Automated Invoice Approval Workflow – the Path to Establishing Strong Vendor Relationships

invoice approval automation

Approval of vendor invoices is taken care of by the accounts payable team. Each invoice requires to be reviewed and reconciled carefully by the members of the AP team. Quick and effective approval of invoices requires an invoice approval workflow that streamlines the flow of tasks. Manual invoice approvals are not only inefficient and time consuming, but they also rob the AP team from their productive work hours. This blog explores invoice approval process, the need to automate the accounts payable approval process, and the best way to automate the process. 

Challenges in Manual Invoice Processing

When the invoice reaches a company, it is just the beginning of a process that stretches over several tasks before approval. But, when these steps are executed manually, the AP team is tasked with a difficult proposition that is error prone and time consuming. Here are some of the disadvantages of manual invoice processing –

Errors with manual entry – When data-intensive tasks are carried out by AP team members, the rate of errors and inconsistencies increases significantly. Discrepancies and errors in invoice processing can lead to under-or over-paid invoices, and other problems that cause financial troubles for the organization. The labor-intensive nature of invoice processing causes fatigue in employees, which leads to errors and inconsistencies in processing. 

Delayed approvals – Manual invoice approvals are time consuming and hence lead to delay in payments. When payments to suppliers are delayed, the relationship with suppliers is adversely affected. Especially when they deliver products or services promptly, it can be frustrating for them to wait for payments. 

Lack of visibility – If your organization is following a manual invoice process, it is going to be a challenge tracking invoice statuses manually. The lack of visibility makes it difficult for suppliers and contractors to estimate the payment clearance time. 

Vulnerability to fraud – Accounting departments face rampant fraud in billing. From mismatch in invoice and purchase orders, to tampering of invoices to duplicate billing – the accounts payable department has to deal with several fraudulent practices while processing invoices manually. 

What is the Invoice Approval Workflow?

Invoice approval is part of the procurement cycle when you have to pay the suppliers for the goods or services they delivered against the purchase order. Once the supplier delivers the products or services as per the purchase order, the data between the PO, goods receipt note, and invoices is matched. Timely and accurate invoice approval process requires an invoice approval system that automates repetitive and data-intensive steps in the invoice workflow. 

For companies that have not automated their invoice workflow, the workflows may look one of the two ways. There might be a word processing document either saved to a computer or printed off a cubicle with different steps delineated. Supervisors in the AP department can write documents, farm them to junior staff. The disadvantage is that the staff requires some time to get used to this kind of invoice approval workflow. Even when they get used to approval templates, there are chances that the staff misses out on crucial steps. 

Some AP departments don’t even get to the point of having documented invoice approval workflows. Undocumented workflows are often passed down from one AP supervisor to the next or other AP specialists. In the process of knowledge transfer, the likelihood of missed information or misinformation is very high. While there may be outstanding AP staff that can coach and mentor new comers, having this as the last line of defense entails a lot of risks. 

You need to familiarize yourself with the invoice processing workflow so that the workflow can be optimized according to business needs. The accounts payable approval process is made up of steps needed to validate and pay the invoice. Invoice processing steps include verification of information and getting the necessary approvals before submitting the payment. Once invoices are approved, they are cleared and money is sent to proper parties. 

As business operations expand, it gets more complex to track invoice approvals. Using an invoice workflow software to streamline the invoice workflow is a good idea to streamline the workflow and help the AP team track invoices. A paperless invoice approval system also helps get rid of voluminous paperwork that results from manual invoice processing. 

Steps in the Invoice Approval Workflow

An invoice workflow is a series of steps that are followed to clear an invoice. Invoice process steps begin with the receipt of the goods and services that were ordered. Typical invoice approval steps are listed below- 

Verification of the invoice- The first step in invoice processing is verification of the data in the invoice. The data in the invoice is validated against purchase-related documents like purchase requests, purchase orders, and goods received notes. 

