As you begin your business venture, you'll find that developing an invoice approval workflow can make it significantly easier for you to maintain your cash flow and ensure that you stay on top of your accounting books.
As a business owner, you'll encounter certain expenses, such as processing costs and paying for the procurement of goods or services. Having an invoice processing procedure can help ensure that each invoice is for the right amount, that there are no problems with payment, and that each invoice is paid on time to avoid late payments that could result in additional fees. An efficient invoice management process will help avoid bottlenecks while still ensuring that business rules have been properly followed.
We'll walk you through the business processes involved in creating your own workflow and how you can create an effective system that isn't overly time-consuming. Here's what you need to know to manage this portion of your accounts payable.
What Is an Invoice Approval?
In the course of doing business, you'll regularly receive invoices from others for items or services you purchased on behalf of the business. You'll then have to develop accounting systems that will allow you to stay on top of these invoices to make sure that you keep your books updated and have a solid understanding of your income and expenses.
During invoice approval, an approver looks at the specific invoice and makes sure there's no reason it shouldn't be paid, routing it toward the payment process. Having business rules can help create a clear audit trail that tracks the flow of money throughout the organization.
An approval process can help your business better organize its accounting needs. You'll find that it becomes significantly easier to catch potential errors. For example, if a vendor has a typo on their invoice, the approval process gives you the chance to review the invoice and make sure that the amount matches your records. It also prevents you from accidentally paying an invoice twice. It will make you a better manager of your money and more confident in your accounting.
What Is an Invoice Approval Workflow?
An invoice approval workflow is a series of steps through the approval process. It might incorporate some automation or manual data entry, depending on the size of your business and the steps in your process. The goal of each step lies in ensuring that the invoice has been properly processed and approved and that it moves on toward payment in an orderly, efficient way.
By creating an accurate and effective process, you can feel confident that each invoice your business receives has the same thorough analysis and caution. This will keep your business from damaging its credit due to unpaid invoices. It will also help you avoid losing money due to failing to properly cross-check an invoice and paying the wrong amount or accidentally making duplicate payments.
How to Create an Invoice Approval Workflow
The key to creating an effective invoice approval workflow process is ensuring that each invoice receives a thorough review. At the same time, you want to keep the process moving to avoid late payments. We'll walk you through the stages of this process.
Invoice Verification Process
During the verification process, you'll need to make sure that the information included on the invoice is accurate. You'll want to look at other records you have related to this invoice, such as any purchase orders. This allows you to verify that the invoice you have received matches what you expected to pay for the goods or service.
If the approver managing this part of the process notices any problems or discrepancies with the invoice, it will need to be forwarded to the person or department who can help clarify the invoice and resolve any errors.
As you begin this process, carefully record the invoice number and PO number so that you can track the invoice in real-time through each step. Many small businesses will use a manual invoice approval process, where paper invoices move from person to person. However, some workflow automation, such as automatically forwarding the invoice to the designated approver at the appropriate time, can help improve overall functionality.
Resolve Discrepancies
If you have uncovered any errors with the invoice, such as a mistake in the total, you'll want to make sure you resolve the problem before you move forward with payment. The team member who handles invoices with missing or incorrect information can work with the vendor, double-check their own records, and update internal data to ensure that the invoice is corrected and only the right amount is paid.
Once the invoice has gone through this correction process, the invoice goes to approval.
Invoice Approval Process
Once an invoice has gone through the review process and either received an error-free designation or the necessary corrections, it will progress to the invoice approval part of the process. During this stage, the person tasked with managing the accounts needs to officially sign off on it. You can help streamline this part of the process by including the supplier invoice alongside any necessary documentation so that the approver involved can process each invoice quickly.
Invoice Payment Process
Now, the invoice has arrived at the payment part of the process. The person in charge of managing the accounts for the business will need to pay the invoice on behalf of the business. They should also make a note of the invoice and its details - including the date and vendor - in the business accounting books. Maintaining proper books helps you when the time comes to prepare taxes. It also ensures that you know how much money you have in your accounts to help with investing in the business and finding growth opportunities.
As you pay invoices, it can also be helpful to review how well particular investments paid off. Consider the metrics that indicate your return on investment (ROI) from a particular purchase and if it met your goals. This can help you plan for the future of the company.
Businesses should also take a minute to review the terms for bill payment. For example, some vendors might offer early payment discounts. With these discounts, you can save money by making sure that your payment goes through the approval process before the assigned deadline. Some organizations find these discounts can help them maximize their available resources and build their businesses.
Easily Manage Your Company Invoicing With Skynova
Accounting software designed specifically for small businesses like yours can make the invoice approval process significantly easier to manage. With a straightforward interface tailored to the needs of busy small business owners, Skynova helps create an outstanding accounting experience for small business owners.
As you process and pay your invoices, Skynova makes it easy to track your expenses and financial information. Your approvers will quickly uncover saved receipts and estimates so that they can quickly verify the information contained in the invoice.
You can also record each payment you make so that you have a firm understanding of how your business's money gets spent and where investments pay off the most. Skynova also offers easy-to-use templates to help you send professional invoices to customers or clients.
It has never been easier for a small business to manage its accounting. If you want to build a strong business, see how Synova can make a difference for you today.
Notice to the Reader
The content within this article is meant to be used as general guidelines for approving and managing invoices and may not apply to your specific situation. Always consult with a professional accountant to ensure you're meeting accounting standards.