Automating Invoice Approval Workflows
Invoice approval is a crucial step in managing the financial operations of any business. It involves verifying the accuracy and legitimacy of incoming invoices before they are paid, and then disbursing payments to vendors in time.
Traditionally, this process has been manual and time-consuming, often leading to errors and delays. However, with the advancement of automation technology, businesses can use tools to streamline their invoice approval workflows and enhance efficiency.
In this article, we will cover the basics of invoice approval, the detailed steps involved, and how automation can help save your business time, money, and resources.
What is Invoice Approval?
Invoice approval is a critical step in the financial management process of organizations. It involves a systematic review and verification of incoming invoices to ensure their accuracy, authenticity, and compliance with internal policies and external regulations. The goal of invoice approval is to prevent errors, fraud, and unnecessary expenditures by confirming that the goods or services detailed in the invoice were indeed received or provided and that the associated costs are correct.
Traditionally, the invoice approval process was manual and paper-based, requiring employees to physically review invoices, match them with relevant documents like purchase orders or receipts, and then route them to the appropriate individuals for authorization. This approach was time-consuming, prone to errors, and often led to delays in payments.
In recent years, automation solutions have transformed the invoice approval process. Technologies like artificial intelligence, machine learning, and workflows can streamline and expedite the invoice approval process. These tools capture data from invoices, validate it, match it with relevant records, and route it to authorized personnel for approval. This automated approach not only saves time and reduces errors but also enhances transparency and accountability in financial operations.
Efficiencies in the invoice approval process, such as invoice processing time, average cost per invoice, and RoI on invoice automation, are some of the key metrics that business leaders look to while analyzing areas of improvement in their financial operations. According to a survey by Inside Big Data, e-invoicing can reduce costs by 90%, but only about 41% of organizations automate their financial processes.
Automated invoice approval workflows thus offer businesses a way to enhance efficiency, reduce manual workload, improve accuracy, and ensure compliance with financial regulations. By embracing automation, companies can redirect their resources toward more strategic tasks, ultimately contributing to better financial management and decision-making.
How do you streamline invoice approval?
Streamlining the invoice approval process involves several key steps that ensure accurate and efficient handling of invoices. While it may vary depending on the scale and type of organization, some steps remain common.
Here’s a brief overview of the key steps in the invoice approval process:
- Collect and Organize Invoices: Invoices can come from various sources, including emails and postal mail. An efficient workflow should be able to capture and organize these invoices in a centralized system for easy access and management.
- Capture and Validate Invoice Data: Once invoices are collected, the next step is to extract relevant data from them. OCR tools like Nanonets can help capture key information like invoice number, date, amount, and vendor details. Additionally, these tools can validate the data to ensure accuracy.
- Match with Supporting Documents: Invoices need to be matched with supporting documents such as purchase orders or receipts. Any discrepancies are flagged, and the invoice is sent back to the vendor for clarification or correction.
- Run through Approval Workflow: Invoices that have been validated and matched are then routed to the appropriate authorized approvers based on internal spending policies. This step ensures that only legitimate and compliant invoices are approved for payment.
- Trigger Payment Setup: Once approved, the system sets up payments through various methods like wire transfer, ACH, or checks, depending on the vendor’s preferences and company policies.
- Record in ERP or Accounting Software: The final step involves recording the payment in your company’s ERP or accounting software. This ensures proper tracking and accurate financial reporting.
Automating Invoice Approval with AI
Automation, particularly powered by artificial intelligence (AI), is making a significant impact on the invoice approval workflow. Data suggests that the average small-to-mid-sized enterprise takes about 25 days to settle an invoice, while automation could cut that period down to 3-5 days. Here’s a closer look at how AI-driven automation can optimize the way invoices are processed and approved:
- Auto forward Emails and Batch Upload: Modern automation tools can autonomously gather invoices from various sources. Whether it’s scanning email inboxes for digital invoices or performing batch uploads from different platforms, the automation process begins by efficiently collecting invoices.
- Automated Data Capture: AI comes into play by intelligently extracting relevant data from invoices. This eliminates the need for manual data entry, reducing the chances of errors and accelerating the entire approval process.
- Matching and Validation: Once data is captured, AI algorithms perform intricate matching and validation tasks. The system cross-references the invoice data with related documents, such as purchase orders or receipts. This process ensures accuracy and compliance by detecting discrepancies and anomalies.
- Approval Routing: AI-driven automation follows predefined rules to determine the appropriate route for each invoice. Invoices are directed to the correct approvers, ensuring a consistent and compliant approval process. This eliminates bottlenecks and prevents delays.
- Slack or Email Approval: Communication platforms like Slack or email are seamlessly integrated into the automation process. Automation tools can send out notifications and approval requests to authorized individuals through these channels, enhancing collaboration and expediting the approval cycle.
- Payment Execution: Once invoices are approved, AI continues to drive the process by executing payments. It facilitates payments through preferred methods, such as wire transfer, ACH, or checks. This end-to-end automation ensures that the approved invoices are promptly settled while maintaining financial accuracy.
- Integration with Accounting Software: Integration of an automated invoice approval process with a company’s accounting software further ensures that all financial data is synchronized, eliminating the risk of discrepancies due to disjointed systems. Tools like QuickBooks Online can help with tracking and reconciliation of invoices, providing a comprehensive view of financial transactions.
By leveraging AI in the invoice approval workflow, businesses can achieve unparalleled levels of efficiency, accuracy, and transparency. The streamlined automation process not only saves time and resources but also minimizes errors and improves compliance, ultimately contributing to a stronger financial foundation for organizations.
This article spoke to the numerous benefits of automation invoice approvals, from reduced costs to increased time-savings and financial integrity. Automating invoice approval workflows can thus be a game-changer for businesses seeking efficiency and accuracy in their financial operations. With AI-powered solutions, companies can ensure timely and compliant invoice approvals, paving the way for smoother payment processes and improved financial management.