How to automate your invoice approval workflows

Automating your invoice approval process speeds things up, eliminates errors, reduces risk, and streamlines spend management. The question really isn't, "Why do it?" The question is, "Why wait?! "

To get you started, we've broken down the key parts of the process, the benefits, and what to expect from a good solution.

What is an invoice approval process?

Every invoice goes through an approval process to ensure accuracy and legitimacy before payment.

A typical invoice approval process involves receiving an invoice from a supplier, reviewing, approving, processing, and eventually paying it.

And an effective invoice approval process? This process involves clear but automated approval workflows to help you maintain financial control and visibility and increase operational efficiency. It also supports automated data collection, helping your organisation take a more strategic approach to financial management.

The ten steps to a manual invoice approval process:

1. Receive invoice
2. Enter invoice data manually
3. Verify the accuracy of the invoice
4. Match the invoice with the goods receipt and purchase order
5. Correct any discrepancies found
6. Send invoice to designated approver via email
7. Resolve any comments/concerns of the approver (you will probably need a couple of emails to get through this)
8. Send back for approval
9. Pay invoice
10. Update records to ‘invoice paid’ (and multiply this step if you're using multiple systems)

The automated invoice approval process with an intelligent platform:

1. Receive invoice receipt
2. Let intelligent technology extract the data automatically and categorise it with the correct cost centre, category, and any custom field
3. Catch possible discrepancies automatically with zero human effort and flag for investigation via the in-built three-way matching technology. If the tech flags discrepancies, then it triggers a specific workflow so someone can review it and approve or reject
4. Keep all communication within one platform
5. Invoice paid automatically
6. Automatically update records, including auto-reconciling via ERP integrations

Common invoice approval challenges

Recent research found that 60% of organisations process over 1000 monthly invoices. That’s a lot of invoices. Imagine your finance or accounts payable manually entering the data for all 1000 of them.

Now imagine the stress and delay of closing the month when your team still has piles of invoices to deal with, late payments to manage, damaged supplier relationships, cash flow issues, and difficulty with expense reporting and tracking.

Lucy Payne, Head of Financial Control and Reporting at Astrid & Miyu, says:

Since moving to Payhawk, we've been able to close our accounts payable ledgers two days earlier than with our previous platform! And we no longer dread the end of the month!

Key features of an automated invoice approval workflow

Fed up with manual invoice approvals and processing (and all the delays that go with it)? Here’s how to build an approval flow that works for you.

OCR: Optical Character Recognition

Optical Character Recognition (OCR) makes capturing invoice data incredibly easy. Once someone uploads and scans an invoice, OCR captures the data you need to process it automatically, including supplier details, dates, amounts, VAT numbers, etc.

At Payhawk, our OCR feature can read documents in over 60 languages and multiple alphabets, quickly extracting data, populating relevant fields, and even matching invoices to purchase orders. The OCR feature speeds up the whole data capture and categorisation process, freeing up your finance team to concentrate on other things and eliminating the human error often seen in the old copy-and-paste method.

Nadia Vanuytrecht, HR and Operations Manager at Explose Agency, says:

Payhawk makes accounting activities easier; the OCR does part of my job by identifying duplicate invoices and populating the fields, so it’s sort of like the four-eyes principle in action.

Automated two or three-way matching

Two-way and three-way matching are vital for flagging accounts payable discrepancies and are much easier to manage if automated.

With automated two-way matching, the system scans both the supplier's invoice and the purchase order (PO) and assesses details like supplier name, quantities, and prices. Once all details match, you can process the invoice.

Meanwhile, automatic three-way matching examines the supplier's invoice and PO (like two-way matching) but also checks the goods receipt note (GRN) or receiving report. By auto-checking this additional document, you can verify that you received your items on time and correctly and that the quantities and prices match both PO and GRN. Despite being a little more complex, three-way matching protects against errors, fraud, and disputes.

Customisable approval workflow

Customisable approval workflows let you tailor how you process and sign off invoices to meet your company's specific needs, unique organisational structure, and policies.