Definition of exceptions – Invoices that fail the verification process due to discrepancies or missing information are flagged off as exceptions. Exceptions are directed to the relevant people that can fix the errors or provide missing information. Once the errors are fixed or missing information is furnished, the invoice is sent to the AP team again for review and approval. 

Get necessary approvals – Invoices that are thoroughly verified and validated are sent to approval to the relevant personnel in the AP team. 

Payment of invoice – Once the final approval is received for the invoice, it is forwarded to the finance and accounting team. The invoice is closed once the finance and accounting department processes the payment. 

Invoice approval entails different levels of approval. Within the AP team itself, the invoice may go through multiple approval levels. Once the AP team clears the invoice, it is sent to an executive like the CFO controller, or the internal certified public accountant (CPA) for approval. While CPAs approve the invoice they must also make sure that there are sufficient funds to pay the bill. 

How Do You Design an Invoice Approval Workflow?

Invoice workflow software can be used to create approval workflows that are streamlined and efficient. The steps in an invoice workflow vary in every organization, but they have certain common steps that are listed below. 

1- Creating a database for receiving invoices –

The ideal invoice approval workflow will begin with all invoices being queued up. Tracking and processing invoices in batches is much more effective than processing them individually. The invoice database can be created in one of the 2 ways –

  • Designate an email address exclusively for receiving invoices
  • Create an invoice submission form that automatically adds submissions to the queue for review

2- Listing the approval conditions –

Processing an invoice should be done only after validating whether the invoice is valid or not. The conditions for validation will vary depending on the organization or type of products/services the vendor is supplying. The basic questions that the invoice must be validated against are –

  • Did the invoice deliver the product or render a service?
  • Were there any issues with the product or work that requires a render or discount?
  • Does the invoice include all the information required for processing the invoice?
  • Does the amount quoted in the invoice match with the established process?

3- Outline the approval hierarchy –

In a majority of organizations, there are specific decision makers who are responsible for validating invoices. For example, the president of a small organization may have a hand in validation of the invoices in every project, so they can approve or deny invoices. In larger organizations however, multiple departments are involved in the decision making process. Depending on the size of the organization, and the scope of operations, a list of decision makers involved in the approval process, and specific types of invoices they were responsible for. 

4- Setting workflow routes –

Every condition from step 2 can be framed as an action item on a checklist. The checklist can be structured to confirm basic information and then be gradually increased in complexity to include conditions.If-then approval workflow conditions can be mapped in an invoice workflow. While outlining the workflow, it is important to map out the approval hierarchy as well. Once all the workflow elements are in place, uncertainty will be eliminated from the process and the team will be able to carry out approval tasks faster. 

Benefits of Automating Invoice Approval Workflow

Using an invoice approval workflow software brings several benefits to the approval process. Timely approval of invoices translates to strong vendor relations. What are the other benefits of automating the invoice workflow process? 

Improved transparency in invoice processing – An invoice approval software improves the transparency in invoice processing. All the users are aware of the status of the invoice via the dashboard. Invoice approval software helps track all the orders and invoices through one platform. 

Saves time and productivity – As with any type of automation, invoice workflow automation also takes over the repetitive and mundane tasks. When such tasks are automated, a significant amount of time is saved for the AP team. The lesser the time spent on such tasks, the more time the AP team gets to spend on productive tasks. The productivity of the invoice processing increases with workflow automation. 

Better supplier relationships – When invoices are cleared in a timely fashion, supplier satisfaction scores improve considerably. After delivering goods or services on time, vendors expect their payments to be done on time. Delayed payments affect vendor relationships adversely. Automating the invoice approval workflows streamlines the approval process, so that tasks are completed on time, every time. 

Reduced human error – Automating tedious tasks in the invoice approval workflow minimizes the human dependency in the approval process. Automating data-intensive and repetitive steps in the workflow eliminates human role in the process, which in turn minimizes the incidence of errors and inconsistencies. Duplicate payment and fraud risks are also mitigated by automating the invoice approval workflow. 

