Invoices are categorized into two types – The ones that have a purchase requisition or purchase order, and the ones that are not associated with any purchase order or request. The payment approval workflow comprises the following steps:
Creating an invoice – For creating an invoice, all the relevant information should be captured and recorded in the document. Timely approval of invoices requires the capture of relevant information for payment, like total cost, number of units, and cost per unit.
Validation or PO matching – The next step of the process is to categorize the invoice based on the type of purchase. The validation step identifies and links other related purchasing documents like order receipts, purchase orders, purchase requests, and goods received notes.
Define exceptions – Invoices that do not go through the validation stage due to any discrepancy or missing information need to be forwarded to specific people who can fix the errors or furnish the missing information. Once the discrepancy has been addressed, the invoice is rerouted for approval.
Routing approvals – Validated and matched invoices are routed to the appropriate approver. The approver is chosen based on the information mentioned in the purchasing document, such as the PO number, department, or requestor name.
Processing payment – approved invoices are forwarded to the finance team for further processing. Invoices that are approved are sent for payout, once payment is complete the invoice can be closed.
Why should you automate the Invoice Approval Process?
The need for automating the invoice arises from the inefficiencies of manual invoice approval. Traditional invoice approval processes are filled with a number of inefficiencies and process gaps. Organizations that use manual invoice approval processes experience delays and fraudulent practices.
Here are 5 reasons why you should automate the invoice approval process:
- Unexpected delays in approval – conventional invoice approval processes are characterized by delays in the review and approval of invoices. Manual processes are also riddled with bottlenecks
- Lack of visibility – the stakeholders do not have visibility into the status of the invoice in a manual process. The lack of visibility into the status of invoices causes delays in approvals.
- Lack of transparency – manual processes are not standardized and depend more on human intervention. This decreases the transparency in invoice workflows.
- Long approval cycles – any process that is driven by human efforts is ridden with delays and long approval times.
- Excessive paperwork – manual processes use a lot of paper-based documentation. Loss or damage to paper documents causes delays in the approval process.
Manual invoice approvals are ridden with all of the above challenges that slow down invoice approvals. An electronic invoice approval process addresses all these challenges and improves the speed and efficiency of invoice approval.
When should you automate the Invoice Approval Process?
There are several reasons why you should automate the invoice approval process. Organizations looking to improve the efficiency of invoice approval and eliminate errors and frauds from the process must consider invoice approval automation.
Most organizations are still using archaic manual approval processes mainly due to the simplicity and minimal costs associated with manual workflows. Finance and procurement teams are so used to working on manual systems that they do not want to step out of their comfort zone and adopt automated invoice approvals.
When should a business consider automating its manual processes? There are some indications in business operations that must be taken as a sign to automate the invoice approval process. Here are signs that indicate that the invoice approval process must be automated:
Time wastage – When too much time is wasted on reviewing and approving invoices, it is time that businesses consider automating their invoice approval process. Business processes comprise several repetitive tasks that are time-consuming and tedious. Accounts personnel spend several hours of their productive work time on routine, low-value tasks like invoice matching, following up on invoices, and tracking missing documents.
Misplaced documents – In large organizations that follow manual invoice processing, the issue of misplaced or damaged documents is very common. Accounts personnel waste a substantial amount of time searching for missing documents. Paperless invoice approval systems can relieve the team from the additional work of finding missing or misplaced documents. When incidents of missing or damaged paper documents are on the rise, organizations must consider digitizing the documentation workflow.
Delayed approvals – When invoice approvals are delayed, payments to vendors are subsequently delayed. Delayed payments to vendors affect vendor relationships adversely. This situation can get worse in large organizations where multiple approvers are involved and the visibility into who is responsible for which approval is blurred. Consistent approval delays are a clear case for invoice approval automation.
Exposure to fraud – One of the biggest challenges faced in manual invoice approvals is the risk of fraud and duplication. Manual workflows offer very less oversight and visibility into the accounts payable process. Compromised visibility opens up gates for fraudulent practices in invoice submission and approvals. Duplicate or fake invoices are on the rise.
