How Do Automated Invoice Approval Workflows Eliminate the Risk of Manual Approval?
MHC Marketing October 18th, 2022
Your accounts payable (AP) team has a large number of documents to manage in order to keep up strong relationships with your valued customers, and financial documents are among the most important. For enterprise businesses dealing with high volumes of transactions, efficiently tracking and processing every received invoice while staying in compliance with all internal business rules and external regulations can be an expensive, time-consuming task when handled manually. Let’s take a closer look at the ways your AP department handles invoice approvals, as well as several of the biggest challenges you can mitigate with a reliable, automated invoice approval workflow.
TABLE OF CONTENTS
- What is an Invoice Approval Workflow?
- 5 Steps of an Automated Invoice Approval Workflow
- What Does the Invoice Approval Workflow Look Like without Automation?
- Why is Manually Processing Invoices Risky?
- What Are the Benefits of Automating Your Invoice Approval Workflow?
- Automate Your Invoice Approval Workflow with MHC
What is an Invoice Approval Workflow?
Basically, an invoice approval workflow includes any steps an organization requires for an invoice to clear. You can think of it as a checklist of steps that ensure that invoices are processed quickly and with minimal errors. Every organization has its own specific business processes, but approving invoices generally begins with your business receiving an invoice from a vendor or supplier.
The information in that invoice is checked by a buyer or business user who works with that client, then passed along to accounts payable department for approval and payment processing. For enterprise organizations, the volume of invoices is higher than can be handled by manual invoicing processes. An invoice approval software system is usually necessary for those organizations.
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5 Steps of an Automated Invoice Approval Workflow
Automating your invoice approval workflow is a fairly simple process that should quickly yield noticeable benefits. From the time you receive an invoice through its final approval, automation ensures that your invoice process is seamless, speedy, and consistent. Let’s look at the key steps involved in an automated invoice approval workflow.
Invoice is received
Automation allows for easy receipt of invoices in a wide range of formats, including paper documents, faxes, emails, or electronic document formats like Word, PDF, Excel, and others.
Invoice is captured
Optical character recognition (OCR) makes it simple for your automation software to capture key data from received invoices and port that information into your system.
Invoice is verified
Once the relevant data has been captured, your automated system uses 3-way matching to validate each invoice against two other documents, ensuring that the data is accurate and protecting your AP team against invoice fraud. Any invoices that cannot be verified are flagged for manual verification.
Invoice is sent for approval
Verified invoices are routed to the appropriate people within your organization to be approved. Automation ensures that each invoice reaches the person authorized to approve it in a speedy and efficient manner.
What Does the Invoice Approval Workflow Look Like without Automation?
It’s difficult to say how the invoice approval usually works for organizations that go without an automated solution, because those processes are often vaguely defined. In many cases, an AP team will rely on a shared document or spreadsheet that details each step in the process and requires manual data entry to keep track of when each one is completed and by whom. This can create problems due to human errors, bottlenecks and back-ups during busy periods, and lack of visibility into where each invoice stands in the process. Without the speed and reliability of an automated solution, these businesses greatly increase their risk of duplicated efforts, late payments, and damaged relationships with vendors and customers.
Why is Manually Processing Invoices Risky?
Relying on outdated solutions and manual processing creates several potential problems, especially for enterprise organizations dealing with a large number of invoices, purchase orders, and other financial documents. Some of the biggest risks of manually processing those documents rather than relying on automation for invoice approvals and payments include:
The more human touch points involved in a process, the higher the chance of human errors. A single careless mistake can result in overpayments, underpayments, or unpaid invoices, all of which require significant time, money, and effort to mitigate. When it comes to timely invoice payment, those types of avoidable error can also damage your organization’s reputation for quality control and have a negative impact on your relationships with valued customers.
LACK OF VISIBILITY
Being able to track invoices and payments at any point in their processing is a vital part of your accounts payable workflow. Without an AP automation system, your visibility into those processes is severely limited. That not only leads to poor communication with vendors and suppliers who rely on accurate documentation, it also makes it much more difficult to follow an audit trail when trying to identify problems in your invoicing process.
RISK OF FRAUD
Internal and external fraud is a major concern for any AP team, and financial documents are an especially ripe target for fraudsters. Improperly approved invoices and other common forms of payment fraud are much easier to pull off in a system of manual checks and multiple human touchpoints.
Time is money, and your invoice approval processes are important means of tracking both. All of the risk factors mentioned above carry the added weight of being extremely time consuming. Every hour your finance department spends correcting human errors, identifying fraud, or tracking down missing invoices is an hour that could have been spent on more productive tasks. Add to that the fact that manual processing is simply slower and more cumbersome, and the case for automation becomes hard to ignore.