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Why Automate Invoice Approval Workflow with Cflow?

Cflow is a no code workflow automation solution that can automate key business workflows with a visual workflow builder. The invoice approval workflow can be easily automated by simply moving the visual elements and connecting them based on the approval conditions. Before getting into why choose Cflow for automating the invoice workflow, let us look at the key features that the software offers. 

Visual Workflow Builder –

Cflow is among the first workflow automation providers to implement no code workflow automation. You can speed up workflow creation with the visual workflow builder. 

Document management –

With Cflow you can manage digital documents with a centralized document management system. Searching and accessing documents is super easy with the digital document management system. 

Rules engine –

Each business has its own hierarchy in approval processes, these preset conditions define the flow of tasks in the approval process. The one-click setup in Cflow can be used for creating workflows based on multiple conditions and operators. 

Integrations –

Running a business requires seamless integration between multiple systems. Cflow can seamlessly integrate with essential third-party applications for smooth business operations. 

Data security –

Finance and accounting related processes like invoice processing, PO processing, 3-way matching require high levels of data security. Cflow offers best in class security with the highest level of reliability and protection for your data. 

SLAs and Escalations –

Compliance management requires adherence to SLAs and industry regulations. Cflow enables you to create rules and SLAs that ensure that you never fall out of compliance. 

Auto approvals –

Delayed approvals translate to weak vendor and customer relationships. Alerts and notification feature in Cflow makes it super easy to auto-approve repetitive and non-critical tasks. 

The features provided by Cflow take care of all the aspects of the invoice workflow. The dynamic and customizable workflows in Cflow make it easy to process invoices and do not require programming knowledge. Here are 3 reasons why Cflow is your best workflow automation solution for your invoice workflows. 

  • Process Maps can be used to Identify Approval Delays : There are instances when the AP staff has done everything possible to prepare an invoice for payment, but the invoice has to wait weeks or even months for an executive’s approval. Moreover, companies that use paper-based invoice approval workflows can only wait for approvals to happen. Cflow takes this issue head on creating process maps that lay out the process clearly. This makes it super easy to identify bottlenecks and delays. The intuitive dashboard helps users automatically track the number of days it takes for invoice to approvers to give their sign off for payments. 
  • Easy onboarding of Invoice Approvers : A no code automation platform like Cflow makes it easy and quick to onboard the AP team. The process for onboarding invoice approvers can be easily done with the visual workflow builder. Control features like thresholds by dollar amounts can be enabled for additional approvals and safeguards. Approvers get a greater context, which enables every action made on the invoice to be easily accessible. 
  • Alerts and notifications for Invoice Approvals : There will never be a missed approval deadline with Cflow. Management gets an overview of all the invoices and they can automatically track approval times. Automated emails are sent out to track invoice approval requests, question requests, and field update requests. Cflow makes the invoice approval process clearer and more efficient, and cost effective for businesses. 

Invoice management is a fundamental process for most businesses, but they are not equipped with the ability to scale up to growing business needs. A workflow automation platform like Cflow, makes it easy and effective to automate invoice workflows. The visual workflow builder in Cflow requires users to simply rearrange visual elements as per specific business rules and conditions. The more opportunities that a business gets, the more complicated it becomes to track invoice approvals. Invoice approval workflow software streamlines the approval workflow so that businesses are not overwhelmed by the mounting pressure in processing invoices. 

Key Takeaways

The AP teams are caught in the quagmire of manual processing of invoices. As business operations expand, the volume of invoices to be processed also increases proportionally. Handling such huge volumes of invoices becomes a nightmare for the AP teams without the right invoice approval software. Cflow is a no code automation software that can streamline the invoice approval workflow. If you are looking to automate the approval process, then Cflow is the right solution. From small to medium to large enterprises, Cflow can easily automate key business workflows across multiple departments. Take Cflow for a test drive, sign up for the free trial right away.

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