Accounts payable invoice approval software

In a recent survey, accounts payable (AP) professionals reported that they spend 20% of their time managing invoice approvals. Chasing colleagues for one out of every five workdays is a waste of resources and can lead to frustration and conflicts between departments. Additionally, poorly defined or technologically inadequate AP approval channels expose organizations to increased risks of fraud and abuse. This is where AP invoice approval software can help.

In this article, we’ll explain what AP invoice approval software is and discuss the benefits of using it. We’ll discuss the different deployment options for invoice approval software, provide some best practices to modernize your AP invoice approval process, and explain why you should consider automating your approval channels.

Invoice approval software is a powerful digital solution designed to streamline and automate the process of approving invoices within an organization. It provides a centralized platform where invoices can be submitted, reviewed, and approved electronically.

Invoice approval automation eliminates the need for manual paperwork. It allows for seamless collaboration between departments and stakeholders involved in the invoice approval process. With features such as automated notifications, customizable approval workflows, and real-time tracking, AP invoice approval software improves accuracy, reduces processing time, and enhances financial control. This enables organizations to achieve greater efficiency, minimize errors, and gain better visibility into their AP operations.

Automating the invoice approval process in accounts payable offers several benefits:

• Automated invoice approval workflows improve efficiency. With automation, manual tasks such as the printing of invoices, routing of invoices, and the need for physical signatures are eliminated.
• Automation reduces the need for manual intervention, saving valuable time for AP staff.
• The elimination of paper-based processes reduces costs associated with printing, storing, and transporting physical documents.
• With fewer manual touchpoints, invoice approval automation reduces the risk of human error, ensuring greater accuracy in invoice approvals.
• Automated approvals provide real-time visibility into the invoice approval status, allowing stakeholders to track progress and identify bottlenecks. Increased transparency enables better decision-making and proactive management of cash flow and vendor relationships.
• Automated systems maintain comprehensive audit trails, capturing all activities and changes made during the approval process. This documentation ensures compliance with regulations and internal policies. As a result, audits are smoother, and the risk of fraud or unauthorized actions is mitigated.
• Timely approvals lead to faster payment processing. This results in improved vendor satisfaction.
• Automated systems generate detailed reports and analytics, providing valuable insights into invoice processing times, approval trends, and performance metrics. These insights can be used to identify areas for improvement, optimize processes, and make data-driven decisions.

Invoice approval solutions offer various features and deployment options to meet the unique needs of businesses. Here are the different types of AP invoice approval software based on their deployment models:

Cloud-based

Cloud-based invoice approval software, also known as Software-as-a-Service (SaaS) solutions, are hosted on remote servers and are accessed through web browsers or mobile apps.

This deployment model offers several benefits, including:

• Accessibility: Users can access the software from anywhere with an internet connection.
• Scalability: Cloud-based solutions easily scale to accommodate the dynamic business requirements of a growing business.
• Automatic updates: Manual updates become a thing of the past as updates and maintenance are handled by the provider.
• Cost-effectiveness: Cloud solutions typically have a subscription-based pricing model, reducing upfront costs.
• Simplified disaster recovery: Cloud-based software eliminates the need for complex disaster recovery plans. SaaS vendors manage these issues and are equipped to do it faster than in-house IT departments.

Cloud-based software requires an internet connection, may raise security concerns, potentially limit customization and have ongoing subscription costs.

On-premise

On-premise invoice approval software is installed and hosted locally within the organization's infrastructure.

This deployment model offers several benefits, including:

• Control: Complete control over the software, data, and infrastructure. This ensures compliance with the business’ security and privacy requirements.
• Customization: On-premise solutions can be tailored to specific business needs and integrated with existing systems.
• Offline access: Users can access the software without an internet connection, which can be beneficial in certain scenarios.

On-premise solutions may require higher upfront costs for software licenses, hardware, and maintenance, and updates and upgrades are typically managed by the organization's IT Team.

