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What is Invoice Approval Workflow?

Invoice Approval Workflow
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Every successful organization, regardless of its size, industry or complexity, relies on a well-oiled machine of operations to keep its wheel turning. At the core of this well-oiled machine lies the Accounts Payable playing a pivotal role.

Irrespective of the size of your organization, AP plays a vital role in ensuring effective cash management and vendor relationships.

It becomes imperative for businesses to maintain a harmonious relationship with all vendors and suppliers. Timely and accurate payments become the cornerstone of this relationship which allows strong bonds beneficial for the organization.

However, according to a survey by Ardent Partners, 44% of businesses need help with the approval process, and 42% need help matching invoices to purchase orders.

Using AI-led automation in the invoice approval workflow process helps enterprises achieve a higher degree of efficiency and helps to streamline the Accounts payable process, timely payments eliminating any descriptions that occur due to manual processes.

What is an Invoice approval workflow? 

The invoice approval workflow is far from a simple one-step process when it reaches a company. It is often a complex series of actions extending over days, weeks, or even months. On average, large enterprises with over 1,000 employees take 20 days (about 3 weeks). 

The essence of an invoice approval workflow lies in the codified set of steps that Accounts Payable (AP) personnel and other stakeholders involved in the procure-to-payment (P2P) process must follow.

The primary goal is to ensure that each invoice is paid in the most efficient and cost-effective manner. Although each company may have its unique approval workflow, some common steps are widely advisable and can significantly streamline the process. 

Invoice Approval workflow steps

The journey of an invoice within an organization extends far beyond its initial arrival, often encompassing a significant period before approval for payment. Let’s explore the typical steps that form an integral part of the invoice approval workflow process:

Receipt and Capture:

The process begins when an invoice arrives at the company in paper form or digitally. Regardless of the format, the invoice must be accurately captured and entered the company’s accounting system. 

A crucial verification step, known as three-way matching/N-way matching, takes place next. The invoice is cross-referenced with corresponding purchase orders and receipt reports to ensure that the billed amount aligns with the goods or services received. 

Resolution of Exceptions:

If the invoice contains any discrepancies or inaccuracies, the Accounts Payable (AP) staff diligently work to resolve these exceptions, ensuring the invoice is error-free and ready for approval. 

Approval by Executives:

The appropriate executives, such as the CFO, controller, or internal CPA, are then provided with the invoice for approval. This authorized individual examines the invoice’s specifics, approves the payment, and confirms that there are enough funds in the company account to pay the charge.   

Entry into Payment Queue:

The invoice enters the payment queue after being approved, completing the workflow process for invoice approval. The procure-to-payment cycle is now complete as the invoice is placed in line for payment processing.

Companies may ensure accuracy, transparency, and timely payments by adhering to five crucial phases in the invoice approval procedure, improving supplier relationships and enhancing overall financial efficiency. 

Drawbacks of manual Invoice approval workflows

Manual invoice workflows include a number of serious flaws that can reduce productivity, introduce errors, and expose firms to fraud. The following are the main issues with manual invoice workflows:  

Time-consuming:

For employees in charge of accounts payable, manually processing invoices takes a lot of time. It might take up a lot of time to reconcile invoices with purchase orders, follow up on invoices, and confirm accuracy via email, phone calls, or in-person encounters.   

Missing paperwork:

Working with several invoice formats can cause invoices to be misplaced or forgotten, as well as purchase order paperwork to go missing. It is difficult for staff in charge of accounts payable to complete their work successfully because of this disorganization.  

Slow approvals:

Without workflow automation, it may take a while for an invoice to be approved, particularly if it gets stuck on a manager’s desk or in their inbox.

Lack of Visibility and Exposure to Fraud:

Due to a lack of supervision and visibility into the account’s payment process caused by manual invoicing processing, there is a higher risk of fraud. Email fraud, in which scammers send fraudulent invoices while posing as reliable providers, is an increasing problem.  

Late Payments:

Manual invoice workflow inefficiencies can result in late payments, which can harm supplier relationships and delay the supply of goods or services. The fallout from late payments can also be detrimental to a company’s standing with clients. 

Missed Savings Chances:

Manual procedures may cause vendors’ early payment discounts to go unnoticed. Over time, these discounts can add up to significant savings, but without prompt payment, firms may pass up these cost-cutting chances.  

Costly Mistakes:

Inconsistent bookkeeping and overpaid or underpaid bills might be the result of human error in manual data entry. Even a minor inaccuracy, such as a dropped decimal point, can lead to financial issues and difficulties with audits.  

Check out our research report- Invoice Workflow Automation (IWA) Report

What are the Benefits of automating invoice approval workflow? 

For your business, streamlining your invoice approval processes with invoice approval workflow software for invoice approval offers a few appealing advantages, including:

Time Savings and Error Elimination:

Automating the invoice procedure eliminates the need for manual invoice and purchase order matching, saving your AP team numerous hours and lowering the possibility of mistakes.

Even matching can be carried out automatically by automated technologies, significantly reducing the procedure.  

Enhanced Accuracy:

With automation, human errors that occur during manual data entry are reduced. The risk of overpayments or underpayments is decreased because of the system’s accurate three-way matching of invoices, purchase orders, and receipts. 

Better Visibility and Control:

Automation enables stakeholders to track bills at every stage of the workflow by providing real-time visibility into the progress of invoice approval. This openness encourages improved management of financial operations and guarantees adherence to both internal and external regulations. 

