How to set up an invoice approval workflow

The business world is an interconnected network of organizations. In many ways, the valuable products and services businesses provide — to customers and each other — are what keep industries going. And paying invoices on time is foundational for these relationships.

That’s why invoice approval workflows are so important. Consider them organized and consistent processes to validate and pay invoices — regardless of who submits them, who’s responsible for validating them, or how many invoices your company receives on a daily basis.

To set up an invoice approval workflow, all you need is an understanding of what it is, how it works, and which tools make it as efficient as possible.

What is an invoice approval workflow?

An invoice approval workflow is a process companies follow to clear an invoice for payment. Think of it as a checklist to determine whether an invoice is valid. Depending on the size of your organization, one specialist may perform this process, or the work may require an entire accounting department.

The workflow generally begins when a vendor submits an invoice. Someone then reviews the invoice to ensure its accuracy, including looking at the billed services, the information needed for processing, and the amount requested. After everything checks out, someone approves the invoice, and the appropriate person processes the payment.

How to design an invoice approval workflow

Invoice approval workflows vary in every organization, but they all have certain steps in common.

1. Create a database to receive invoices

The ideal invoice approval workflow will begin with all invoices going into a queue. This makes it easier to track and process them in batches. Here are two ways to achieve this:

  1. Designate an email address to receive invoices — and invoices only, nothing else. (This is key!)
  2. Create an invoice submission form that automatically adds submissions to a queue for review.

2. List approval conditions

To process an invoice, your team must determine whether it’s valid. The conditions will differ depending on the organization and type of products or services a vendor is supplying. Here are some basic questions someone reviewing the invoice might ask:

  1. Did the invoicing agency deliver the product or render the service?
  2. Were there issues with the product or work that justifies a reorder or discount?
  3. Does the invoice include all information needed for processing, such as where to remit payment?
  4. Does the invoice amount align with established prices?

3. Outline the approval hierarchy

Most organizations have specific decision-makers responsible for validating invoices. For example, the president of a small organization may have a hand in every project and therefore approve or deny all invoices.

In larger organizations with numerous departments and hundreds, if not thousands, of employees, department heads or other managers will probably be the decision-makers for invoices specific to their units. Make a list of anyone in charge of approving invoices and specify what types of invoices they’re responsible for.

4. Outline workflow routes

You can frame every condition from step two as an action item on a checklist. Structure the checklist to confirm basic information (such as information needed for payment) and gradually increase complexity. This is how you map a logical if-then approval workflow.

  • If the invoice lists a bank account to remit payment, then move it to the next item on the list.
  • If the invoice is missing this information, then reply to the sender to inform them that they need to provide more information.

This helps map out the approval hierarchy in a workflow as well. For example, if the invoice is from a graphic designer, then send it to the art director to validate.

Once all workflow elements are in place, you’ll remove uncertainty about how to process invoices — and your team will be able to perform approval tasks faster.

This article is originally published on Apr 06, 2021, and updated on Apr 08, 2021.
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