An Invoice Approval Workflow automates invoice validation, approvals, and payments to ensure accuracy and compliance with financial policies.
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The simplest definition of the invoice approval workflow would be the set of steps involved in the validation of invoices. The invoice approval workflow validates invoices by checking the invoice data against data in the purchase order and goods receipt. Doing invoice data validation manually can be a chore for the accounting team. A fully automated invoice approval workflow overcomes these challenges and breathes productivity and efficiency into the approval process. Read on to know invoice approval workflows in detail, challenges in manual invoice validation, and ways to streamline the process.
A manual invoice approval process is where manual labor is put in charge of matching the order and invoice details and furthering the payment process. Statistically analyzing, many organizations still use the manual setup of practicing invoice approval. However, compared to an automated system, manual invoice processing has numerous limitations that bring down the efficiency of the process. Steps like mailing, faxing, and paperwork create enough bottlenecks, compromising the efficiency and productivity of the entire organization.
As manual processes are paper-based, proper documentation and routing of these documents for validation and approval can be extremely time-consuming. This can drag the process to days and even weeks as it demands all the involved employees’ time and availability. Generally, an invoice approval workflow consists of the following steps.
A manual invoice approval process starts when the organization receives the invoice from the vendor or the supplier. The accounts payable department takes up these invoices for processing for approval. This also falls under the procure-to-pay process. Broadly two categories of invoices are submitted for payment:
Even though they are categorized as different, both these types require some level of verification and review before they are approved.
The Accounts Payable team is responsible for manually entering the inputs into the organization’s accounting program or an ERP system. They capture the invoice data and document the invoice receipt. Based on whether the invoice is on paper, faxed, or digital, The capturing and documenting steps will vary.
For the physical invoices, the steps may include:
After the extraction of the data and documentation, this data has to be verified. For PO invoices, either of these will be carried out:
For non-PO invoices, the verification process includes:
In case any errors are spotted during the verification process, the accounts payable department is responsible for cross-checking the information, getting connected to the vendor, and contacting the procurement team for details. These issues are common in a manual approval workflow.
Once the manual verification and approval are done regarding the invoice details, the invoice is finally verified and approved. After the approval has been sanctioned, it is then moved to accounting for bookkeeping and future auditing purposes. The bookkeeping workflow process can be effectively streamlined using an automation solution, and optimize the process to efficiency.
With more and more human labor being involved in the process there are several limitations associated with the manual invoice approval process. Let us explore some of the challenges in a manual invoice approval workflow.
There needs to be a standardized procedure and a centralized receipt system, the chances of succumbing to the limitations happen easily in such a situation. Issues like invoices missing in the clutter of emails, tools, or even a system. Therefore, a tool providing a common space for all the tasks to be centralized becomes necessary.
Without a proper framework or streamlining of the invoice approval process, inefficiency grows within the process. The manual process is paper-based and does not allow smooth running of the process. Imagine having to take paper documents to different approvers and getting them approved.
When there is a lack of a defined structure to any process, exercising control over the process becomes difficult. Most often, rather than a streamlined process, the tasks tend to overlap each other with zero transparency in the process. This may lead to wrong or duplicate payments, fraud, or even non-compliance, hence creating higher risks.
One of the biggest challenges of the manual invoice approval process is that it is not cost-effective. There are a lot of hidden areas that demand a lot of expenses. The more time spent on the task the more expenses have to be dealt with. In a paper-based and manual, some of the time-consuming areas are:
These errors that occur are costly and can be effectively avoided by implementing automation software.
No matter how skilled and reliable a team can be, human errors are inevitable. It could happen due to several reasons. Lack of understanding and attention can often lead to these errors. These problems can also create overpaid or underpaid invoices, and also create financial issues for the organization itself.
In a manual setup, there is scope for fraud to take place. Fraudulent billing is a huge problem, and detecting this in a manual approval process is difficult. These frauds often go undetected, finally resulting in loss.
Improving the invoice approval process is an essential step any organization can take. Implementing sudden changes will not do much good but disrupt the existing workflow. Instead what can be done is to take a holistic approach while optimizing the process. Focus on the key areas that need to be improved such as precision, transparency, speed of the process, and the money being spent.
With an automated system, the invoice approval workflow can be made less complex and transparent. This also reduces any errors or fraudulent activities and thus improves the authenticity of the process.
Some of the benefits acquired from implementing an automated invoice approval workflow are as follows:
| Automated Invoice Approval Workflow | Manual Invoice Approval Workflow |
|---|---|
| The software tool that automates the process, improves the speed of the process as well. It also easily places the data into the accounts payable system | In a manual setup, due to the human inputs, the process becomes slower and delayed |
| Invoice management is achieved with accuracy with zero errors in an automated invoice approval workflow | Manual invoice approval workflow is error-prone, this again causes more delay in the process. |
| Automated three-way matching is achieved without much time being deployed into it. | Human labor has to be employed to perform the three-way matching for each invoice. The process is highly time-consuming |
| Archiving, reviewing, and retrieval of the data are made much simpler and hassle-free with cloud-based storage. Auditing of the invoices can be done with ease with the digital paper trail | Handling paper documents is hectic. There is always the risk of losing these documents as there is no effective storage storage system. Thus, it is difficult to track these as well |
| When the approval process is faster, it means that the payments are also done at a faster pace. This improves the smooth functioning of the organizations and the vendors | With the lack of an efficient approval process, the payments tend to go overdue and often lead to the work getting delayed. The vendors will have to wait for a longer time to process the payment and supply. |
Cflow is the most apt tool to efficiently take care of the invoice approval process with the automated workflow creation. Our platform is one of the most preferred no-code automation tools available with business-friendly features that help streamline the processes and bring productivity to the business.
The invoices can be effectively verified and sanctioned for the transaction as the tool gives a common space for the employees to carry out these tasks. For finance and payment transactions especially, Cflow gives a deep sense of clarity with its zero-coding ability. Approvals can be easily passed with seamless and instant three-way matching making the process much faster than before. Cflow lets its users work with 1000+ other applications simultaneously with its powerful integration feature.
Some of the perks that Cflow offers are:
An effective invoice management system offered by invoice approval automation software like Cflow can empower the invoice approval process to the next level. It provides an incredible shift from a manual and strenuous process to an upgraded version that is more efficient and authentic.
The challenges that business organizations face when manually performing the process can all be overcome effortlessly with an automated invoice approval workflow. Explore more about Cflow’s features and unfold the wide spectrum of possibilities for optimizing your business. Sign up now!
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