STRAINED VENDOR RELATIONSHIPS
Maintaining a strong working relationship with your vendors is a must for the long-term success of any business. Not many things put a strain on that relationship more quickly than late payments and invoicing errors. A lack of visibility and an inability to correct mistakes swiftly not only make vendors lose confidence in your organization, they can also lead to credit holds, loss of early payment discounts, late fees, and reputational damage across your industry. Automating your AP workflows helps to eliminate many of the factors that might make your vendors think twice about bringing their business to you in the future.
LESS EMPLOYEE ENGAGEMENT
Even the most dedicated AP employee would probably admit that there are plenty of elements of their job that are not the most stimulating work they could be doing. Performing data entry and manually processing invoices, payments, and other financial documents requires a great deal of tedious and repetitive tasks. Given the high risk of human error mentioned above, those tasks also come with a high degree of stress and responsibility, all of which adds up to a less engaged workforce, higher rates of burnout, and more employee turnover.
What Are the Benefits of Automating Your Invoice Approval Workflow?
By now the immediate benefits of increased automation should be evident, but let’s run through some of the specific areas where automating your organization’s invoicing process can reduce risk, save time, and cut costs.
REDUCE ERRORS AND DELAYS
Without an automated solution, your AP team ends up spending an inordinate amount of time tracking down late or missing invoices across multiple departments, and even more time correcting mistakes and manually checking each invoice for completeness. Automated invoice processing drastically reduces that time-drain by easily integrating with your organization’s accounting systems and databases, making sure that invoices are submitted on time, routed correctly, and checked for errors. Investing in an automated solution for your invoice approval workflows takes tasks off of employees’ plates and allows them to focus on more important and engaging work.
MORE VISIBILITY INTO APPROVAL DELAYS
When occasional errors and delays do occur, an automated system provides easy visibility into every step of invoice processing. That allows your AP team to quickly investigate how and where in the process those issues occurred, making it much simpler to correct errors, eliminate bottlenecks and inefficiencies, and make sure that the same problem doesn’t arise the next time.
HELPFUL NOTIFICATIONS AND REMINDERS
Even if your AP team is operating at the top of their game, they are only one of the many moving parts in your invoice approval process. Invoice approval software can send out automated reminders and error notifications to every department involved with signing off on invoices. That reduces the time your AP team needs to spend trying to contact approvers and chasing down signatures to keep your processing on schedule.
STRONGER VENDOR RELATIONSHIPS
Maintaining a strong working relationship with your vendors is crucial for any business, especially in an era of challenging supply chain issues. Automated invoice approval helps to keep those relationships solid by making sure that each invoice arrives on-time and error-free. That keeps your vendors happy and eager to work with you in the future, which in turn helps to boost your reputation within your industry. Many vendors offer early payment discounts as well, which is always a nice perk for your accounting team.
If you’ve ever worked with a manual approval system, you know there’s always one department or supervisor who creates their own bottleneck. Working around those internal slowdowns wastes time and money, and is often demoralizing for the employees tasked with getting those difficult sign-offs. Automating your invoice processing gets the right documents in front of the right people at the right time and makes sure they know when their approvals are due.
LESS RISK OF FRAUD
Automating invoices and payments not only makes it more difficult for bad actors to perpetrate fraudulent behavior, but also allows your team to identify fraud more quickly when it does happen and pinpoint the responsible parties. By automatically flagging irregularities and running 3-way matching to confirm the legitimacy of every invoice, your software solution helps protect your reputation and keep you compliant with all relevant regulations.
EASIER ONBOARDING OF INVOICE APPROVERS
In manual processing systems, incoming employees often have a difficult learning curve. Learning and remembering every step in the invoice approval process while also managing a variety of other new tasks and responsibilities takes time and opens up many opportunities for mistakes and human error. An automated invoice approval system with intuitive controls significantly reduces the new material these approvers are expected to learn, taking off some of the pressure and allowing a smooth transition into their roles.
Automate Your Invoice Approval Workflow with MHC
Accurate and efficient processing of your accounts payable documents is simply too important and complex a process to be left to manual processes or outdated software solutions. MHC provides scalable AP solutions that can accommodate the complicated needs of any enterprise organization. From intelligent invoice capturing to automated invoice auditing and processing to real-time visibility into your business’s most vital invoicing functions, we provide a reliable and easy-to-use software system that integrates with your existing ERP, right out of the box. Contact us today to schedule a demonstration of the many ways MHC automation solutions can streamline invoice approvals and many more crucial financial documentation processes.