Improving the Invoice Approval Workflow in Accounts Payable

Automating the financial function has become increasingly important for organizations looking to improve vendor relationships and create a more efficient workflow. Today’s companies need an AP solution that allows for a remote or hybrid process, as opposed to traditional AP methods that rely on moving physical papers from desk to desk for approval. By using an AP automation platform like MineralTree, organizations can significantly improve their invoice approval workflow, saving time and money while reducing errors and enabling remote operations.

State of AP Report 2021 Download

What is the AP Invoice Approval Process?

Invoice approval is the process of reviewing incoming invoices to ensure they are legitimate and accurate before paying them. Because the AP team is often not familiar with the specifics of each invoice, this typically involves getting approval from the stakeholders who are most familiar with the situation.

Invoice approval is a powerful tool to prevent mistakes or even invoice fraud. It should always take place prior to paying an invoice and ideally before an invoice impacts your GL.

The Standard Invoice Workflow

Payment approval is a pain point for accounts payable teams with manual systems because it forces AP staff to continuously follow up with approvers to get invoices paid. This can be tricky if stakeholders are busy and hard to reach. Without any automation in place, tracking down invoice approvers can be extremely time-consuming and tiresome, yet it’s an essential process that minimizes late payments and enables important approval hierarchies.

Unfortunately, the standard invoice approval process isn’t always conducive to a hybrid or remote work environment. Manual invoice approval often requires approvers to receive a physical copy of the invoice. Once the approver grants approval, the invoice returns to the AP department for payment. While it sounds simple in theory, this process is commonly dragged out, especially when payments are large enough to require approvals from multiple stakeholders. When not handled in a timely manner, this can result in late payments and weaken important vendor relationships. Digitizing invoice approvals and reminders cuts down these extra hurdles, streamlining work for the AP team to process payments more quickly.

But going digital isn’t always enough. Even for organizations that have embraced a paperless AP process, invoice management can continue to strain AP’s internal resources. This is because invoice approvers like marketing directors or c suite personnel have busy workloads that can cause them to overlook or deprioritize invoice approval emails. Once again, this can lead to the AP department needing to send reminders or track down the individuals in question. Keep reading to learn more about common challenges with invoice approval processes, and how to solve them.

Challenges in Approving Invoices Manually

Unsurprisingly, manual invoice approval processes come with many challenges, especially for organizations handling fluctuating or increasing invoice volumes, or those that rely on remote and hybrid workers. These challenges include, but are not limited to, the following:

  • Difficulty obtaining approval for hardcopy invoices when approvers or AP department workers work remotely
  • Difficulty digitizing paper invoices received in the mail when AP department members are off site
  • Overlooked email requests for approvals, requiring time-consuming follow-ups and increasing the risk of late payments
  • Inability to scale, hindering the ability to meet fluctuating or increasing invoice volume
  • Lack of institutional memory as knowledge about processes may reside with individuals and can be lost if they leave the company
  • Increased risk of fraud
  • Increased risk of processing delays
  • Errors such as duplicate payments or incorrect entries are much more likely
  • Limited availability for AP staff to work on high-value projects, as they spend the majority of their time tracking down invoices for approval
  • Difficulty with Invoice capture when invoices come in different formats–email, regular mail, etc.

Solutions like MineralTree not only offer a robust AP automation platform, but they also automate approval reminders so you don’t have to. Due to the challenges listed above, invoice approvals have been the most common AP task to automate over the last two years. In fact, about 7 out of 10 companies surveyed have automated this part of their AP process, making it easier to streamline and execute their payments. However, it’s important to note that organizations benefit most when implementing an end-to-end solution that removes other common bottlenecks from the payment process.

Automating the Invoice Approval Workflow

AP automation directly routes invoices to the right stakeholder for approval with scheduled follow-up reminders sent as needed. An AP automation tool like MineralTree allows approvers to review and approve invoices from anywhere on any device connected to the internet. Compared to manual approval workflows, this approach reduces errors and delays, works well in remote work environments, and is much easier to scale.

The first step of automating the invoice approval workflow is selecting the right automation platform for your organization’s needs. The right platform should allow you to create rules for invoice approval routing based on the department, what the invoice is for, and so on. Some platforms like MineralTree even set up a designated email inbox with rules to automatically forward emailed invoices to that inbox for processing.

These systems and their rules automatically digitize invoices before routing them to the right people for approval–also handling subsequent automated reminders as needed. Another key perk to this approach is that centralizing all invoices into a single system virtually eliminates the possibility of redundant invoices or duplicate payments. Automating these historically time-consuming processes not only reduces errors but saves the AP staff significant time.

Invoice Approval Best Practices

Use the following best practices to streamline your automation efforts for invoice approvals and more effectively manage your AP:

 

  • Set up a multi-tier invoice approval process:

Smaller invoices don’t usually require the same level of approval as larger dollar invoices. Set up clear rules so that larger invoices are routed to the right people and smaller invoices are allowed to bypass unnecessary approvals.

