How to Accelerate Invoice Approvals with Invoice Approval Workflow

Slow invoice approval cycles are one of the top challenges cited by accounts payable leaders, Ardent Partners reports.

“Time flies” is a popular refrain.  But things never seem to move fast enough for accounts payable leaders.

The move to Work from Home only makes things worse.  Manual and semi-automated accounts payable and invoice processes simply weren’t designed for remote working.

Slow invoice approvals are a big problem with AP departments.

 

Backlogs of invoices awaiting approval create big problems for businesses:

• Late-payment penalties
• Missed early payment discounts
• Lots of calls and e-mails from suppliers regarding the status of invoices and payments
• Strained internal and external stakeholder relationships
• Difficulty forecasting and managing cash flow

 

Manual and semi-automated invoice processes are largely to blame for slow invoice approval cycles.

In a typical accounts payable environment with geographically dispersed approvers, getting invoices from one party to another requires several steps. Staff must scan invoices, determine the purchaser, and e-mail the invoice to the individual.  The e-mail is then opened, printed, signed, re-scanned and e-mailed back to accounts payable.  Invoices that require multiple approvals may require multiple e-mails.  And accounts payable leaders can never be sure where supplier invoices stand in the approval process.

This manual routing of invoices for approvals is time-consuming and prone to delays.

It is no wonder that most businesses cash in on few, if any, early-payment discount opportunities.

Eighty percent of the businesses surveyed by IOFM receive invoices that offer early-payment discounts.  In fact, 5 percent of those surveyed said that more than 25 percent of the invoices their business receives offer discounts for early payment, while 3 percent of businesses say between 16 percent and 25 percent of the invoices they receive offer early-payment discounts.  Businesses that take advantage of a discount term of just 1/10 net 30 earn an annualized 18 percent return – a lot more than they can earn from a typical interest-bearing bank account.

But most businesses capture less than 21 percent of all early-payment discount offers. And 12 percent of businesses are unable to capture any early-payment discounts, IOFM’s research found.  These results are more sobering when you consider that 79 percent of businesses say their suppliers offer payment terms of 30 days or more.  Only 27 percent of businesses capture more than 80 percent of early-payment discount offers.

Nearly one-in-five controllers surveyed by IOFM reported that the inability to maximize early-payment discounts was their accounts payable department’s biggest challenge.

 

How automation speeds invoice approvals

Transforming accounts payable with digital technologies accelerates invoice approval cycle times.

Accounts payable software robots effortlessly retrieve invoices from a portal or e-mail box.  Important data from invoices is automatically extracted and validated.  Invoices then are matched against purchase orders or delivery receipts.  Unmatched invoices are digitally routed to the appropriate approvers based on pre-configured business rules.  Suppliers are sent an e-mail with a hyperlink that enables them to input any missing or incorrect data directly into an online portal.  Once an invoice is approved, data is seamlessly uploaded to an ERP platform or other system of record and the invoice information is digitally archived and available for instant retrieval.

Graphical dashboards show the status of invoices in real-time and alert managers to bottlenecks that could delay approvals.  Accounts payable staff and approvers are notified of invoices approaching their due date; the technology also can be configured to automatically escalate invoices to a manager for review or approval, if desired.  The technology also tracks key metrics on approval cycle times.

Moreover, the machine learning built into some solutions enables the platform to become faster over time by “learning” from its accomplishments and errors, and understanding the actions taken by human operators (e.g. routing invoices for approval or accessing data for exceptions resolution).

And integrated self-service online supplier portals make onboarding suppliers and gathering supplier data a breeze.

It is for these reasons that payables departments with digital transformation solutions can process invoices in less than half the time of average departments (3.7 days versus 8.8 days) and in less than one-third the time of laggards (3.7 days versus 14.3 days), per research from PayStream Advisors.

 

Transform Accounts Payable Into a Profit Center

Faster cycle times enable businesses to capture more of the early-payment discount offers that can transform accounts payable into a profit center.  Top performers capture 7-times more early-payment discount offers as a percentage of spend as their peers, per The Hackett Group.  That means that a $1 billion-revenue company that previously captured $200,000 annually in early-payment discounts stands to gain $1.4 million a year in additional early-payment discounts through automation.