You Need An Automated Invoice Approval Workflow, Here’s Why
A paper-based invoice approval workflow leans on the side of being haphazard. At any step of the process, humans are tracking down documents, manually keying in data, and obtaining payment approvals, whether in person or over long email threads. And that says nothing of if invoice exceptions or other problems start to arise.
That said, there’s a better way to handle invoices.
Join us today as we explore the basics of invoice approval workflows, why it’s wise to move beyond a paper-based process, and how AP automation from providers such as Stampli can help companies take the next step.
Invoice Approval Workflow Basics
When an invoice reaches a company, it’s not — or at least it shouldn’t be — a one step process to get it ready for payment.
Often, invoice approval is a complex series of actions that can happen over days, weeks, even months. In a survey report by Stampli and Treasury Webinars, “AP Today: Bottlenecks, Benchmarks & Best Practices” small companies needed an average of 15 days to pay invoices, medium-sized firms needed 17 days, and enterprise businesses with over 1,000 employees needed 20 days.
An invoice approval workflow is the codified set of steps AP personnel and other involved in the procure-to-payment, or P2P process should follow to ensure each invoice is paid in the most efficient and cost-effective manner. Each company can have its own unique approval workflow, though as we’ll explore in a moment, there are some common advisable steps.
Typical Invoice Approval Workflow Steps
As we noted a moment ago, when an invoice reaches a company, it’s really just the beginning of a process that might stretch out for some time before a company approves a bill for payment. Here are some typical invoice approval workflow steps:
- The invoice arrives at a company, with Stampli and Treasury Webinars noting in their report on bottlenecks that 40% of companies are still receiving paper invoices. However it arrives, the invoice must be captured and inputted into an accounting system;
- Three-way matching occurs where the invoice is grouped with corresponding purchase orders and receipt reports;
- Invoice exceptions or inaccuracies are cleared up by AP staff;
- The invoice is sent to an executive like a CFO, controller, or internal CPA who can approve the invoice for payment and ensure a deposit of funds in a company account to pay the bill;
- The invoice enters the payment queue.
And of course, that’s just everything that happens up to the point of approval, with more work ahead in the full cycle accounts payable process. And of course, the approval process can vary, or become even more complex if you outsource invoicing. In Stampli and Treasury Webinars’ bottleneck report, 34% of companies admitted they had special approvals for certain vendors, 31% said they had them for threshold amounts, and 7% had ones that were general ledger specific.
How Invoice Approval Workflows Normally Look
For companies that haven’t automated their invoice and payment processing, the workflows might look one of two ways.
They might be a word processing document either saved to a computer desktop or printed off at a cubicle with different steps delineated. AP supervisors can write the documents, farm them out to lower staff to draft, or attempt to find examples of them online. The disadvantage here, of course, is that in order for staff to use this style of invoice approval workflow, they must keep physically referring to it until it becomes second nature. And even then, staff can still forget certain steps.
Some AP departments don’t even get to the point of having documented invoice approval workflows. It’s simply knowledge passed down from one AP supervisor or specialist to another. While there are certainly outstanding AP staff who can help newcomers or others learn the tricks of the trade, making this the last line of defense in approving invoices is a recipe for disaster.
The Drawbacks of Invoice Approval Workflows that Don’t Include AP Automation
Paper-based and manual invoice approval processes might sound simple and low cost for businesses reluctant to invest in AP automation. But the old ways of handling accounts payable approvals are fraught with potential errors.
Here are a few reasons to start thinking about automating your invoice approval workflow process today.
Approval Takes Too Long
In a survey report by Stampli and Treasury Webinars, “The How, the Why & the ROI of AP Automation” 24% of respondents admitted that invoice and payment approvals taking too long helped motivate them to invest in automation. Slow approvers ranked as the No. 1 biggest AP headache in Stampli and Treasury Webinars’ report on bottlenecks.
Certainly, all of the delays can have costs. In recent years, small businesses have had $3 trillion in cashflow tied up with late payments. With 30.2 million small businesses stateside and the U.S. accounting for 15.2 percent of the world’s GDP, this suggests the average American small business has around $15,000 a year tied up.