At Payhawk, we offer several different ways to customise your invoice approval workflow with our workflow designer. Here are three examples of typical, time-saving workflows and what they involve:

• Invoice amount. For anything less than £500, you may just require your team managers' approval, whereas anything more would be sent automatically to a senior staff member for sign-off.
• Cross-departmental approvals. Rigid workflows aren't one-size-fits-all because every organisational structure is different. With Payhawk, you can create specific approval workflows that span across departments
• Fallback approval paths. You can even define alternative approval paths with our customisable fallback options. Should a selected invoice approver miss signing off the invoice for any reason (for example, because they're on vacation), we can redirect to a predesignated team member within your organisation, keeping the invoice approval process smooth and stress-free.

Daniel Tang, Finance Manager at PinPoint Media says:

Payhawk’s workflow designer has improved the overall ease of use by being very intuitive. It has also improved the customisation functionality, as we can modify the workflows depending on the project department.

Real-time reconciliation

Think you’ve digitally transformed your invoice process because you can now pay them via your spend management solution? Unfortunately, that’s only half the battle.

Let’s say you receive an invoice from a supplier, upload it to your spend management solution, check it with automated matching and pay it. Job done, right? Wrong. Now, you need to manually update your ERP or accounting system with a process that can open you up to financial discrepancies, inaccurate reporting, poor overall visibility, and wasted time.

But how much time are we talking about? Take MDM Props, for example. Before they switched to us, the team spent 32 hours manually reconciling their accounts (which equates to four working days!), but now, it just takes them minutes.

You must find a spend management system that supports seamless invoice processing and reconciliation. Look for a solution (like Payhawk) with robust ERP and accounting integrations that are essential for financial continuity. Then, once you’ve auto-checked and paid your invoice via your spend solution, your ERP and accounting software will reconcile in real time, and there will be no errors or discrepancies in sight.

Automated notifications and reminders

Delays happen when you rely on manually notifying approvers. You know how it gets: You end up constantly chasing them to take action, whether it’s to approve, deny or ask for additional information. What’s worse, this chasing might happen on an entirely different platform, such as email or Slack, making the communication even more complex.

With automated notifications and reminders, we consistently update the original requester with the status of their invoice so they know exactly where it is in the approval process, i.e., it’s been rejected. And the approver? They receive automatic push notifications to remind them there’s an invoice awaiting their approval.

Automating small interactions like this removes any confusion for both parties.

In-app and platform communication

If you’re currently relying on communication platforms outside of your spend management solution, there’s a problem. Your comms are fragmented, meaning invoice approvals can get delayed, and you might miss important messages (perhaps lost somewhere in your Slack channel).

A spend management solution with in-app communication capabilities will help you centralise all communications with everyone involved in the invoice approval process — finance managers, team managers, employees, stakeholders, etc.

In Payhawk, for example, you can tag relevant users in the comments and get responses directly in your inbox. This process means you don’t miss any vital changes coming in from senior management, and there’s no hiding: Everyone is accountable, and comments are transparent.

The ability to measure budgeting KPIs

Real-time visibility over budget spend puts you in a powerful position to make accurate decisions on budget allocations as and when you need to.

With our solution, you can see what the business has spent on invoices so far and what you've committed to in the coming months. You can do this for your department or even for a specific project you are working on — even better, the information you can pull out of the budget tracking feature is all in real time.

Four benefits of implementing automated invoice approval workflows

Implementing automated workflows for invoice approvals has plenty of benefits. The most obvious are saving time and reducing errors.

Reduces both fraud risks and human errors

According to the Association of Certified Fraud Examiners (ACFE), expense reimbursement fraud accounts for 17% of all business fraud cases and costs businesses billions across the globe. With an automated invoice approval process, you significantly reduce these fraud risks and any human errors made in the manual expensing process.

Reduces the volume of manual work

Manual work is tedious and time-consuming, particularly as your organisation scales, structures change, and you introduce new processes.

