The level of frustration that arises from the delay of unpaid invoices is immeasurable, and the truth is told, no one likes to be on the receiving end of delayed payments.
Sadly, most financial departments in an organization still conform to the traditional ways of invoice processing. They rely heavily on manual and paper-intensive methods that offer no visibility and often take longer because of the manual approval processes and levels involved. The direct consequence of using below par invoice processing methods reflects on the company’s overall growth and performance. Eventually, your company will start losing the good status it enjoys with its suppliers or dealers. They may become lax in negotiating future contracts with your organization. Often, companies get poor reviews from suppliers and dealers when invoices are honored late.
That is just a scratch on the surface; you can risk losing more in terms of revenue if you’re still using inefficient invoice approval methods. You may experience shortages in liquidity because of multiple payments. For instance, delayed payments may prompt a supplier to resend an invoice more than once. Because of the heavy paper flow, some lapse in concentration may occur and prompt multiple payment approvals on a single invoice.
Without a doubt, manual invoice processes will expose your organization to unforeseen financial risks that are both costly and time-consuming. It may also make your organization susceptible to fraudulent activities.
A well-structured invoice approval workflow
To begin with, you have to move from financial paper operations to automated operations. This will save your company from the blushes of going under because of a failed financial system. Consider the following effective measures:
- Have a submission portal
All invoices should arrive and be managed from one central point. A centralized submission portal will ensure that all invoices are configured and automatically redirected towards the relevant departments based on the particulars of the invoice.
- Determine submission requirements
Form clear guidelines and communicate them to your suppliers. Your suppliers will need to comply with these guidelines for their invoices to merit approval. For instance, certain key details should be captured; the invoice number, the due date of payment and where payment is to be sent.
- Have approvers incorporated in the system
It’s critical that all persons tasked with the invoice approval process be included. Certain purchases will require different levels of approval. Ensure the system accommodates the person defined for all approvals at each department level. In the event that the person assigned is not available, the system should be able to allow the next in authority to make an approval. This saves on time. You may also use a free invoice generator to save time.
- Support Documents for approval
To eliminate errors related to fraud, there must be a subsection that allows an approver to justify why they approved the invoices. If the invoice has all the required support documents, then it moves to the payment cue before being dispatched to the supplier.
- Automatic alerts and notifications
This maintains communication with the supplier and sends status updates of the invoice process whenever necessary. It allows the supplier to know the stage of the invoice if need be.
Benefits of a Good Invoice Approval Workflow System
The obvious benefit to a company is the elimination of financial errors. Because every stage in the approval process is recorded, grave financial mistakes that would have otherwise gone unnoticed are identified and eliminated.
Consequently, information gathered on recordings can be translated to data easily and used as performance indicators, thereby being able to analyze and optimize all the resources available to the organization.
The records are further useful in making streamlined decisions before approving an invoice. As it shows each stage of the invoice, you’re able to see who made a purchase, for which department was the purchase made, and from whom was the purchase made. This makes it simple to approve or reject the invoice without the need for back and forth dialogue between the concerned parties. Finally, an additional benefit in terms of efficiency is time-saving; you can activate the automated recurring invoices. Sometimes, organizations prefer to work with only one supplier for a certain service or product. These payments are known in advance and are always budgeted for. Approval becomes unnecessary, and there is no need for an employee to intervene.