Can you imagine running your business without an efficient invoicing system?
Payments – both in and out – would never be on time, cash flow would be disrupted, and it could have severe effects on your business as a whole.
Having an efficient invoice approval workflow can help you avoid any potential pitfalls and can keep your business operations running smoothly.
In this article, we’ll look at the essential elements of implementing an invoice approval workflow so that you will never have to worry again.
- An invoice approval workflow is the process you or your company takes to validate and pay invoices.
- The steps involved in an invoice approval workflow are typically: verification, discrepancy checking, approval, and processing.
- Invoice approval software eliminates the errors and bottlenecks associated with manual invoice workflows.
Invoice approval workflow definition
Having an invoice approval workflow means that you have a process in place where a number of steps are taken to validate and pay any invoices.
Good workflow management is something that can be crucial in different areas of your business but especially in your invoicing process.
That can include steps such as verifying all the information contained in the invoice, getting approval to pay the invoice from relevant and authorized persons, and, finally, sending any payment and ensuring it arrives safely.
Without a good invoice approval system in place, you could well encounter problems with both customers and suppliers.
What are the steps involved in a typical invoice approval system
Of course, invoice approval workflows may differ slightly from business to business, but most will contain the following steps:
- Verification. Checking all the information in the invoice. This could be from receipts, order documents, progress reports, and any other relevant documents.
- Extra information. If you feel there are any discrepancies (or missing information), then you should check and clarify with appropriate team members or managers.
- Approval. Once sure that all info contained in the invoice is correct, then you need to get it signed off by a manager who can approve payments.
- Processing. The final stage in the process is to actually send payment. This will happen via a route agreed between the two parties in advance. It may take the form of a bank transfer, or it may be by business check. It’s worth noting that payment will often take place within an agreed time frame.
The problems with manual invoice approval workflows
The key word in this phrase is ‘manual’.
As with other business processes, this means a process potentially prone to human error.
Noting the disadvantages that come with manual invoice approval workflows can enable you to make an informed decision as to whether an automated process would be more efficient.
Depending on the size of your business, and the scope of your products and/or services, a manual invoicing system can be time-consuming and complex.
As well as manually entering any final details, they may also need to check (and cross-check) any applicable product/service codes and details.
This is perhaps the biggest drawback when it comes to any form of manual documentation. Human error can lead to delays and costly mistakes.
A simple transposed number could have a knock-on effect when it comes to final totals, and this mistake may not be noticed until the invoice or payment has been sent.
It can also cause disruption to your sales workflow process when invoices are unpaid.
Another potential issue with manual invoicing is that you are creating a massive paper trail.
And the more paperwork you have, then the more likely that some of it will be mislaid or lost.
This can create a problem when you want to check the details of previous transactions in order to create a new invoice.
When you have a manual invoicing system, then it’s possible that you need input from multiple sources. You also need to be able to get the final approval for payment from any authorized party.
This can, again, be time-consuming, and it only takes one involved party to be absent or unavailable for a bottleneck to be created.
Many businesses offer discounts if an invoice is settled early.
When everything is done manually, delays can happen, which means you miss out on that ‘discount window’.
While a single discount may not be a substantial amount, it can add up over the course of a financial year and potentially cost your organization a lot of money.
What are the benefits of invoice approval workflow software?
As you can see, a manual invoicing process can create many potential barriers to operational efficiency and a smooth workflow.
That means that an automated process may be of more benefit.
Of course, that usually comes at a cost, so it can help to know the tangible benefits you might experience as a result of implementing automation.
1. Time saving
As with any automated process, one of the main benefits is that it saves your employees (and you) a significant amount of time.
When your staff don’t have to spend a lot of time checking and double-checking invoice information, they can focus their attention on other tasks, which can boost productivity.
2. Account management
A lot of work on invoices will be carried out by your accounting team.
This can distract them from other finance-related tasks, such as supporting your sales staff or developing better customer relationships.
By implementing an automated system with workflow automation apps, you are minimizing the time they have to spend on invoicing.
3. Reduce human error
When you remove human error from the equation, you should be seeing increased accuracy at every step of your invoicing workflow.
That can cover every step of the process, from ‘simple’ data entry to invoice reviewing. It can also improve the approval part of the process by allowing authorized parties to electronically sign any invoice that needs to be sent.
4. Less stressful
It may not seem like it, but invoicing can be a very stressful process.
Your staff may be working to tight timeframes, and invoices have to be sent z – or paid – by a certain date.
This can be especially true when early payment discounts are involved. You can set up your software to ensure any deadlines are met every time.
This means that you are reducing the stress placed on staff, and they can focus elsewhere.
5. Cost saving
One advantage that will make your CFO smile is that an automated invoicing process will save you money in the long term.
Even with any initial investment in software, you will make significant savings over time.
You will be making savings in both time and labor costs associated with a manual process.
Invoice approval automation: Find a comprehensive solution
You can see the disadvantages of manual invoice processing and the advantages of good workflow automation software.
The beauty of PandaDoc’s software is that it can be used for any size of business and will help you boost efficiency and to avoid potentially costly mistakes.
For a small business, there can be many demands on a probably limited workforce.
You also need to consider that a steady cash flow or revenue stream can be essential to ensure both survival and growth.
A human error in a manual invoicing process could have detrimental effects on your cash flow and could cause real issues when it comes to your ability to operate.
For a larger business, PandaDoc’s software can help automate unwieldy and complex workflows.
When you are dealing with a large number of customers and/or suppliers, a manual process means it can be all too easy for things to go wrong.
With automated workflows, everything can be done in prescribed timelines and can ensure that you never pay an invoice late and that reminders can be sent to customers when payment is due.
For any size of business, the whole concept of discounts on early payments can make a real difference.
With PandaDoc’s automated workflow system, you can ensure that you gain as much benefit as possible from these offers.
Enter the actual required payment date and match it with related discounts and when they apply.
One stage to pay attention to is approval.
It makes good sense to have this responsibility shared rather than assigned to a single person (unless you have a very small business).
When you use PandaDoc’s automated workflow management, you can make this step easier, and you can also allow for any relevant forms to be signed electronically.