Faster Approvals:

Automated notifications and reminders maintain the process’s efficiency by preventing bottlenecks brought on by unnoticed approvals. Managers can quickly approve invoices on the fly with the use of mobile-friendly forms and electronic signatures, speeding up the payment process.  

Improved Supplier connections & Early Payment Discounts:

On-time payments encourage better connections with suppliers, which may result in better future arrangements. By taking advantage of early payment discounts, you can save a lot of money.

Scalability:

Automated systems are capable of processing large numbers of invoices without sacrificing effectiveness. The automated workflow can readily handle the increased demand as a business expands.  

Analytics and data insights:

Through automation, businesses may get important data insights. Making wise financial decisions and streamlining cash flow can be facilitated by analyzing trends, patterns, and spending habits.   

Compliance with electronic invoicing and auditing:

Automated workflows for invoice approval keep a trustworthy, verifiable record of all financial activities. This guarantees adherence to accounting rules and makes the auditing process easier. 

How can Zycus help in automating invoice approval workflow?

When compared to traditional invoice management systems, Zycus Accounts Payable Automation Software stands out for its wide range of features and functionality. Here are some reasons why Zycus e-Invoice is revolutionizing supplier invoicing:  

Free and Comprehensive Supplier Portal:

Through Zycus Supplier Enablement, Zycus e-Invoice offers a sophisticated supplier portal that ensures seamless supplier communication and automation. Suppliers can efficiently manage their invoicing process and send invoices with ease. 

Workflows that can be customized:

Zycus e-Invoice offers multi-criteria-based workflows that can be customized to meet a variety of business requirements. Even recurring workflows are supported, making it easier to manage routine billing activities.

Learn more about Zycus’ AI-powered e-invoicing software for matching invoices.

Intelligent Invoice Receipt Management:

By utilizing the Merlin AI Suite’s capabilities, Zycus e-Invoice makes it possible for intelligent invoice receipt management. This feature automates data extraction and validation, resulting in quicker and more accurate invoice processing.   

Global Compliance Management:

The platform enables geography-specific billing, ensuring compliance with various regulatory standards across several geographies and improving global compliance management.

Adoption of the Non-PO No Pay Process:

Zycus e-Invoice powers a strong matching process that guarantees the precise processing of non-PO based invoices, enhancing financial management.  

By allowing for configurable exception management depending on set tolerances, the system makes sure that inconsistencies are dealt with properly and quickly.  

Effective Invoice generating:

AP managers can quickly and easily generate e-Invoices from received non-PO invoices using Zycus e-Invoice by providing only the necessary information. This streamlines the invoice generating process.

Dynamic Workflow and Approvals:

Based on workflow conditions, the platform dynamically invokes the appropriate approvers, speeding up approvals and cutting down on delays.   

Zycus e-Invoice makes a number of reports easily accessible, enabling users to produce reports quickly.

To know more on the best practices for invoice approval, read IOFM’s invoice approval best practices. To know more on how Zycus can help your organization setup a invoice approval workflow, talk to our expert, register now.

FAQs:

How can I build up a workflow for invoice approval?

Establishing an invoice approval workflow entails specifying the processes that bills must pass through in order to be approved, including choosing approvers, designing the workflow, putting automation technologies to use, and testing the procedure.

How is an invoice approved?

An invoice must be approved through a number of steps, including data collection, comparison with purchase orders and receipts, resolution of any inconsistencies, approval from key stakeholders such department heads or executives, and completion of payment processing.

People with budget and expense-related responsibilities must authorize invoices. Department heads, financial managers, executives, and procurement officers can all play a part in making sure information is accurate and compliant with company regulations.

What advantages do automated workflows for invoice approval offer?

By eliminating manual chores and errors, giving companies real-time insight into the approval process, expediting decision-making, nurturing strong supplier relationships through on-time payments, and allowing them to comply with regulatory standards, automated workflows improve efficiency.

How might automation enhance the approval of invoices?

By removing human error from data entry, speeding up matching procedures, assuring consistent adherence to rules, enabling quicker approvals with digital signatures, and enabling greater financial insights through centralized data, automation streamlines the processing of invoices.
Related Read:

  1. Combat the perils of Non-PO invoices by Invoice Workflow Automation
  2. AP Workflow Automation: From Tedious Tasks to Automation-led Time and Cost Savings
  3. Setting Up Internal Controls in Accounts Payable Processes
  4. Top 7 reasons to Digitize Accounts Payable
  5. Al-powered Automated Invoice Matching Software
  6. 5 Key Benefits of Enhancing Your Business with an e-Invoice Generation Tool
  7. What is Dynamic Discounting?
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Swagata Kumar having over 13 years of experience as a seasoned Product Marketing leader, developing and implementing effective Go to Market strategies for high growth B2B SaaS Products and Technology solutions. She bring with an unique and strong blend of experience across Product Marketing, Go to Market, Customer Marketing, Business Strategy, Sales Enablement and Business Development in B2B SaaS. Throughout her rewarding career, she have closely collaborated with sales leaders in diverse markets, enabling me to design and implement impactful campaigns that have significantly contributed to business revenue growth and market share expansion. As a result, She have developed an in-depth understanding of revenue-driven marketing strategies for B2B SaaS products in the US and EMEA regions. She expertise encompasses Product Marketing, Product Positioning and Messaging, GTM Strategy, Cross Functional Leadership, New Product Launches, Sales Enablement, Product Evangelization, Customer Marketing, Market and Industry Research, Competitive Benchmarking, Content Marketing,
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