Hybrid

Hybrid invoice approval software deployment combines elements of both cloud-based and on-premise solutions. This deployment model offers a mix of local and cloud-based infrastructure to leverage the advantages of both approaches.

This deployment model offers several benefits, including:

• Flexibility: Organizations can elect to keep sensitive data on-premise while utilizing the cloud for scalability, accessibility, or specific functionality.
• Security: Sensitive data can be housed within the organization's infrastructure. This provides an extra layer of control and data security.
• Integration: Hybrid solutions can integrate with existing on-premise systems while utilizing cloud-based features for enhanced efficiency.

Hybrid solutions offer a balance between control and flexibility but may require additional considerations in terms of data synchronization, security, and the management of multiple environments.

Businesses should evaluate their specific requirements to determine the most suitable deployment model for their AP invoice approval software.

Approval channels serve as guidelines for managers or team leaders to review and authorize invoices, purchase orders, expenses, and payments. Once an invoice has been coded and matched to a purchase order, it’s routed to the designated approver for the next step, typically payment.

Based on our experience of establishing approval channels for numerous accounts payable professionals, we recommend the following best practices:

1. Implement multi-level approvals: Set up a system with at least two levels of approval. It can be useful to establish different approvers based on a specified dollar threshold. For example, invoices exceeding $1,000 require approval from two different individuals. Some systems allow customization to ensure the invoice proceeds to payment only after both approvers have given their consent.
2. Separate approvals for invoices and payments: Assign different people to approve invoices and payments. This segregation enhances your company's risk prevention strategy by minimizing the potential for fraudulent redirection of funds.
3. Formalize your approvals matrix: Document an official organizational structure outlining the approval channels and adhere to it. The structure should clearly indicate the designated approver, their timeline for approval and specify a secondary approver in case of their absence.
4. Segregate duties: Adhere to Generally Accepted Accounting Principles (GAAP) by implementing segregation of duties as part of your accounting best practices. This practice ensures that financial decisions are not concentrated in the hands of a single person.
5. Establish a purchase order approval workflow: Create internal guidelines for initiating a purchase before placing an order. Begin by generating a requisition that requires internal approval from a manager or the finance department. Once authorized, the requisition can be sent to the supplier. Many workflow management systems offer trigger-based actions to streamline the management of purchase orders.

Companies looking to implement sophisticated approval channel controls can consider leveraging automation software. AP automation offers customizable approval channels tailored to the company's specific requirements. 

Quadient AP by Beanworks is among the few AP software solutions that offer a highly customizable organizational structure with distinct approval workflows for various accounting processes, including purchase orders, invoices, and payments.

Here are three key benefits:

1. Restricts unauthorized access: Only authorized approvers can view the status, history, and reports and approve an invoice or payment. This ensures that sensitive financial information remains secure and only accessible to the appropriate individuals.
2. Customized routing: Invoices can be routed based on specific criteria such as location, department, project, or vendor. For example, an employee in Vancouver can assign an invoice to the marketing head of the company's New York location. The marketing head can then collaborate on the document by adding comments or questions online. This creates an electronic audit trail of all approval steps completed for each document.
3. Approval sub-sets: CFOs can establish subsets or criteria for certain types of invoices. For instance, an invoice may be marked as approved after receiving approval from either of two approvers. Organizations can further customize this workflow so that an invoice is only approved when all approvers have reviewed and accepted it.

We often hear about the value of continuously updating processes to maintain competitiveness, yet we often make do with outdated systems. Even a minor change can have a significant impact. General Electric, for example, stated that a 1 percent improvement in oil recovery was worth an additional 80 billion barrels per year, equivalent to billions of dollars in extra revenue.

In a time when the financial aspects of a business are more critical than ever, we strongly recommend investing in automated invoice approval software. It can help reduce costs by eliminating inefficiencies, allowing your team to focus on more strategic work, and safeguarding your organization's spending.