How To Approve An Invoice For Payment: Practical Tips for Accounts Payable
Small businesses should adopt a streamlined invoice approval process to maintain good relationships with suppliers and avoid being hit with late fees for past due invoices. Your business needs a simple process in place to approve an invoice for payment, one that preferably begins before you even receive an invoice from a vendor. Seeking payment approval at the purchase order stage or waiving the need for approval entirely for small purchases can reduce the bottleneck of approvals and keep the accounts payable department running smoothly at your company.
These topics will show you how to approve an invoice for payment:
How to Approve Invoices For Payment
Your small business needs a clear process in place for approving invoices. Here’s a step-by-step guide for a simple bills payable system:
Check the Invoice for Accuracy
First, review all the details of the invoice to make sure they’re accurate. Look over the products or services provided and make sure they align with the agreement in the purchase order or contract. Look at the amount you’re being charged and make sure it’s in line with what you discussed with the supplier.
Cross-Reference Invoice Dates
Check the dates of all the goods and services listed on the invoice and cross-reference them with your past invoices to make sure there’s no overlap. If there is overlap on the dates, follow up with the company to make sure you’re not being charged twice for the same purchase.
Confirm the Work with the Project Manager
If the invoice covers services that were overseen by someone else, check in with the project manager for the job to make sure the work was performed to their satisfaction and confirm all elements of the project you’re being billed for have been completed.
Check the Vendor Details
Next, review the vendor details to make sure they reflect what you have on file in your accounts payable system. Check that that business name and tax ID number haven’t changed. Revist the vendor’s payment methods and make note of the method your company plans to use to pay the invoice.
Record the Invoice Due Date
Make note of the invoice payment deadline. File the invoice in your records by the invoice due date. If the supplier offers any discounts for early payment, make note of those and confirm whether it’s possible to meet the early payment deadline to save money.
Schedule a Payment
Schedule a payment in your accounts payable system. Make sure the payment is scheduled at least a few days before the invoice due date, to leave a buffer in case any issues arise when you go to make the payment.
How to Improve Invoice Approvals
Streamlining your invoice approval process can help you pay your bills faster and avoid incurring late fees. While it’s important to clear major purchases before they’re paid for, there are methods for speeding up the invoice approval process to free up time and avoid bottlenecks. Here are some easy-to-implement tips for improving invoice approvals:
- Approve purchase orders: Requiring approval of purchase orders and then requiring approval again when the invoice is received wastes time and energy. Consider requiring approval for purchase orders only so your accounts payable team can pay invoices faster.
- Set a threshold for invoice approval: To make the approval process more efficient, consider setting a cost threshold for approvals and allowing invoices for small amounts of money to be paid without the need for approvals.
- Try in-person approvals: You may want to set up a system where your accounts payable team simply goes to the approver in person to discuss any details of the invoice and get it approved quickly on the spot. Or, schedule weekly approval meeting where invoices are discussed and approved in bulk.
- Consider negative approvals: Sometimes, requests for approvals get buried in people’s inboxes, which bogs down the payment process. You can try implementing a policy of negative approvals, where accounts payable sends an invoice to the approver and if they don’t hear back in a certain amount of time, usually a couple business days, they can consider the invoice approved.
- Automate approvals: There are accounts payable systems available that allow you to automate the approval process in the cloud, so invoices are processed more efficiently and payments are made quickly. You can also automate your invoice payment by using recurring bill payments for any vendors that invoice you a set amount on a regular basis.
Benefits of Improving Accounts Payable
By streamlining your business’s accounts payable approval system, you can make your team more efficient and save money. Here are some of the benefits of improving your invoice approval process:
Streamline Decision Making
When you simplify the approval process for invoices, you streamline decision making for accounts payable. Eliminating the need for approvals on small purchases or removing some of the layers of invoice approvals needed means the financial accounting team will spend less time chasing approvals. It also means the managers tasked with approvals can spend less time reviewing invoices, freeing up time for more important work.
It might sound counterintuitive, but if you’re committed to paying your invoices on time or even settling them early, you can save money in the long run. When you always pay bills on time, you avoid being hit by late fees, which can add up over time. And many suppliers offer discounts and rewards to companies that pay their invoices early, which saves your business money. If you set up automatic bill payments for your invoices when it’s possible, you can improve cash flow. You’ll always know when money will be leaving your business account each month, so you can plan ahead to cover those foreseeable expenses.
Maintain Good Vendor Relationships
Businesses love customers that consistently pay their bills on time. Not only is there a greater chance your suppliers will offer you discounts and rewards when you improve your invoice approval process, they may also prioritize your work if they know you’re a reliable client. This can mean that your orders get filled faster or your projects get completed sooner. It can also mean that if you ever have an issue or complaint, your vendor may act faster to reach a solution in order to keep your business.