And it doesn’t just happen with businesses waiting for money to come in so they can pay their bills. Too often, it’s about invoice approval taking entirely too long, with the average small or mid-size company needing weeks, even months. It’s a big part of the reason invoices can cost in excess of $20 to process, according to another survey report from Stampli and Treasury Webinars, “How and Why Companies Choose Payment Types.”
Lack of Control and Transparency
No one really knows what’s going on with an invoice when it’s part of a manual or paper-based approval process. It can be hard to know where it is in the pipeline, who needs to see the bill before it’s paid, and whether it’s a priority.
The uncertain visibility with manual invoice approval makes it easy for things to fall through the cracks and for avoidable issues to become magnified, all of which lacks controls finance needs to ensure efficient and timely operations.
Duplicate Payments and Fraud Risks
Paper-based processes can also lead to double payments. Paying an invoice twice often happens when there is either a stack of paper invoices needing to be processes which AP is trying to get through the door. Equally as devastating is when AP is behind the aforementioned stack of unpaid invoices, which leads to the vendor to submit another invoice and before anyone knows it, the first invoice is processed along with the second.
Double paying also occurs when invoices arrive. The problem here is that an invoice can be sent by email, and by mail, and with the goods or services supplied. The same invoice being sent via different mediums and likely different departments only increases the odds of the invoice being paid more than once when not leveraging technologies like AP automation which automatically intakes invoices and flags duplicates.
Needless to say, businesses need every tool in their arsenal for combating duplicate payments, including by espousing 21st century invoice approval workflow processes.
Why to Automate Invoice Approval Workflows with Stampli
Companies can stick with paper-based invoice approval workflows. Or they can turn to Stampli invoice tracking software, which offers dynamic and customizable workflows that are easy to operate and don’t require a programmer’s knowledge.
With invoice approval workflows from Stampli, invoices will rout automatically for approval, saving companies from weeks or months of waiting and helping lower the cost of processing. Here are three ways Stampli helps facilitate fast and effective invoice approval workflows.
1. Data Can Be Used to Identify Approval Delays
Few experiences in AP compare to when staff has done everything possible to prepare an invoice for payment but then has to wait weeks, even months for an executive to approve payment. For companies with paper-based invoice approval workflows, nothing can really be done except to wait. But Stampli takes this problem head on in a variety of ways and allows companies to leverage their data to zero in on approval delays.
With Stampli, there’s no more guessing about who or what is holding up approval. A built-in management overview dashboard within Stampli automatically tracks the number of days that it takes for invoice approvers to give their sign off for payments. Dashboard data can be served up both for individual employees and different departments within companies to help identify company averages, star performers, and logjams.
It’s one more way to ease headaches and get everyone on the same page in the invoice approval process.
2. An Easy Process to Onboard Invoice Approvers
Sometimes, invoice approvers want to stick with paper-based workflows because it’s the way things have always been and they’re comfortable. All the same, approvers have nothing to fear with Stampli, which provides an easy process to onboard anyone who uses the system.
Stampli makes it so that the approval process remains largely the same, but much easier and more intuitive with automation. Control features such as thresholds by dollar amount can be enabled to require additional approvals and safeguards.
Approvers also get greater context, with every action made on the invoice and information such as previous vendor invoices all easily accessible on top of the digital invoice itself. Then when approvers have questions, they can easily make them on the invoice itself and invite any required party to that particular invoice to provide additional context.
3. Notifications and Reminders for Invoice Approvals
Invoice approvers don’t have to go it alone in remembering looming payment deadlines with the help of AP automation.
AP automation systems such as Stampli can automatically send out emails to users for invoice approval requests, question requests, and field update requests. As mentioned earlier, these systems track invoice approval laggards and can also increase the frequency of notifications and reminders to busy approvers which require additional reminding.
This also works the other way for those approvers who prefer a clean inbox, where AP can decrease the frequency at which notifications are sent. It’s all part of the effort to make invoice approval workflows cleaner, more efficient, and, at the end of the day, more cost-effective for businesses.
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