Do you look forward to turning in your obligatory monthly expense report? Most people hate having to deal with the paperwork and hassle of monthly expense reporting and invoice approval, but it is necessary.
What if you could make that process easier?
Businesses are discovering the power of an approval process for their company. This helps create smart workflows that people love, maintains strong financial control, and improves your team’s productivity. Here’s how to get started.
Purposes of an Invoice Approval Process
Security. Creating an approval process makes expense reporting go faster and creates additional levels of security. When people are dealing with money, you want to have automatic checks and balances in place to protect the company.
Too often the invoice approval process settles on one person who covers all of the approvals. The danger of this is when you have someone who can work the approval process to embezzle money from the company.
Many leaders think, “That only happens to other companies.” The fact that it does happen at all should caution leaders to not follow that practice. You want to safeguard your company’s finances and the people who handle them.
Your team will appreciate the extra security to protect them from false accusations. If one person is the one in charge and something is missing, they will get blamed even if they didn’t do anything.
Accountability. Accountability is often looked at as a negative thing, but it actually helps everyone involved. When your team members are accountable for their purchases, they will think clearly before making a purchase.
This accountability should be on every level of the business. Each person should be able to show their reason for purchasing and their receipts. This adds another layer of protection for your finances.
Accountability also helps align actions with the company’s vision. You can open up the finances toward the things you want to go after in the company. This helps to move your company in the direction you want it to go.
Problems With an Invoice Approval Process
Many people hate their company’s invoice approval process because it becomes a seemingly unnecessary burden. Too often company workflows are slow and frustrating due to outdated invoice approval systems.
The Rules vs Relationship Approval Process
Many companies base all of their approvals on a set of rules. This is fine for the most part, but too often the rules grow over time. This creates a bloated set of rules that slows everyone down.
Setting up rules should be done with the mindset of seeing them as guidelines. This pushes accountability into the relationships your team members have. People prefer personal accountability to just following the rules on paper.
People can explain things and help someone understand why they were turned down for a request. They can also help train people to think the way the company wants them to think instead of just being rule followers.
The Problem? Power Struggles
Rules will bring about power struggles within your organization. The rule enforcer can become a de facto dictator. Their ability to enforce rules and allow exemptions gives them tremendous power.
You want that power to be in your chain of command and not sitting in the hands of one person. Too much power in one person can adversely impact the smooth functioning of your business.
How to Implement an Approval Process and Workflow
Bill approval should flow throughout your organization. You want to focus on setting up a process that streamlines approvals for everyone involved. A little work upfront can pay off in the long run for your company.
Work to create a system that splits approvals and directs them to different – and appropriate – levels of authority. This keeps any one person from having to do all of the approvals, helping to keep your system moving and not get bogged down.
It also engages your managers with the system and doesn’t give them the option of “passing the buck” to someone else. They are there to implement your vision and should be willing to make the important choices.
Separation of Approval Power
When you split up the approval process, you are creating built-in protection for your organization. All the approvals don’t rely on one person and responsibility is carried by a group of people.
This can also help push decisions down the chain of command. Smaller approvals don’t need to go much higher up the chain. Team leaders should not have to go to a group leader when they could make the decision.
Create a Clear and Open System
Whatever system you create, you want to communicate it clearly to all team members. This improves unity in the group because everyone knows the expectations and who to go to for answers.
Your system should seek feedback from all levels of the approval process. This creates a space where your team can brainstorm improvements. Employees will buy into systems better if they have input into the process.
Split Up the Work
Generally Accepted Accounting Principles recommend you split up the different jobs of people handling the finances. This keeps one person from having all of the power and helps spread out the workload.
You can split the accounting of different departments among different people. You can also build in-house auditing in between different departments to make sure nothing is missed.
Prework the Approvals
Creating an approval process helps your invoicing system speed up because the approvals are already in the system. This keeps your approvals from having to float around to different desks within the office and wasting time.
This keeps your accounting from having to wait for invoice approval and can pay bills faster. Your vendors will appreciate the fast payments and you will build goodwill with them for future transactions.
What Value Bills Should Go Through the Approval Process?
One of the key components of an efficient invoice approval process is spelling out what expense categories and/or threshold amounts require which levels of approval. This can help create a smooth system for everyone. Companies set the amounts that are needed for approval. This helps you give your team members freedom to do their job up to a specific point.
Your goal is to have all invoices and bills accounted for but not every invoice should need approval. Routine bills and small invoices can be set up for automatic approval to keep the process moving.
Employees should know the amounts that need approval and who to go to for approval.
Instead of creating one amount for everyone, consider creating different amount threshold levels.
This helps your team members see how you trust them and motivates them to be smart financially. They will take ownership of the company’s money and be less likely to waste it when they feel trusted.
Tools Needed for the Process
Automating the invoice approval process is the best way to have a smooth workflow for everyone. Automation can help communicate the approval process by showing everyone how to go about seeking approvals.
It also creates automatic workflows that don’t require endless emails or paper trails. If a purchase is preapproved in the system, accounting can automatically send the payment when the invoice is received.
You will want to find an automated software that works within your system and gives you a fair amount of customization. This helps you put your system into place and not be slaves to a software system. Check Captera.com for an excellent resource for finding software to meet your needs. It has thousands of reviews and user comments on an enormous range of applications.
Take the Headache Out of Your Approval Process
Many companies are still working with invoice approval processes from 20 or 30 years ago. This slows down the organization and causes friction among team members.
Take the time to focus on creating an approval process that is clear and easy for everyone to navigate. Your vendors, your employees, your auditors, and your accounting team will thank you.