It’s hard to keep on top of the growing to-do list. But by automating these processes, you get this time back to focus on more value-adding business tasks, such as forecasting, resource planning, allocation, etc.

Knowing your processes are in the capable hands of automation makes every process easier to manage.

Improves your vendor relationships

With an automated invoice approval workflow, you won’t miss an invoice payment again, meaning you always pay your suppliers on time. Smart technology like OCR and three-way invoice matching eliminates manual data entry mistakes, and discrepancies are flagged immediately, helping you intervene quickly to query and rectify any problems with payment amounts or details.

Enhances financial control and transparency

At Payhawk, every invoice you pay first goes through your predefined approval workflow. This process means all spend is accounted for and signed off by the appropriate person, increasing transparency and financial control across the organisation.

No matter how complex your organisational structure is, you can build policy compliance into our spend management system to limit who can spend, what they can spend, and how it gets approved. Any amendments made to the invoice are logged in an audit trail, so accountability is built in, too.

What to look for in an automated invoice management software

Choosing invoice management software is a big deal because finding the best fit means you can unlock better spend visibility, improved control, and increased efficiency and productivity when processing invoices and other business expense types.

But how do you sort the wheat from the chaff? Here are a handful of things you should consider when researching your options.

Consider whether it integrates with your existing systems

Finding a solution that integrates with the rest of your tech stack will further cut down manual data entry and boost process efficiency. Why? Imagine accessing just one dashboard to view financial data instead of having to log into multiple systems, ERP, accounting, and spend management, to manually sync data.

Check if your software option integrates with market-leading software or allows you to set easy-to-use and modify templates. This way, you can take advantage of real-time reconciliations.

Make sure it supports you as you scale

As your organisation scales, so does your staff pool, which means more employees to educate on your processes, more departments, and more supplier invoices to process. Waiting to automate your invoice approval process until it’s already too late will cause major problems and potentially stall your invoice management processes.

Robbie Hadfield, (ACCA-qualified accountant) and Senior Director of Product Engineering at Payhawk, says:

As your scaleup grows, CFOs face new challenges in expense management. Initially, formal processes may seem unnecessary in small teams where trust is high. However, as the company scales, managing expenses becomes more complex. With more people and more projects, the CFO often has to support the founder in shaking off 10 million approval threads and instead give accountability to the budget holders (without losing transparency and oversight). That’s where Payhawk comes in.

Make sure you choose a system that can grow and change with you. From customisable workflows to automatic policy compliance, it's time to future-proof and save yourself the hassle of changing to yet another platform in the future.

All-in-one spend management platform

Managing all your spend under one roof means no more juggling disconnected tools; instead, you can manage spend across all entities from the same platform. This gives finance managers and CFOs complete control and visibility over all types of spend, as well as access to accurate financial data means better budgeting, forecasting, and planning for future growth.

Nick Yanev, Marketing Manager at Eleven Ventures, says:

Payhawk saves me a surprising amount of time. All of our marketing tools, subscriptions, and platforms are connected to my Payhawk card, which makes it very easy to not think about the next payment or where and how I should pay.

The ability to schedule payments

It may seem like a small thing, but scheduling payments can improve financial planning, help you stay on top of upcoming expenses, and pay suppliers on time. You can also use the built-in amortisation scheduler to defer transactions and spread out costs more effectively.

Exceptional supplier management features

Effective supplier management will help you keep your finances organised and improve oversight. With our solution, you can sync supplier data with your ERP, access a central database, track changes with audit logs, and categorise expenses — all in one place to streamline processes and stay in control.

Before you go

Automation is a time-saver no matter what area of spend management you’re trying to optimise. But when it comes to invoice approvals, automation can help you build better supplier relationships, ensuring timely invoice payments, clearer financial visibility, and easier budget
planning.

Without automation, you can easily miss mistakes and end up overpaying invoices and running manual corrections, which is a big drain on resources.

Want to see all the components of our automated invoice approval workflow in action? Request a demo to learn more.