Many businesses want a more efficient process for vendor invoice approval, and with good reason.
The time-tested method for ensuring correct payment is to have accounts payable sign off on a supplier invoice, then have an additional check signer if a payment exceeds a certain amount, ensuring oversight on larger payments.
This makes sense theoretically, because it requires multiple senior-level employees for approval. More eyes, more checks against mistakes or nefarious behavior.
The problem is that paying vendor invoices this way is inefficient; more often than not, it slows down payment and introduces another step in the accounts payable process without actually strengthening oversight. Since this two-step for accounts payable is just an extra check, it lends itself to not being taken seriously.
Even so, there's little lost by having two people approval a vendor invoice when there are only a few invoices each month. The two-step process might not actually strengthen safeguards, but it doesn't significantly hurt.
Vendor invoicing approval becomes a bigger issue when there are many of these invoices to be approved each month. Making matters worse for the inefficiency of the process is when these invoices require processing on a paper; there's the chance of lost invoices, human error during data entry, or invoice duplication.
These issues typically lead to a high cost-per-invoice for the average business, which is why many businesses look for a better way to handle vendor invoices.
Accounts Payable Automation
There is a better way: accounts payable automation through an enterprise resource planning (ERP) system.
An ERP system serves as the nerve center for a business, storing all a company's data from inventory and sales to financials, human resources and accounting. ERP systems integrate all a firm's data and serve as the system or record for a business.
There are many reasons why a business should be using an ERP system, including greater visibility, more efficient business processes and automation instead of manual data entry.
If those benefits sound like they might be useful for the issue of vendor invoice approval, you're right.
With a modern ERP system, a business can eliminate paper invoicing and automate accounts payable in several ways, reducing the inefficiency from the traditional two-step needed for invoice approval.
Because ERP systems integrate the data and business processes across a business, it is possible to set up automatic pre-approval of purchases against budgets and track contracts so the system automatically knows which invoices are correct, and can automate payment without the need for several layers of approval.
Another area where accounts payable automation can help is e-invoicing; vendors can submit their invoices to a business electronically and have these invoices routed and processed automatically by comparing the invoices against the orders already in the system. With an ERP system in place, businesses also can handle currency conversion, inter-company transactions, and multi-entity bills easily.
This automation of accounts payable delivers faster payment turnaround and reduces the cost-per-invoice because less manual oversight and staff time is needed.
For firms that want the efficiency of accounts payable automation but still want some manual oversight, notifications can be set up in the system to automatically alert key personal when an invoice needs review or varies from what was expected. This can reduce invoice approval even in cases where manual approval is required.
ERP is for SMBs, Too
Even when the advantages of accounts payable automation and a single integrated business system that tracks and automates business processes across a company is well understood, there's the misconception that only large corporations can afford and manage such systems.
While it used to be the case that only larger firms could afford ERP, that changed with the emergence of cloud-based ERP systems. Instead of having to invest millions in expensive hardware and software licensing, businesses can now get access to full-featured ERP system in the cloud for a small monthly fee. Instead of having to support and maintain these systems, businesses now can leave the backend administration to the cloud ERP vendor and focus instead of using the system to support their business.
A range of prepackaged industry solutions from Navigator and others also exist to serve specific industry verticals, complete with common configuration and best practices for a given industry baked into the ERP system.
Any firm that needs centralized business processes, organizational visibility and automation can now afford such systems.
So there's little reason to continue using the onerous and inefficient manual process for vendor invoice approval. There is a better way: accounts payable automation built into your ERP solution. By automating invoice approval, invoices get paid faster, there's better oversight and less chance for human error, and staff can focus on tasks that better deserve their attention.
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