What is Digital Invoice Approval?
Digital invoice approval involves reviewing, approving, and processing invoices electronically prior to payment. An electronic approval workflow takes out the paper-based component of this process to improve transparency, allowing teams to accurately track the status of their invoices. As a result, finance teams increase efficiency, while reducing manual tasks.
How the Traditional Invoice Approval Process Works
Traditionally, the invoice approval process has been a very manual one. Accounts payable teams must either email or directly deliver invoices to the desks of decision makers. However, AP teams must also track payment deadlines and follow up with approvers if these invoices are not reviewed in a timely manner. For this reason, the invoice approval process can be a pain point for finance teams looking to increase their productivity. By digitizing the process, finance leaders can better maximize employee output, while shifting the role of AP teams to being more strategic.
The Challenges of the Traditional Invoice Approval Process
The traditional invoice approval process involves many obstacles for AP teams. These include the following:
Time Consuming:
Invoice approval processes are traditionally manual, requiring accounts payable to follow up directly with decision makers and approvers. As a result, AP teams can’t spend time on high-value projects since their days are consumed with other time-intensive tasks.
Lack of Visibility & Late Payments:
Since the traditional approval process is paper-based, it’s difficult to gain insight into the status of an invoice or payment. Invoices can easily get lost on the approver’s desk or email inbox. As a result, companies may risk late payments, which can strain vendor relationships.
Risk of Duplicate Payments:
Without full visibility into the invoice-to-pay process, teams can easily risk duplicate payments. Vendors may send invoices in multiple formats to ensure that payment is received. Without the right system, those invoices may get processed as two separate payments instead of being flagged as the same.
The Benefits of Electronic Invoice Approval
Digital invoice approvals offer several advantages for companies. These include the following:
Better Transparency
The lack of transparency in accounts payable is a pain point for employees and vendors. Digital processes ensure that companies can execute timely payments while allowing AP teams to identify any potential issues.
Better Suited to a Hybrid Workforce
Paper-based processes are not well suited for a hybrid workforce. About 1 out of 10 employees (12.7%) work entirely from home, and over one-quarter of employees (28.2%) are hybrid. Additionally, 98% of survey respondents desired to work remotely at least part of the time. Digital invoice approval tools make it easy for vendors to get paid, no matter where employees are located.
Make the Process Easy
Paperless invoice approval systems don’t necessarily require additional seats or logins. With tools such as MineralTree, decision makers can simply review and approve invoices via email. These decision makers can also approve invoices from anywhere, whether they be a hybrid employee, in the office, or on a business trip.
Automated Reminders
The right approval system will send automatic reminders should approvers not review invoices within an appropriate time frame. As a result, AP team members can dedicate time to more strategic initiatives instead of following up with approvers directly.
Stronger Relationships
Most AP teams noted that vendor relationships have become increasingly important over the past year. By prioritizing swift and timely payments, teams can improve their relationships with their suppliers.
Increased Efficiency
Combating the effects of inflation is a top challenge for CFOs. In fact, 62% of CFOs agree that this is not a good time for companies to take risks. As a result of this concern, CFOs aim to improve efficiency across their departments. By embracing digital transformation and reducing manual tasks, finance leaders can maximize their budgets.
Case Study: House of Cheatham Improves Visibility into the Invoice Approval Process
House of Cheatham is a U.S. manufacturer of personal and beauty care products. When they began investigating potential AP automation solutions, they had one team member handling all invoice payments. However, the high volume of invoices and lack of visibility posed problems for the company.
David Carter, House of Cheatham’s Staff Accountant, wanted to improve their accounts payable workflow. “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.” As a result, they partnered with MineralTree to streamline their entire AP process.
Final Thoughts
According to our State of AP Report, almost 30% of companies have not yet automated their invoice approvals. By simply digitizing this process, finance teams can better allocate resources to more high-value projects while ensuring invoices get paid in a timely manner.
However, companies can benefit by expanding their automation capabilities to the entire end-to-end AP process. By embracing a paperless accounts payable workflow, teams can save time and effort, pay vendors easily in their preferred formats, and improve supplier relationships. To learn more about how MineralTree can benefit your team and streamline invoice approvals through the cloud, request a demo.
