The Complete Guide on Invoice Approval Workflows

Key takeaways

  • When an invoice is received, the accounts payable team is responsible for reviewing and reconciling the invoice so payment can be posted.  
  • Manual invoice approval workflows are inefficient and time-consuming, they lack control and transparency for teams, and are expensive and error-prone.
  • Automating the AP process conserves time and resources (for both AP and IT teams), streamlines and standardizes approvals, centralizes key data, and eliminates repetitive tasks like approval notifications, assignments, and follow-ups. 
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What is the invoice approval workflow?

The invoice approval workflow is part of the larger invoice processing process and is made up of a series of steps that must be completed in order for an invoice to be considered legitimate, validated, and approved for payment. 

When an invoice is received, the accounts payable team is responsible for reviewing and reconciling the invoice so payment can be posted. In order for this final step to happen, the invoice must be approved through the invoice approval workflow. 

Approvals can be requested and submitted either manually with a hard copy of the invoice or electronically using an invoice approval system like a procure-to-pay (P2P) solution or e-procurement software to collect digital signatures.

The 5 steps of invoice approval workflows

The invoice approval workflow will vary depending on the company and its size or maturity, but the steps are typically pretty similar: 

  • Receive invoice 
  • Consolidate data 
  • Review and reconcile invoices with purchase orders (POs) and goods received note (GRN)
  • Submit validated invoice for approval

While this is just a high-level overview of the workflow, below is a step-by-step guide of the invoice approval process.

Step 1: Receive the invoice

The invoice approval workflow begins once the supplier or vendor submits an invoice for payment. The accounts payable department is responsible for approving the invoice, which also falls under the procure-to-pay process.

There are two types of invoices that can be submitted for payment: 

  • PO invoices (requires 2-, 3-, or 4-way matching before approval)
  • No-PO invoices (requires review and approval from authorized approver following a 2-way match)

Despite their differences, these two types of invoices require some form of approval or verification before being approved. 

Step 2: Capture invoice data 

Once the invoice has been submitted and received by the AP department, the team is responsible for capturing invoice and documenting invoice receipt. This step will vary based on whether the invoice received is a paper or faxed invoice or a digital invoice.

For physical invoices, this step may include manually preparing invoices by:

  • Removing staples
  • Fixing tears
  • Collecting POs and GRNs
  • Photocopying invoices and/or attachments
  • Indexing digital images
  • Sorting invoices by source or cost center

If there’s missing information, this may also require manual follow-ups.

If the procurement team is leveraging a digital procure-to-pay solution that seamlessly integrates the purchasing process with the accounts payable process, suppliers can easily upload or submit non-physical invoices and the AP team can quickly collect, sort, and follow-up on data (in the case that something is missing). With a centralized P2P system, the AP team can also quickly access POs and GRNs required for 2-, 3-, and 4-way matching. 

Step 3: Verify the invoice

Once the data has been extracted and indexed and relevant documents have been collected, it’s time to verify. 

For PO invoices, verifying invoices involves either: 

  • Matching invoice to the related PO (2-way matching), 
  • Matching invoice to the related PO and GRN (3-way matching), or  
  • Matching invoice to the related PO, GRN, and inspection report (4-way matching).

For non-PO invoices, verifying invoices includes: 

  • Verifying the invoice with the GRN or inspection report (2-way matching).

Step 4: Flag and correct irregularities

In the case that an error or discrepancy appears during the verification step, the AP team will either need to reconfirm the information, contact the vendor, and/or connect with the purchasing team or original requester. 

This issue may be more common for manual approval workflows since it’s more prone to data-entry errors or mistakes. 

Step 5: Approve the invoice

Once all errors or irregularities have been resolved and the invoice has been verified, it’s officially ready for approval. This step can be streamlined and made more transparent with a P2P solution by centralizing and automatically alerting approvers of verified invoices and deadlines to prevent payment delays or late penalties. 

After the invoice has been approved, payment can be released and the invoice can be archived.

Top challenges for manual invoice approval workflows

Decentralized invoice receipt 

Without a centralized and standardized receipt system, lost or missing invoices can become an expensive headache for AP teams spending hours toggling between email threads, tools, and systems. 

Inefficient and time-consuming routing

Paper is the enemy of efficiency, and the leading cause of human errors, approval bottlenecks and delays, and late payments or penalties. For companies managing a large influx of invoices, manually processing and routing approvals (whether it’s paper or a PDF) become a time-consuming ordeal for both approvers and the AP team managing the approvals. 