 

  • Put controls in place to prevent fraud:

It’s a good idea to keep a reasonable number of humans in the loop, able to review the automated processes and check changes in settings against each other.

 

  • Consider investing in an end-to-end AP automation solution:

Instead of just automating invoice approvals, seek out a complete solution that automates the entire AP process from invoice capture all the way through rendering payment. Doing so can significantly streamline your AP department functions and help you capture the full benefits of automation.

 

  • Invest in accurate data capture:

Automation is great, assuming the invoice data put into the system is accurate. If invoices are not captured accurately, this can lead to a mess down the line. So, make a point to invest in a solution that ensures accurate capture. For example, MineralTree makes use of optical character recognition (OCR) technology to input invoices, but also backs it up with human review to ensure accuracy.

 

  • Make approval easy

Choose an AP automation platform, like MineralTree, that streamlines the approval process by allowing authorizers to review invoices via email and either approve or reject them without needing to learn a complicated ERP platform. Reminders are also sent out automatically via MineralTree to simplify follow-up.

 

Case Studies

Simple Mills Leverages AP Automation to Improve Challenges with Invoice Hierarchies

Simple Mills provides crackers, cookies, snack bars, and baking mixes with nutrient-dense ingredients. When Cristina Vera, a Senior Accountant, and Maddy McGannon, Simple Mills’ Controller, first joined the company, they operated the AP process via Bill.com, causing issues in streamlining invoice approvals.

The system didn’t allow for invoice hierarchies, creating extensive workarounds for the Simple Mills AP team. Vera noted, “I had to maintain a separate spreadsheet with our various approval hierarchies by vendor. I found that this required too much memorization and manual effort on my part. For example, if an invoice exceeded an approver’s threshold, I had to stop what I was doing to figure out who I should route it to next.”

By implementing MineralTree, they were able to capitalize on the platform’s suite of offerings to streamline the entire invoice-to-pay process. With MineralTree’s invoice processing automation capabilities, the Simple Mills team was able to make the AP process more efficient for everyone involved. Vera noted that, “Rather than spending time manually capturing, coding, and routing each invoice, I simply review the invoices MineralTree has auto-captured and matched, and make sure everything is coded correctly. Once they’re ready, the invoices are automatically routed to the appropriate approvers and then approved invoices sync over to NetSuite.” Vera no longer needs a cheat sheet to handle invoice approval hierarchies and this transition has helped improve collaboration throughout their business.

BrightView Health Streamlines Invoice Approvals for Busy Doctors and Nurses

BrightView Health provides outpatient medication-assisted treatment in Ohio and Kentucky with the goal of helping patients achieve lifelong recovery. When selecting an AP automation platform, it was important that the team’s new solution streamlined their invoice approval process. Doctors and in-field nurses don’t have time to be bogged down by lengthy paperwork or time-consuming approval processes. MineralTree was able to make it easy for these essential care providers to quickly approve invoices without taking significant time away from patients.

Additionally, MineralTree automatically captures invoice information, saving time for AP teams and reducing invoice capture errors. Our combination of OCR technology and human review grants AP teams the peace of mind that comes with automated invoice capture, even for invoices multiple line items.

House of Cheatham Gains Visibility into the Invoice Approval Process

House of Cheatham is one of the oldest manufacturers of health and beauty products in the US. They have a commitment to excellence in their accounting data. However, with only one AP member processing invoice payments, they needed a modern AP tool to streamline work where possible.

Prior to implementing MineralTree, House of Cheatham relied on email for invoice approvals. However, this approach restricted visibility and invoice tracking. David Carter, House of Cheatham’s Staff Accountant, knew the team needed more visibility into their approval process. “We couldn’t always see where there could be possible obstacles,” Carter explained. “For example, why would some invoices take longer to get approved than others? Which invoices were at risk of not getting paid? We needed to be able to answer these questions and address any underlying issues they represented.”

By working with MineralTree, House of Cheatham streamlined its entire AP workflow and reduced the manual hours needed to approve invoices. “MineralTree makes all invoice details very visible and saves a lot of time,” said Carter. “Where our previous payment process took at least six hours a week, our payment runs with MineralTree now take all of five minutes.”

Final Thoughts

There are many reasons for your team to make the case for AP automation, including invoice approvals. Most importantly, automation is a powerful tool that streamlines processes and enables scalability. Organizations late to the automation bandwagon will likely find themselves at a disadvantage, especially in a market with supply chain disruptions, remote work, and rapid innovation.

MineralTree offers an end-to-end AP automation solution called TotalAP. It digitizes and automates the entire invoice-to-pay process, including approvals, and has been shown to facilitate up to a three-fold increase in invoice volume without adding headcount, and reduce the total cost per invoice by up to 430 percent. To learn more, request a demo today.

State of AP Report 2021 Download

Jim Coughlin

As a Senior Implementation Manager at MineralTree, Jim has a passion for process improvement and a knack for learning new products. When he's not helping customers improve and automate their accounts payable workflow, he enjoys improving internal processes and helping teammates think through complex problems. He has been with MineralTree since 2018.