instant data capture and coding using OCR and AI technologies to enter information in the right fields.

Onboard Invoice Approvers With Ease

Smart expense management tools allow you to designate approvers within the system, eliminating guesswork on where an invoice needs to go for approval. Using automation in AP also makes it easier to divert unactioned invoices to an alternative approver if the person who was supposed to do the review is out on leave or vacation. Documenting changes in designated approvers automatically leaves a clear audit trail making it faster to track the approval history.

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Receive Automated Notifications and Reminders

Efficiency, concerns over cost, and cycle time drive 82% of large companies and 75% of small businesses to automate processes. Manual processes often require the AP team to coordinate everything. You might be surprised by the accumulated time spent preparing email approvals and making sure they arrive. Automation takes over invoice routing and sending automatic reminders to approvers.

Reduce Fraud Risks

Fraud compliance and management is one of the top applications for data provided by AP automation tools.[1] Today, AP teams need a more effective way to catch inconsistencies and unusual transactions captured from invoices. AI-powered AP systems use algorithms to flag invoices indicating fraud for improved fraud monitoring and detection.

Check the Status of All Invoice Approvals in Real-Time

AP automation lets you check the status of all invoices in one dashboard. With all invoices in one workflow, you track payment due dates with ease. You will also see who’s holding up the process and check on them to make sure invoices get paid on time. Knowing who to call to get invoice approvals moving also saves time for everyone.

Capture More Early Payment Discounts

You can’t manage what you don’t track. The same goes for invoices. If you have full visibility over the status of your pending invoices, you can pay earlier. Best-in-class AP teams process invoices 81% faster – allowing them to capture more early payment discounts. While total discounts may not seem much, they can add up. Being a prompt payer makes it easier to negotiate payment terms or make special requests from your supplier.

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Faster Month-End and Year-End Close

Automation is also the key to reducing the turnaround time for financial reports. Software solutions that automate invoice processing can be integrated into your accounting software. 

Through integration, you can push information from your expense management tool to a cloud-based software like Xero or QuickBooks.

With all these benefits, you’d think that all companies will ditch a manual for an automated invoice approval workflow. But that’s not the case.

Who’s Still Using Manual Accounts Payable Today?

Paper-based invoice processing seems like an archaic practice next to AI-powered tools, ChatGPT, and smart devices. However, the latest surveys reveal that 12% of companies still rely predominantly on a manual process.[2]

Suppose there are 100 million companies and 12 million struggling with a manual invoice approval process. While manual invoice processing remains to be a problem, the majority of companies (76%) are now using a mix of manual and automated AP.

More businesses are realizing the merits of automating AP, but there are roadblocks ahead. What’s preventing companies from breaking free of time-consuming and error-prone manual processes?

Reason #1: Management Initiatives and Priorities

In 44% of small companies and 65% of large entities, site management priorities are the biggest obstacle to being highly automated. Getting executive buy-in is crucial to embrace more automation in the AP function.

Build a case for automation by highlighting potential benefits for the Payables department. Studies reveal that wasted spend that could have been prevented by automating AP processes is about 11%.[3] Actual cost savings could be higher for your organization depending on the invoice volume and the nature of your business.

Run test data through invoice automation solutions to evaluate potential ROI from using smart technology to improve business processes.

Pro Tip: Try Envoice automation solutions – it’s free! Plus, you only need to provide an email address.

Reason #2: Lack of IT Resources

The availability of IT to support automation is the next biggest reason for sticking to a manual or partly manual AP process. About 57% of large companies and 44% of small businesses cite a lack of IT resources.

Some companies may require specialized solutions, but many AP departments can benefit from using cloud-based AP automation apps that require fewer IT resources. 

SaaS vendors provide various options for companies looking to automate AP processes without building a system from scratch. Subscribing to a plan rather than developing one, reduces the waiting time to move from a manual to an automated invoice approval workflow.  

 Reason #3: Capital Requirements

30% of small companies cite capital requirements as the reason for not pursuing automation. However, businesses can jumpstart automation initiatives in the AP department without spending a fortune. 

Greater competition in providing smart technologies in the Accounts Payable department makes it possible to find products that can help you automate invoice approvals on a budget. Even if most AP automation tools follow a subscription-based model, some software solutions like Envoice only charge a small monthly fee for the first 30 documents and an additional fee for each additional invoice. Since you’re paying based on usage, you don’t have to pay a large bill if you only have a few invoices to process this month.

Approve Invoices in a Few Clicks

Stop wasting time on data entry, and automate time-consuming and repetitive AP tasks with Envoice. Now, your Accounts Payable team can focus on high-priority tasks, foster better supplier relationships, and focus on strategic initiatives to maximize cost savings. You’ll have a more productive AP department and a happier team. 

Are you ready to create a more scalable Accounts Payable process? Schedule a consultation with the Envoice team today.

[1] Ardent Partners 

[2] Strategic Treasurer

[3] Pymnts