CFO Guide: How to Speed Up Invoice Approvals

Supplier invoice approvals can feel like a necessary evil.

One one hand, reviewing each invoice is one of the best ways to see how much money your company is actually spending, check invoices are valid, and catch duplicate invoices.

On the other hand, invoice approvals can be a nightmare of missing documents, incomplete or duplicate invoices, and lost emails. 

It doesn’t have to be this way.

By making a few changes to your accounts payable policies and a strategic investment in AP automation software, you can streamline your invoice approval workflow. This article will show you how.

Let’s get started by talking about the roots of the problem.

Why invoice approval workflows get bogged down

In 2021, Stampli surveyed 282 CFOs, controllers, and finance leaders about their biggest Accounts Payable headaches and bottlenecks. The answers are revealing.

The Biggest Accounts Payable Headaches

Most AP departments (18%) reported that slow approvals was their biggest headache, followed by too much paper and too many manual processes. Big headaches, but as they say, the devil is in the details.

Three results stand out: too many processing errors, too many invoices, and too many time-consuming manual tasks. These reveal a deeper problem with AP workflows, one that is slowing down invoice processing

Here’s a little story that explains the truth behind the numbers.

Let’s pretend I’m the CFO of an organic food producer based on the Pacific Coast. We produce sustainably sourced ready to eat meals that are sold across the country. Like many businesses, we moved to a hybrid working environment after the pandemic. 

Unfortunately, the transition to hybrid work has revealed some problems with our manual invoice approval system and accounts payable department workflows. Approvals are getting bogged down, everyone is getting frustrated, and my inbox is filling up with escalations. I’m concerned we’re going to fall behind on payments to our suppliers, especially because I don’t have the time to sort through and approve a stack of invoices. The situation is also playing havoc with our cash flow management. 

We need a solution.

I asked my controller to look into the problem. They investigated and came back with this list of process inefficiencies:

Unapproved purchases are getting past Procurement

My controller discovered that some of our production managers have been ordering from suppliers outside of our procurement processes. As a result, we’re getting invoices from suppliers without a corresponding purchase order. Our AP team has been forwarding these invoices on for approval without the PO. Some approvers have been approving them (more on this later), while others have been rejecting them as unauthorized purchases. 

Invoices are being forwarded for approval without documentation

We found our AP team is forwarding a significant number of invoices for approval without the corresponding documentation (purchase order & receipt). Once again, some approvers have been signing off on these, but some (including me) have been rejecting them and asking for the proper documentation.

Manual Approval Process

Invoices are going to the wrong approver

We have a formal approval policy, but we have not updated it in years. As a result, our AP team has been forwarding invoices on to the wrong approvers. Sometimes the invoice amount is above the amount the approver may approve, sometimes it’s the wrong spend category, and sometimes AP just sends the invoices to me because they don’t know where else to send them.

Approvers are not replying in time

I’ll admit I’m guilty of this one. Our controller reported that on average, invoices were sitting in approval queues for 10 days. Although I set time aside each week to review and approve invoices, it’s too easy for me to miss an invoice. Other approvers reported the same problem–they were simply forgetting about approval requests or missing them in overflowing inboxes.

Invoices are not verified

Finally, our controller discovered our AP team is sending invoices for approval without verifying them against the purchase order and shipping receipt. Our AP policy specifies a three-way matching process to detect discrepancies and confirm invoices. However, our AP team is extremely busy and there often isn’t time to validate each invoice. Hybrid working also plays a role. It can be difficult for an AP clerk working at home to get in touch with our procurement team or receiving department to track down paper documents. 

They say knowing is half the battle. While I’m not happy with the results, at least we know what’s causing the problem and we can work on a solution.

How to streamline the invoice approval process

On this episode of the Leaders of Modern Finance podcast, Ben Murray, Founder of The SaaS CFO, joined Marc Greenberg, Head of Finance and Facilities at Blend, to discuss how CFOs’ roles are changing in the hybrid workplace. As part of his strategy to adapt to a hybrid environment, Marc prioritized his team’s needs over other goals, and took advantage of technology to make it easier for them to do their jobs.

I’m taking a similar approach. Adapting to a hybrid environment has been challenging for our business, especially because we have always relied on manual processes. My AP team is excellent, but they are facing a new work environment with outdated tools and processes. My priority is to support them so they can do their jobs efficiently and effectively. 

Our management team took our controller’s findings and came up with a plan to streamline and optimize our invoice approval workflows. 

Step 1: Revise procurement and approval policies

We’re going to start by revising our procurement and approval policies and internal controls. Our goal is to close a few loopholes and clarify roles and responsibilities. For example, our new business rules will state that all purchases must go through Procurement. I’m also going to meet with our COO to talk about how our procurement team can better serve our production teams so they aren’t tempted to circumvent the purchasing process. 

We’re also going to establish clear approval guidelines specifying which position handles which approvals. We’re going to set spend limits for each approver, with clear routing and escalation paths if an invoice goes to the wrong approver.

