Payment Approval Workflows – Streamlining the Payment Approval Process

Payment approval for vendor invoices has a direct bearing on business success. On-time vendor payments translate to mutually beneficial business relationships. Are manual payment approval processes capable of scaling up to the expanding requirements of growing businesses? Definitely not! Manual payment approvals are marred by delays and bottlenecks, the net result being compromised vendor relationships.

Automated payment approval workflows are the solution. The most effective way to streamline the payment approval process would be to automate the workflow so that redundancies are eliminated and payments are done on time.

This blog explores the payment approval workflow and the benefits of automation.

What is the Payment Approval Process?

Accounts payable processes play an integral part in the success of a business and its overall efficiency. In simple terms, the payment approval process involves all the steps involved in the review and approval of vendor payments. So, what are the steps involved in the payment approval process?

1. Checking the invoice for accuracy

The payment approval process begins with a review of the details on the invoice to ensure that the details are accurate. Details on the products or services delivered need to be examined to ensure that they align with the purchase order or contract agreement. The amount charged by the vendor also needs to be verified to ensure that it is in agreement with what was discussed with the vendor. Other details like quantities and other credits, sales tax assessments, etc can also be part of the invoice verification process.

2. Verifying invoice dates

Check the dates of all the goods and services mentioned on the invoice and cross-reference them with past invoices to ensure that there is no overlap. If an overlap of dates occurs, then you need to follow up with the vendor to ensure that you are not being charged twice for the same purchase.

3. Confirming with the Project Manager

If the vendor invoice covers services that were overseen by someone else, then you need to check with the project manager for the job to ensure that the work was performed to their satisfaction and confirm if all the elements of the project that you are being billed for are satisfactorily delivered.

4. Recording the Invoice Deadlines

Keeping track of the invoice payment deadline is important in the payment approval process. While filing the invoice records, file them by the invoice due date. If suppliers offer discounts for early payments, make a note of that too and also confirm whether it is possible to meet the early payment deadline to save money.

5. Scheduling the payment

Once all the verification steps have been successfully completed, vendor payment needs to be scheduled. You need to schedule the payment at least a few days before the payment deadline so that you get a buffer in case any issues or unforeseen delays arise when you make the payment.

The payment approval process entails several steps that are data-intensive and time-consuming, especially the ones that involve data verification. At scale, these steps can eat up a substantial amount of work time for the accounts payable team. Timely execution of these steps is crucial for invoice processing and sustained vendor relationships.

Why Should You Streamline the Payment Approval Process?

A streamlined payment approval process makes the accounts payable process more efficient and helps save costs. Setting up a clear payment approval workflow for the accounts payable function is a must to ensure timely payments. Why should you streamline the payment approval process? Here is why –

Eliminate internal fraud

A streamlined payment approval workflow standardizes the process, which eliminates fraud and duplication. In the absence of a workflow, issues like cutting corners, signing blank cheques, and duplicate payments arise.

Assign responsibilities

A payment approval workflow equips the team with proper controls and checks on the payments that go out of the organization. Without these checks and balances in place, it is difficult to gauge who is responsible for what in the approval process.

Avoid late payments

The main issue when companies don’t have a proper payment workflow in place is late payments. The more paper-based invoice processing that happens in the company, the slower the overall process will be. This results in late payments that affect the company’s cash flow negatively and hamper supplier relationships.

Better transparency and oversight over payments

A streamlined approval workflow provides teams with the transparency over status of payments. Teams are fully aware of the status of each payment and, hence, control all payments that go through the system.

Minimize errors in invoices and inaccuracies in payments

Deeper transparency into payments helps reduce errors and inaccuracies in invoice processing. The chance of fraud and embezzlement is also eliminated in a streamlined payment approval workflow.

Maintain good vendor relationships

The most important reason for streamlining the payment approval workflow is maintaining and building strong vendor relationships. Businesses love customers who pay their bills on time. Consistent time;y payment patterns will encourage suppliers to consider offering you additional discounts and rewards. Also, they will strive to fulfill your orders on time once they know that you are a reliable client.

Given the benefits that businesses stand to gain from streamlining their approval workflows, automated payment workflows must definitely be considered. A workflow automation software like Cflow is highly effective in streamlining the business workflow by automating data-intensive and repetitive steps in the process.

Ways to Streamline the Payment Approval Process

You can avoid late fees and pay your bills faster with a streamlined payment approval workflow. We have listed some easy-to-implement ways to improve the efficiency of the payment approval process.

1. Approve Purchase Orders Immediately

When you have to approve an invoice, and you realize that the purchase order has not been approved in the first place, it leads to a lot of time and energy wastage. You can consider requiring purchase orders only so your accounts payable team can take care of the invoice payments later.

2. Set thresholds for invoice approvals

Setting cost and time thresholds for approval of payments is a good way to streamline and accelerate approvals. Minor authorized purchases such as office supplies can be approved without the need for discussing any invoice details with superiors.

3. In-person approvals

For small businesses, setting up a system where the accounts payable team directly goes to the approver in person to discuss any invoice details and get approvals on the spot can be set up. Another way is to schedule weekly approval meetings that enable bulk approval of payments.

4. Set Negative Approvals Policy

In some situations, requests for approvals get buried in people’s inboxes, which slows down the process drastically. Here is where the policy of negative approvals may be useful. When the accounts payable team sends the invoice to the approver for review and approval and does not hear back from them in a certain amount of time, then they can consider the invoice approved.

5. Approval automation

This is by far the most effective way of streamlining the payment approval workflow. Automating approvals in the accounts payable system takes care of approvals so that invoices are processed more efficiently and payments are made quickly. The invoice approval process can be automated based on recurring bill payments for any vendors that regularly invoice a set amount. This way not only is the approval process accelerated, but fraud and duplication are also avoided.

Creating the Payment Approval Workflow

Payment approval workflows vary depending on the type and size of the business. So, how do you create the right payment approval workflow for your business? Ask yourself the following questions and design the workflow accordingly –

Who – Decide on who the stakeholders are in the approval process. Possible stakeholders are office managers, personnel incharge of purchasing, external accountants, or in-house bookkeepers. Once you have this information, assigning roles in the approval process becomes easy.

How much – What are the amounts that each person in the workflow is allowed to approve? Setting up thresholds in the approval process becomes easy once you have this information.

What – What type of action will trigger the workflow? This is a very important criterion for designing the workflow. Setting the trigger action right decides the direction of the workflow. Trigger action examples include – when an invoice is added to the system or when it is ready to be paid.

Key Takeaways

Streamlining the payment approval process fosters stronger and more sustainable vendor relationships. The most efficient way to streamline your payment approval workflow is to automate it.

With workflow automation tools aplenty in the market, which one should you go for? Choose a no code BPM-based automation solution like Cflow for quick and effective automation. The visual form builder in Cflow can be used to automate any business process within minutes.

Ready to try out Cflow? Sign up for the free trial right now.