Accounts Payable
How to streamline your accounts payable approval process

How to streamline your accounts payable approval process

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If you use a manual process for approving vendor invoices, you already know the headaches that come with it.

Moving to an electronic payment process can do more for your business than make that process digital. It can automate the accounts payable approval process, sending payable invoices to the right people and managing the approval workflow with one software solution.

This article will walk you through the benefits of automating your accounts payable approval process and show you how to do it.

What is approval in accounts payable?

For businesses that receive invoices, it's necessary to verify that each invoice is billing for the correct amount and is accurate for what was received. 

Approval means that everyone (including an accounts payable team, the billed department, and other stakeholders) has reviewed the invoice and verified it as correct using a set process.

Once an invoice has been verified, it is "approved" and ready to pay.

Examples of when an invoice may be unapproved are:

  • Duplicate invoices
  • Incorrect billing amounts
  • Incorrect line items
  • Discrepancies with a purchase order

Explaining the accounts payable approval process

The accounts payable process is the steps a business takes to verify an invoice before making a payment. 

How the approval process looks varies from business to business. A company processing a large quantity of high-value invoices will have more protections in its payment approval process than a business processing a handful of small invoices.

The process should involve multiple parties as more sets of eyes with different knowledge of the situation gives the best chance at catching errors before they have an impact.

Generally, the accounts payable team or finance department leads the process and depends on the billed department or project manager to confirm the line items were received and accurately billed. Additional details like vendor information, bill date, and due date should also be confirmed to ensure payments are made to the proper party on time.

A common tactic businesses use if they send purchase orders is two-way matching or three-way matching. This is when an invoice is reviewed against the purchase order for differences between what was ordered and what's on the supplier invoice.

What's essential is that the accounts approval process is standardized and routinely followed. Everyone should be on the same page about their responsibilities so the process is thorough and runs efficiently.

Benefits of automating the accounts payable approval process

1. Standardize your AP process

No matter how an invoice arrives, by email or snail mail, electronic invoicing can automate the process.

Invoice data is read by optical character recognition (OCR) software and entered automatically. That data is checked and matched against purchase orders to flag potential problems. Users check the process and send the invoice on its way.

2. Route approvals to the right people automatically

When you automate the approval process, the system will automatically check each invoice against the workflows you provide and route it to the needed people. Payable automation technologies streamline the process of collecting invoice approvals with ease.

3.Request approvals electronically (and remotely)

With electronic approval, an employee can work from anywhere. Request and receive approvals on your mobile phone.

4. Always know where approvals are in the process

Is there a holdup somewhere? Check the status of an approval any time you want to. Automation software will locate the invoice, show you where it was directed, and let you know what steps are still needed. Send a notification reminder from the app and collect that approval without looking up an email address/

5. The amount flows from approval to payment automatically

Another great feature of electronic invoicing is that each transaction amount is filed with each invoice as soon as it arrives. Invoice automation tools integrate with digital payment options and accounting software.

In other words, the invoice moves from initial data capture to approval to payment to your accounting books without anyone having to enter that data again. This significantly reduces the chance of human error.

6. Manage all questions, communication, and documentation digitally

Implementing an electronic invoice processing solution means that every question and reply about that invoice is stored digitally with the invoice itself. If you ever need to look up a previous transaction, all that detailed back-and-forth is recorded in digital, searchable storage and linked indelibly to the correct invoice.

7. Store approvals in a permanent audit trail

All supporting documentation is indexed in a permanent, transparent audit trail. Don't underestimate this advantage to your accounts payable department or business processes.

Having a reliable audit trail has helped companies partner with larger firms and suppliers, helped them decrease the time, stress, and expense of being audited, and even helped them obtain better financing terms.

How to streamline your accounts payable approval process

Streamlining your accounts payable approval process doesn't have to mean doing a complete overhaul. Use these four tips to start making accounts payable process improvements right away.

1. Centralize invoice intake

Every accounts payable workflow needs a launching point that signals to the team that the process needs to begin. This should be when an invoice is received.

If invoices are coming into multiple different places, there's a high likelihood that something gets missed.

To centralize invoice intake, determine where you want invoices coming in and communicate it to your vendors. The most likely solution is an email address monitored by someone on the accounts payable team.

2. Move to electronic invoicing

Entering paper invoices is an additional step, while electronic invoices are already digitized and primed for entry into your accounting system.

Electronic invoices streamline the matching process. They can be automatically checked against a purchase order, saving you an extra step.

Reach out to your vendors to see what it would take to move to receiving electronic invoices. If there's any friction, consider using an AP tool with optical character recognition, which can turn a photo of a paper invoice into readable text that is entered into your accounting system.

3. Have separate workflows for invoices with and without purchase orders

A purchase order helps streamline the accounts payable approval process. Having a document you can refer to match the details means less time verifying that information elsewhere.

The approval process without a purchase order should be more robust and include more verification steps to verify its accuracy.

With a purchase order, you can save steps in your approval process. This lets your team spend their time where it's most valuable and where it's likely to catch a discrepancy.

4. Standardize the invoice approval workflow

Role accountability is the key to a smooth-running account approval process.

Businesses should have an accounts payable policy which outlines their standard procedures and documents the approval process. Every team should be trained on this process so they know what tasks they're responsible for.

If done correctly, the invoice approval process is like an assembly line. They constantly move through the process, with each person jumping on their responsibility when it's their turn. 

Ready to automate your AP approval process with BILL?

BILL helps teams like Bombas and Marine Layer spend 50% less time on their accounts payable process.*

With customizable controls and workflows, you get to define how the platform works for you. Enter as many approval controls and rules as needed and let the system handle them easily.

Streamline each step of the approval process to save time and effort. Automated matching with purchase orders speeds up verification, and custom workflows keep invoices constantly moving through the pipeline.

Ready to see it in action? Sign up for a risk-free trial and pay your first bill in minutes.

*Based on a 2021 survey of over 2000 BILL customers

AP approval process FAQ

Who approves accounts payable?

Approval in accounts payable is a team effort. Ideally, multiple people are involved in approving an invoice for payment.

For example, if the IT team orders a new batch of laptops, they should be involved in the approval process. They'd be the ones to confirm how many laptops were received and whether the order was completely fulfilled.

While the AP team spearheads the accounts payable approval process, other people involved in the purchase should provide another set of eyes.

How long does accounts payable approval take?

The accounts payable process can be speedy or take a long time. What determines this is how many people are involved, how many invoices are being approved, how complex the invoices are, and whether there are supporting documents (like a purchase order).

Your goal is to keep your vendors happy. If you're consistently making payments close to the deadline, consider reworking your process or looking for a new accounts payable solution with automation.

What is an automated accounts payable approval process?

An automated accounts payable process reduces manual inputs by relying on technology to complete some steps.

Automation is used at many points of the approval process. It's possible to set up automation that enters invoices as soon as they're received, notifies stakeholders when they're needed for approval, makes payments once an invoice is approved, and more.

The information provided on this page does not, and is not intended to constitute legal or financial advice and is for general informational purposes only. The content is provided "as-is"; no representations are made that the content is error free.