Finally, we’re going to create formal routing for all approvals, including when multiple approvals are required, and policies for how our AP team handles rejected invoices. Doing this takes the pressure off our AP team to figure out where to route each invoice.

Step 2: Improve vendor document management

It has been challenging for our business to track and share paper documents such as invoices, POs, and receipts. We’re going to look into document management solutions to automate document scanning, organization, and storage. We’re also going to work with our vendors to get them to move to digital invoices and documents. 

Step 3: Optimize 3-way matching

Our 3-way matching processes have suffered because of hybrid working, mainly because of the difficulty managing paper documents. As part of our move to paperless invoice processing, we’re going to investigate solutions for verifying invoices. In the meantime, I’ve told our AP team to verify invoices above $50,000. It’s not a perfect solution, but it will at least allow us to control errors and fraud on high-value invoices and make life a little easier for our approvers.

Step 4: Implement invoice automation

As I worked with my management team on our invoice processing woes, it became clear that even with all these improvements, the core problem remains. Our AP team is overworked, we’re too reliant on manual invoice data entry and paper processes, and we can’t easily verify every invoice. Approvers will still forget or miss approval emails. And as invoice volumes and complexity continue to increase, the problem will only increase with it. We need an automated system that can replace manual processes, automate approval routing and communications, and streamline our payment processing workflow.

Accounts Payable automation is the solution we’re looking for. By automating our accounts payable processes, we can gain more control and visibility over invoice approvals–and reduce the number of headaches for my finance team.

Let’s look at how AP automation can help us speed up invoice approvals.

Benefits of automating AP processes

AP automation simplifies how we process invoices and has several advantages for our business. I’ll jump right into them.

Automated 3-way matching and centralized communications

AP automation solutions completely automate the three-way matching process to verify each invoice. This is a fundamental change for us because it ensures that AP doesn’t send an invoice for approval until it has been verified, which saves our approvers a huge amount of time. Validating every invoice also reduces the risk we’ll send a duplicate payment to a supplier.

Automation platforms also centralize all invoice communications, so approvers can review past conversations, ask questions, and even interact with vendors during the approval process. Again, this is a big time saver as it means approvers don’t need to rely on email and the phone. Plus, faster processing means no late payments.

Automated Approval Process

Centralized invoice review and approval dashboard

One big benefit of AP automation solutions is they provide a complete picture of the invoice for the approver. They do away with email and centralize invoice validation and approval workflows in a single dashboard. Approvers can check an invoice at a glance, ask questions if needed, and approve the invoice in the same workflow. And because the platform tracks every communication and user action, it provides a complete audit trail.

Automatic approval routing and reminders

AP automation solutions let us set up our approval routing any way we like. We can automatically route invoice approval requests to match your process. . Also, the solution we’re going with (Stampli) also lets us set up multiple approval workflows from fixed approval workflows to automated where the system remembers your unique processes and adapts when changes are made.

We can also set up automation solutions to send reminders to approvers after a certain timeframe, which helps people like me who tend to lose or forget emails.

Automated vendor document management

One of our key requirements was a way to automate vendor document management. Again, this is where Stampli stands out. Stampli’s Advanced Vendor Management product automatically collects, organizes, and stores vendor documents. Together with Stampli’s AI-powered invoice processing and verification functionality, Advanced Vendor Management lets us completely digitize almost every document used in our procure-to-pay workflow.

Moving to automated vendor document management makes it a lot easier for us to work in a hybrid environment. Now, instead of chasing down paper documents, our AP team can simply find the documents in Stampli. We can process payments faster, which is great for improving vendor relationships.

User-friendly AP Automation provider

Finally, because we’re working in a hybrid environment and have some unique requirements, we’ve been looking for an AP automation solution provider who prioritizes customer service and support and is flexible enough to meet our needs. 

Stampli was the clear leader here. They share our people-first philosophy, and they go above and beyond to ensure we’re happy with our service. This commitment to quality service places them at the top of the AP software solutions we considered.

Make invoice approvals easy with Stampli

How does Stampli help us optimize vendor invoice management workflows?

Stampli’s solution uses machine learning and AI to automate invoice coding and verification, reducing the need for slow manual processes. Automating these tasks lets us move invoices through the system, and get them to approvers, faster. Stampli also helps us control human error and fraud by providing real-time data visibility through visual dashboards. This oversight ensures that our approvers are getting error-free invoices.

The Leader in Invoice Management

Also, Stampli helps us optimize our international AP operations. Their cloud-based solution and vendor portal provides secure access anywhere in the world. Our international vendors can communicate directly with our AP team members, ask and answer questions, and see their payment status. Stampli Direct Pay brings all our invoice payment methods together in a single solution and gives us the option to easily pay international vendors in multiple currencies. 

Finally, Stampli integrates seamlessly with over 70 ERPs and accounting systems, ensuring data continuity across our business processes.

The bottom line: Stampli is the ideal choice for optimizing your vendor invoice management workflows. Contact Stampli today for a free demo.

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