Lack of control and transparency

When the invoice approval workflow isn’t centralized, structured, or democratized, it’s harder to maintain oversight of all its moving parts. Without control and visibility of the invoice processing and approval workflow, issues with non-compliance, overpayments or duplicate payments, and fraud can occur. 

Expensive, delayed, and error-prone processing

A manual invoice approval process is not only time-consuming, it’s also expensive. High invoice processing costs are among the top challenges affecting AP teams. By some estimates, the average cost and time to process an invoice from start to finish is $10.18 and 10.9 days. By other estimates, that average is as high as $15 to $40 (per invoice!) and 45 days. 

There are many hidden costs that can add up with a manual or paper-based approval process, including time spent:

  • Reviewing invoices
  • Identifying and correcting data entry errors or duplicate payments
  • Archiving and storing physical invoices
  • Calculating discounts lost or incurred penalties due to late payments or errors
  • Performing invoicing duties rather than their assigned functions, like chasing after missing information

The result is costly errors that could have been avoided, identified, and resolved quickly with a procure-to-pay solution that streamlines and gathers this information automatically and accurately every time.

How automation improves invoice approval

End-to-end process automation benefits all stakeholders involved, from requesters to suppliers to accounts payable and procurement. 

That’s because automating the AP process conserves time and resources (for both AP and IT teams), streamlines and standardizes approvals, centralizes key data, and eliminates repetitive tasks like approval notifications, assignments, and follow-ups. It also provides self-service workflows to speed up supplier onboarding and registration.

Below is a longer list of the ways automation improves invoice approval workflows for every stakeholder:

End-to-end stakeholder automation benefits 

For procurementFor requestersFor accounts payableFor suppliers/vendors
– Centralized purchase request information
– SLA visibility
– Audit Trails for automated invoice approval status and tracking updates 
– Integrated e-procurement and AP collaboration
– Real-time invoice reporting and process analytics
– Request tracker 
– Streamlined communication between purchasing and accounts payable
– Automated invoice data entry and capture
– Line-item matching and error correction
Digital signature requests for invoice approvals
– SLA visibility
– Bulk invoice upload
– Attachments and document sharing
– Payment status tracking
– Self-guided supplier portals and workflows

5 invoice approval automation opportunities

1. Invoice receipt 

Once an invoice is received, the accounts payable team is automatically notified and the approval workflow is set in motion. E-invoicing reduces the cost of processing, improves efficiency, decreases the chance of misplaced invoices, and allows for more accurate invoice matching.

2. Invoice reconciliation

By automating data matching and error corrections with robotic process automation, the AP team can reinvest time previously spent reviewing line items on more strategic work to generate business value.

3. Communication and status updates

Keep stakeholders informed on the status of their requests with self-guided workflows, portals, and request trackers. Vendors can easily check on the status of payments, while the accounts payable team has a direct line to all stakeholders and invoice statuses. 

4. Approval requests

Delayed approvals can lead to a slew of financial issues, including missed discounts, penalties, and tarnished buyer reputations. With automated notifications, approvers are notified of urgent requests, deadlines, and details on time, every time. 

5. ERP, tools, and systems integration 

With an integrated procure-to-pay workflow, easily eliminate inefficient and wasteful steps for buyers, suppliers, requesters, and accounts payable teams while gaining end-to-end visibility and transparency. By unlocking the power of stack extensibility, teams can expand the capabilities of existing solutions without complicating the approval process or compromising efficiency.

Learn how to automate the invoice approval process in seven steps.

Invoice approval automation made easy with Pipefy

With a procure-to-pay solution like Pipefy, automating the inefficient and time-consuming manual invoice routing and approval is effortless so you can connect and gain control over the invoice approval process. 

With a customized invoice approval workflow designed to meet your specific AP needs, avoid and prevent the top challenges impacting accounts payable teams. Pipefy’s no-code framework makes it easy to design, test, and implement improvements and automations quickly without tapping into IT resources. 

From request to invoice reconciliation to payment, to improve compliance and spend tracking, improve user experiences for all stakeholders for:

  • Faster approvals and payment cycles.
  • Reduce errors or delays between process and task handoffs.
  • Lower the time (and cost) associated with manually processing invoices, and 
  • Eliminate the back and forth between ERP, emails, e-procurement, and accounting systems. 
Create a connected and error-proof automated invoice approval workflow with Pipefy for P2P
Pipefy for P2P

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