This article was written by one of our amazing contributors! Content may include promotional links.
How much time and money does your invoice approval process take?
At many organizations, invoices have to go through a series of approvals before work starts. They also have to get through approvals so the bills get paid.
It’s a cumbersome process that needs continuous tracking. It goes through the chain of command before a check is finally cut.
That costs your company more than you could possibly calculate. Would you like to know how you can streamline your invoice approvals?
Keep reading to find out how.
Take a Close Look at Your Approvals Process
At every point of your organization, you’re trying to do more with less. Your accounting department is no exception.
Since accounts payable is an operations function and not a revenue generator, you’re inclined to overlook accounts payable procedures. Instead, you’re likely to focus on things that bring in money, not lose them.
This is the time to examine your invoice approvals process. Not taking these steps to effectively manage accounts payable could be costing you more than manpower time.
It could be costing you in late payment fees, prepayment discounts, and vendor relationships. No one like to get paid late and that can impact the quality of service you get from your vendors.
It can be overwhelming to look at your approval process because there may be many people and teams involved. You can have accounting, procurement, executives
This is the key to good cashflow management and it can allow you to free up cash and time that can be applied elsewhere in the organization.
Find the Bottlenecks
It costs anywhere from $2 to $10 to process a single invoice. The median cost is $5.83. If you’d like to see your company at the lower end of the spectrum, you have some work ahead of you.
There are bound to be bottlenecks in the invoice approval process. It may be systemic, or it may be an individual holding things up. Either way, you want to be sure that you identify the issues in your process.
Even if you use a great tool like Quickbooks to cut the checks, you could be approving your invoices manually.
It could be that you’re doing everything manually right now. That takes a lot of time but is also prone to errors. Some approvals can take forever to do because they’re sitting on someone’s desk.
As you’re looking through the process, go through each step, identify who’s involved. You’ll want to note any redundancies in your process, too.
Do you also have a procedure to make sure the purchase orders and invoices match what the contract says? If there’s a mistake, how long does it take to get fixed?
Once you do identify issues, it’s time to create a system that works for you.
Automate As Much As Possible
When you were going through your accounts payable procedures, how much of your process happens on a spreadsheet or manually?
Whatever that number is, it’s probably too much. If you really want to streamline your invoice approval process, you have to move approvals online. There’s no question about that.
By having everything online and accessible, you can speed up your approvals process in no time. You can also integrate your invoice approvals with other tools that you use in your organization.
This helps you create one central spot for approvals, which means less time, less paper and faster payments. An invoice management software like Stampli is one solution that you can look at for your organization.
Create a Real System
You can have the best invoice approval tool in the world, but if your system and approvals aren’t streamlined, then it’s only going to help so much.
What you can do is create a workflow from the very beginning. When you first get an invoice, where does it go? How is it entered into the system? Who needs to approve it? Who’s responsible for ensuring that the correct amount is paid?
You’ll want to then create a follow-up system to make sure that speeds up the process at any point.
Ideally, you want to have a system that takes as few people and as few steps as possible.
Make Life Easy for Vendors & Suppliers
Your relationships with vendors and suppliers are critical to keeping your company running smoothly. What would happen if a supplier didn’t deliver their products on time? That would throw your operations into a potential tailspin.
You can ensure that doesn’t happen by creating a system that works for your supplier and for you. One example would be to create a website backend that your suppliers could log into. They can review the information they need to and ensure accuracy.
Reduce Overpayments
You don’t want to overpay vendors, let alone pay them twice unnecessarily. As part of your system, you should have checkpoints in place to review contracts and deliverables with your vendors.
This will reduce overpayments and payment for work not performed.
An Invoice Approval Process That Works
It’s easy to overlook your invoice approval process until a major mistake is made. In the meantime, your invoice approvals are costing you time and lost opportunities.
You could be creating poor vendor relationships and not even know it because their payments get delayed. You’re missing out on prepayment discounts and likely paying more than you’d like in late payment fees.
All of that can be resolved by creating a standard workflow for approving invoices. That workflow can be enhanced even further by using automation tools to help you approve of your process.
Ready for more business tips? Check out this article about writing winning proposals.