If you use a manual process for approving invoices, you already know the headaches that come with it:
Figuring out who needs to approve what
Collecting physical signatures for every approval — sometimes from people who aren't in the same office
Not knowing for sure where those approvals are in the process
Manually entering accounting and payment data from an approved invoice, with a chance of human error
Matching requests for information with the right invoice and purchase order
Trying to answer questions about an invoice or payment weeks or even months later
Moving to an electronic payment process can do more for your business than just take that process digital. It can automate the accounts payable approval process, sending the right invoices to the right people and managing the approval workflow with one software solution.
This article will walk you through the specific benefits of automating your accounts payable approval process and show you how to do it.
What is “accounts payable”?
Accounts payable is an accounting term for amounts your business needs to pay. When you purchase goods or procure a service from a vendor, your company needs to pay the goods or service provider.
Many small businesses won't enter those amounts into their accounting software until they receive an invoice or bill. As a business grows and its accounting system becomes more sophisticated, those amounts are often entered before the invoice arrives. The entry is triggered by the ordering process.
Either way, from the time that amount is entered into the accounting system until it's paid, it rests in "accounts payable" as an upcoming amount due.
Explaining the accounts payable invoice approval process
In a small business, the time between ordering a service and paying for it might be mere minutes. There's no reason to require invoice approval when the same person makes the buying decision and pays the bill right away.
But as companies grow, financial leaders explore solutions to manage the complexity of their accounts payable process.
Managers become responsible for monthly job costing. Every resource needs to be accounted for. The finance department wants to improve ROI. A customer refund can move a receivable into accounts payable.
To improve financial reporting, project costing, and data capture, the organization creates systems that provide checks and balances.
Invoice processes change from "get it and pay it" to get it, check it against purchase orders for errors, capture the data in accounting, secure approval signatures from 3 managers, run it to the finance team to check those signatures against formal compliance rules, set the payment date based on discounting terms, then pay it.
Doing all of that manually with any kind of practical efficiency is almost impossible.
Benefits of automating the accounts payable invoice 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 software and entered automatically. That data is checked and matched against purchase orders to flag potential problems. Users simply 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 check each invoice against the workflows you provide and route it to the needed people automatically. Payable automation technologies streamline the process, collecting those approvals with ease.
3. Request approvals electronically (and remotely)
With electronic approval, an employee can work from anywhere. Request an approval on your mobile phone, and receive that approval the same way.
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 even 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
In addition, the implementation of an electronic invoice automation 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 right invoice.
7. Store approvals in a permanent audit trail
In fact, all supporting documentation is indexed in a permanent, transparent audit trail. Don't underestimate this advantage to your accounts payable department or to your business processes in general.
Having a reliable audit trail has helped companies in partnering with larger firms and suppliers; helped them decrease the time, stress and expense of being audited; and even helped them obtain better financing terms.
The Bill.com intelligent business payments platform does all this and more.
Better yet, most companies that switch to Bill.com can start paying bills in just a few minutes, without any training. Even our enterprise automation solution can be implemented in a few days, not weeks or months.
You can enter as many approval controls and rules as you need to. The system will handle them all with ease.
Our electronic payments options include ACH, virtual card, physical check, and international wire, all from the same easy-to-use interface. We'll even print and mail those checks for you.
Plus, it integrates with most major accounting systems, including QuickBooks, Sage Intacct, Oracle NetSuite, and Xero.
Bill.com is the flexible accounts payable solution that can increase your AP performance today and scale with you tomorrow.
Ready to see it in action? Sign up for a risk-free trial and pay your first bill in minutes.
"Bill.com saves us time. It removes a lot of the manual work that would be involved for AP if we didn't have it. Not only are we able to initiate payments faster, but it also helps us better manage internal workflow for approvals while keeping our vendors better informed along the way." — Ariana Lucia, Staff Accountant, FLEXE