Automating the invoice approval process is a tested way to steer clear of fraud. When the accounts payable department faces several instances of fraud in invoice processing, it is time to automate the approval process.
High error margins – Human errors in invoice processing can prove to be very costly for the business, resulting in invoices being underpaid or overpaid. Even errors in bookkeeping result in losses for businesses. High error margins in invoice processing not only result in loss of money and disgruntled vendors but also affect the auditing process adversely. When invoice processing errors are on the rise, it is high time you automate the process.
Missed cost-saving opportunities – Payment discounts are often offered by vendors to buyers that make early payments. When invoices are processed manually, buyers often miss out on such cost-saving opportunities. Automating the invoice processing workflow ensures that payments are done on time and buyers can avail of the early payment discounts on pricing. If you have missed payment deadlines and cost-saving opportunities, then it is time to consider automating invoice approval.
When your business faces any or all of the above issues in invoice processing, it is time to consider automating the invoice approval process and payment approval process.
How to Automate the Invoice Approval Workflow with Cflow?
Now that the why and when of invoice approval automation are clear, it is time to look at the “how” part of invoice approval workflow automation. Even when you have an electronic invoice approval process, if the rest of the business processes are weighed down by paper-based manual processes, then automating invoice approval workflows is not going to be useful. Automating the entire procurement workflow provides significant benefits to the business, rather than just invoice workflow automation.
Choosing a workflow automation solution like Cflow enables businesses to automate their key business processes easily and quickly. Cflow is a no-code BPM platform that automates business workflows like procurement, finance, accounts payable, invoice approval, CapEx approvals, HR, and IT operations. Cflow provides several pre-built workflow templates from which you can choose the one that best suits your requirement. Users can also create their own customized workflows using the visual drag-and-drop form builder. The visual form builder creates workflows based on process flowcharts. The document management feature in Cflow allows users to create, store, and update documents from a centralized console. The invoice approval process can be seamlessly integrated with other finance and accounting systems via APIs.
Here is how you can automate the invoice approval workflow with Cflow:
- Creating an invoice template – Cflow provides a visual UI builder for creating invoice templates for business workflows. The invoice must provide complete details about the purchase and payment. The pre-built templates provide commonly used fields in an invoice. Users can customize the template based on their specific requirements. Commonly used fields on invoice templates include invoice number, client details like name, address, contact information, number of items delivered, payment amount, and remarks/comments if any.
- Setting the approval workflow – Cflow is a customizable platform that is powered by an intuitive user interface that can be used by just anyone in the organization. Simple one-click setups in Cflow enable the creation of rule-based workflows for forwarding requests to another person or approving pending invoices.
The deep customization feature uses multiple conditions, operators, and operands, for automated approvals. The auto-approval feature makes it easy and quick to approve repetitive and non-critical tasks. With Cflow you can:
- Specify the primary approving authority and the secondary authority
- Set conditions for approval to be carried out
- Mention the next steps after approval of the invoice
Providing clear instructions on how an invoice is to be approved simplifies and streamlines the approval process. The automation of sales invoice approvals makes it super easy to push the invoice through multiple levels from the accounts team to sales leads, managers, and finally payout.
- Setting conditions for approval – when specific conditions are defined for invoice approval, the flow is clear. With Cflow, you can choose to give selected access to the invoice so that only certain employees have access to it. Only stakeholders involved in the approval process need to be given access to invoices. Individual field access can also be defined in Cflow. For example, critical fields like invoice number, amount, etc, can be set as read-only for additional security. Users can choose the data they want to encrypt in the invoice so that sensitive information is safe from tampering.
Invoice approval workflows can be set up in a jiffy with Cflow. The business activity monitor provides deep insights into process times, bottlenecks, and inefficiencies. Setting up the invoice approval workflow with Cflow eliminates the chaos and streamlines the workflow.