Invoice Approval: It’s Never Been Easier

Have you ever played the computer game The Oregon Trail? Maybe it was a favorite with your kids for a time? In it, the player assumes the role of a wagon leader guiding his party of settlers to the promised land of the west, facing all sorts of obstacles along the way.

I realize this is quite the leap. But when I think of some of the legacy processes in our business function like invoice approval, I can’t help thinking of this game. We’re still prescribing to the antiquated wagon approach when it comes to accounts payable. While it may have been fun to get a glimpse of the struggles of pioneer life in video game form, it’s much less so when it comes to the struggles of legacy business models.

So, why are we still doing it especially when we have access to a modern-day approach? In fact, it’s never been easier. That’s what we’ll share in this post.

What are the typical steps in the accounts payable invoice approval workflow?

First, let’s start by outlining where invoice approvals fit in the accounts payable workflow. Depending on how a business runs operations, the accounts payable workflow can vary. But the main structure resembles this:

Invoice Collection

This part is a no-brainer. The invoice approval workflow can’t begin without first receiving an invoice. The nuance comes in how it’s received. Email, mail, fax, interoffice deliveries, or in-person deliveries are some of the methods by which invoices can arrive. Once received, the invoice is either manually entered into an accounting system or scanned in to create a digital record.

Invoice Authentication

This step is critical as it involves verifying the accuracy of an invoice. That includes everything from reviewing vendor details to cross-referencing purchase-related documents and confirming invoice dates and amounts.

Invoice Exceptions

If during the authentication stage exceptions are found due to discrepancies or missing information, the invoice must be rerouted to the appropriate individuals to resolve. If no exceptions were found, it can move directly to the next step.

Invoice Approval

Now, the invoice is ready for approval. If a clear AP structure exists, then approval or an approval hierarchy typically happens electronically. If not, then hard copies create a written approval paper trail.

Invoice Payment

 The last step is for an invoice to be paid. This can happen via a payment authorization system or feature, or it gets paid manually. Invoice payment processing requires an employee to determine the payment approval hierarchy, workflow and get final signoff for payment.

The challenges with the legacy invoice approval workflow

One of the main things that comes to mind with the legacy approval workflow is that it’s time-consuming. There’s no arguing that fact. But even more so, it hampers a business’ ability to scale. And your ability to scale can make or break your business in today’s environment.

So, let’s explore some of the typical challenges with a legacy process and what it means to your business.

Your approval process is slow.

A legacy invoice approval workflow is tedious and time-consuming. When your business is growing, that pain gets amplified.

An unclear process results in invoices sitting for longer than needed or routed to the wrong individuals. A manual process becomes even more kludgy in a remote environment, which many have likely experienced over the past year. All of this results in delays, negatively affecting payment delivery and vendor relationships.

You’re finding mistakes.

Human error is inherently human, but manual processes mean more opportunity for human error to enter the workflow. When it comes to your business, that could result in unnecessary money walking out the door.

It could take the form of processing errors. Both the beginning and end stages of the invoice approval workflow are heavily burdened by manual data entry, creating room for error. Overpaying, underpaying, or even double payments can happen when mistakes are made in processing.

Fraud could also be part of it. It’s an unfortunate aspect of working in accounts payable, but businesses often must deal with fraudulent billing. With manual processes, it’s easier for it to slip through the cracks.

Regardless of whether it’s from processing errors or fraud, these oversights put your business in a worse financial position.

You lack visibility.

Manual processes provide little to no visibility. That runs the gamut of not having clear sight into where invoices are in the pipeline to who needs to approve it and what priority level it has.

Plus, without a deeper level of visibility, it’s difficult for a business to make strategic financial decisions, much less simply manage cash flow.

A legacy invoice approval workflow is tedious and time-consuming. When your business is growing, that pain gets amplified.

The benefits of an electronic invoice approval process

Spending valuable time on manual, back-office tasks is unnecessary. Quite literally, the process has never been easier with an electronic approval process. More on that in a bit, but first let’s look at the number of benefits businesses can experience from an electronic approach.

Efficiency:

• Automated invoice processing increases productivity.
• Business rules allow smart workflows, accelerating the approval cycle.
• Digitized invoices mean no more paper and clutter.

Accuracy:

• Reduced manual error in data collection, entry, and retrieval.
• Less risk of improper payment to vendors.
• Less fraud with checks on approval thresholds and authorized approvers as well as flags on exceptions.

Visibility:

• Transparency into all your invoices through a single system.
• Clear understanding of where they are at in the pipeline, who is responsible at each step, and what the priority is.
• Better reporting and insight into metrics, resulting in better control over finances.

Why continue to live with antiquated systems when you could fundamentally change the way accounts payable operates? The financial arm of the business and the accounts payable department are strategic resources for a business. It’s time to invest in the software that will position them so.

How onePay’s Otto feature helps accounts payable become a strategic asset

Using accounts payable automation software like OneDataSource’s onePAY helps you modernize, providing efficiency so your team can focus on more strategic work while also safeguarding the spending of your organization. And when it comes to invoice approval, onePay’s “Otto” feature, a technological invoice approval assistant, provides significant benefits.

For example, at MUY! Companies, operating nearly 800 restaurants across Wendy’s, Taco Bell, and Pizza Hut with revenues right at a billion dollars, they’ve seen substantial gains using electronic invoice approvals.

“What we used to do is hand key in thousands, tens of thousands of invoices and now they’re done electronically, so our rate of accuracy is at the 99 point something level of accuracy where I would have guessed we had probably five or ten percent of mistakes,” says James Bodenstedt, President & CEO at MUY! Companies. “Those mistakes can sometimes cost us thousands, or tens of thousands of dollars if we put an extra zero or fail to put in at 0.”

Another customer, WenGap, LLC, started small, but then hit the accelerator. Joey Anderson, Owner/Operator, shared, “I remember doing a bunch of testing with onePAY first with kind of doing some of the low-hanging fruit as far as invoices that we received often, and we know we can just get into [onePAY] immediately… From there we just kept growing which vendors to implement into the full system. Then, over the course of a couple of weeks, it’s slowly rolled into all our payables and all vendors.”

For those two customers, it didn’t matter whether they were managing less than 100 stores or 800 stores. They can process 75 to 80% of their invoices with a lean staff plus onePay with the Otto feature.

And sometimes even a minor change can lead to a larger impact. For ABDD Capital, a private equity firm and OneDataSource customer, they’re leveraging Otto for invoice automation on 15% of their invoices, representing only two vendors. In other words, a small number of vendors representing a big impact in efficiency.

Are you ready to step into the modern age of invoice approvals? Start by finding out where your AP operation stacks up in this 20-question evaluation guide.

Examine the maturity of your AP operation and explore ways to improve your back office – and business – in our evaluation guide, Accounts Payable Health Check.