What are invoice approval workflows and how can they be optimized?

A well-defined invoice approval workflow structure is a cornerstone of streamlined Accounts Payable (AP) operations. It is pivotal to have a detailed understanding of what the workflow structure is and how it can be made as efficient as possible.

From automating approvals to pinpointing crucial triggers, we’re here to guide you through the essential steps of invoice approvals. Are you ready to turn an AP headache into a seamless and cost-efficient operation? Let’s go.

Definition of the invoice approval workflow

An invoice approval workflow is a standardized procedure that businesses put in place to review, verify, and approve invoices before making payments to vendors. It is a critical component of AP operations, ensuring that invoices are accurate, legitimate, and compliant with company policies. 

The typical progression of an invoice approval workflow would include the following steps:

1. The process starts when the supplier invoice is received electronically or physically and routed to the appropriate department for processing.  

2. The invoice details are then captured into the system and validated, most commonly against purchase orders and/or GRN for companies that have more PO than non-PO invoices. Does your company handle a large volume of non-POs? Cevinio has you covered; our solution can also automate the processing of non-PO invoices.  

3. If the invoice requires manual approval it is routed to the appropriate approvers based on the purchase amount, vendor, or other criteria.  

4. When approval is required, approvers will then review the invoice details and either approve or reject it. Alternatively, approvers can seek advice from colleagues or forward the invoice to stakeholder(s).  This process depends on the software solution you deploy, and what steps you have set up within that system. 

5. Rejected invoices can either be sent back to the AP team for review or to the vendor depending on the situation.  

6. Approved invoices are posted in the corresponding ERP for payment.  

7. There are other common scenarios such as “post and block”, also known as posting block, where invoices are posted in the ERP with a payment block before the approval stage. Only once these invoices are approved are they unblocked and released for payment. 

8. Lastly, approved invoices are archived for future reference and audit purposes. 

The specific steps and complexity of an invoice approval workflow depend on the size and structure of the business, the type of goods or services purchased, and the volume of invoices processed. However, the core principles of accuracy, efficiency, and control are essential for any effective invoice approval process.

When a business processes invoices manually, they are distributed to as many departments and approvers as necessary exposing you to the possibility of errors, missed deadlines, and strained vendor relationships. This is one of the many reasons why automating the invoice approval process is so beneficial – and so necessary.  

To get the most out of your automation efforts requires a thorough understanding of the processes and workflows you are automating – and what you expect to get out of the initiative. This is what we explore in our next section.

Tips on how to create an efficient invoice approval workflow

Define your needs 
You must first identify the reasons why your company requires approval of invoices. The most common situations we see are: 

• High-value invoices: Invoices for large amounts of money are typically reviewed and approved by multiple levels of management to ensure that the expenditure is justified and that the goods or services were received as ordered. 
• Invoices from new vendors: Large corporations often have strict policies in place for onboarding new vendors, which may include requiring approval of the first few invoices to ensure that the vendor is reliable and that the invoices are accurate. 
• Invoices for complex goods or services: Invoices for complex goods or services may require approval from a subject matter expert to ensure that the goods or services were provided as specified and that the pricing is fair. 
• Invoices with errors or discrepancies:  It is common to receive invoices that are not a 100% match with the purchasing order, and passing these on for review blunts the benefits of automation. Most AP teams prefer to establish a level of tolerance for PO discrepancies, allowing you to save valuable time. 

In addition to these general reasons, large corporations may also require approval of invoices for specific types of expenditures, such as travel, entertainment, and capital equipment. 

Define roles and responsibilities 
Clearly define the roles and responsibilities of each person involved in the invoice approval process. This will help ensure that invoices are routed to the correct people for approval and that there is no duplication of effort. 

Automate data capture and validation 
Utilize invoice automation software to automatically capture and validate invoice data, such as vendor information, invoice numbers, and purchase order (PO) details. This can significantly reduce manual data entry errors and streamline the approval process. 

Implement a two-way or three-way match 
Verify invoice accuracy by matching it with POs and goods received notes (GRNs). This helps to ensure that goods or services were ordered and received as specified and that the pricing is correct. 

Set approval  and routing rules 
Establish approval paths based on the value of the invoice. For example, invoices below a certain amount may only require approval from one person, while invoices above a certain amount may require approval from multiple people. Use routing rules to automatically send invoices to the appropriate approvers based on the invoice amount, vendor, cost center, or GL account, among other criteria.

Delegate approvers based on authority levels 
Assign invoice approval responsibility to appropriate individuals based on their authority levels and the value of the invoice. This ensures that invoices are reviewed by the right people and prevents bottlenecks. 

Establish clear approval timelines 
Set clear timelines for invoice approvals to ensure timely payments and maintain vendor relationships.  

Implement automatic reminders and notifications 
Use automated reminders to notify approvers when they have pending invoices to review. This will help to keep the approval process moving and prevent delays. 

Use a centralized invoice processing system 
Use a centralized system to receive, process, store, track, approve, and manage invoices. This will provide a single source of truth for all invoice data and make it easy to track the status of invoices throughout the approval process.  

Monitor and improve the process 
Regularly monitor the invoice approval process to identify bottlenecks and areas for improvement. Use process metrics to track the time it takes to approve invoices and the number and type of errors that occur.

Advanced AP Automation capable of automating your invoice approval processes

Establishing a streamlined and efficient invoice approval workflow is crucial for businesses to ensure accuracy, compliance, and timely payments to vendors. As outlined in this discussion, automation plays a pivotal role in achieving these goals by reducing manual errors, preventing delays, and enhancing overall efficiency. 

Cevinio AP Automation is a centralized AP invoice processing system that offers a complete set of features that radically enhance the efficiency of your AP operations. Whether your company deals with a high volume of PO and non-PO invoices, a complex approval structure with many levels, steps, and conditions, Cevinio’s automation solution can help.  

We provide automatic approval as well as automated approval workflows, routing invoices to the right approvers. And there is more. We can send reminders, escalations, and delegations without human input, shortening the time it takes to handle invoices. 

By deploying Cevinio, businesses benefit from a centralized system that provides a single source of truth for all invoice data. If you would like to see how this would help you monitor and speed.