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We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with PLANERGY.

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Cristian Maradiaga

King Ocean

Download a free copy of "Preparing Your AP Department For The Future", to learn:

  • How to transition from paper and excel to eInvoicing.
  • How AP can improve relationships with your key suppliers.
  • How to capture early payment discounts and avoid late payment penalties.
  • How better management in AP can give you better flexibility for cash flow management.

Invoice Approval Best Practices

Invoice Approval Best Practices

Invoice Approval Best Practices

Today’s business landscape requires businesses to do more with less – regardless of industry. This means freeing up working capital and creating flexible cash flow, and though there are multiple ways to do this, focusing on accounts payable (AP) is a great place to start.

Since the AP process takes place as a back-office function, it’s nothing something many companies look at to give themselves a competitive advantage. However, investing in accounts payable automation helps to increase productivity and saves money by streamlining manual processes, reducing human error and invoice processing costs, avoiding late payments, and capturing early payment discounts.

Even small businesses can make a major impact on their bottom line by implementing digital invoice approval and processing practices. AP automation solutions are affordable for smaller companies, too. While tracking things on a spreadsheet seems like the easiest thing for startups to do, as the business grows, spreadsheets are difficult to scale and full of error potential.

As tempting as it may be to invest in an AP solution and start using it immediately, there are certain accounts payable best practices to consider. Implementing these from the beginning makes things much simpler in the long run.

Build a Purchase Order Approval Workflow

Create a set of internal rules for making a purchase before placing orders. In PLANERGY, this starts as a purchase requisition that is then routed through the appropriate workflow based on various triggers you set up, as dictated by your business processes. For example, purchase requisitions for office supplies, ordered through Amazon, under $100, can automatically be approved by the requestor. Or, all purchase requisitions are routed to the department head for approval. Once approved, the purchase requisition converts to a purchase order, that is then routed to finance for approval, before being sent to the supplier. Larger requests can be routed through multiple approvers in multiple departments, as needed.

Build a Multi-Level Approval Workflow

Ideally, there should be at least two levels of approval. While you don’t need to do this for every order, invoices above a certain amount should go to two different approvers and require both approvers to review and accept before final approval is issued. It’s possible to require only one of those approvers to sign off before approval is granted. All of this can be customized based on your needs.

Create a Separate Approval Workflow for Invoice Payment

The person approving invoices should not be the same person who is approving the person approving payments. This is a security measure to prevent fraudulent routing of funds.

Develop a Formal Approval Matrix

Before starting to build your approvals matrix within your software, it’s important to document the structure formally. This makes it easier to follow as you’re building everything in the system and gives everyone a document to follow if there is ever a question.

The structure needs to clearly define who the approver(s) are, the timeline for approval, and who any secondary approvers may be in their absence.

Once built, the approval matrix should be reviewed periodically and updated accordingly, based on staff changes, so that all staff members know what to expect.

Train Vendors and Suppliers on Your Invoicing Systems

Create a letter that explains your invoice policies and numbers. Insist that they use it. Merging your accounting system with dozens of vendors and suppliers is not only inefficient but has the potential to create costly errors. Continue to maintain a healthy relationship with your providers and continue to send requests until they follow your invoicing process consistently.

If you receive paper invoices, make it a point to scan them into your system as soon as possible after receipt. While batching the invoices may be tempting, doing too many at once could easily increase the likelihood of making mistakes. After they’re in the system, the documents can be indexed with the data the OCR scan picks up, such as invoice number or supplier name. The information is automatically extracted and placed in the corresponding places in the system. This is courtesy of machine learning and eliminates the need for manual data entry.

Go Paperless

Removing paper from the equation reduces the risk of delayed payments, lost paperwork, and many other issues. It’s also simpler for businesses to look up invoicing information when needed.

Centralize Your Processing Office

By setting up a centralized processing office, you ensure a standardized and consistent approach to accounts payable processes.

Strive to process supplier invoices in a timely manner and include a date state. Complete the process in line with any defined service level agreements or contract terms – such as processing invoices within two days of receipt. Automation solutions will make it easier to prevent paying invoices that are inaccurate – either in terms of the amount, quantities, or other details.

Unless you’ve created an agreement with your supplier that allows you to capture early payment discounts, avoid paying your invoices early. Prioritize vendor invoices based on the due date, so that cash flow remains strong and you avoid inadvertently making late payments on other invoices.

Separate Duties

The General Accepted Accounting Principles (GAAP) recommend separating duties for accounting best practices. Separating duties prevents financial decisions from being made by one person. When you have different people in your AP department approve purchases, receive the ordered items, make payments, and reconcile invoices, everyone has access to the same data to verify information, but no one person can do everything, to prevent fraud.

Add Automation

You can have internal control measures built into your purchase order and invoice approval processes, but without automation, you’re still wasting valuable time and risking authorization access issues. Automation creates customizable approval channels, specific to your company requirements. PLANERGY offers a fully-customizable approach for approval workflows for all your accounting processes throughout the purchase to pay cycle – purchase orders, invoices, and payments. Once a purchase order converts to an invoice, an invoice number is assigned and linked to the purchase order, which simplifies data entry and streamlines everything.

Benefits of Automating AP

Customized Routing

With customized routing, you can route invoices based on department, vendor, project, and location. You can route each document through one or more approvers, based on the dollar amount. Employees can create purchase orders and direct them accordingly to collaborate where needed. With the audit trail, there’s no need to keep track of documents or create a lengthy email chain – as every action any user takes is stored for every document. The paperless process keeps everything updated in real-time.

To make things easier, PLANERGY comes preloaded with several pre-configured workflows to accelerate the approval process.

Three-Way Matching

Automation also handles three-way matching, which matches the purchase order to the goods receipt, and to the invoice. This ensures payment processing moves according to only to what has been received and what was on the invoice. If a discrepancy is ever spotted in the invoice data or other documentation, it is flagged for manual review and follow-up, which helps prevent duplicate payment.

Customized Approval Flows

Approval subsets allow criteria for certain invoice types. For instance, invoices below a certain threshold can be approved after one approver has signed off, while others require two or more approvers to review and accept before the invoice is considered approved.

And perhaps most importantly, automation software makes it possible to restrict access so that only those who are authorized to approve documents can do so, with permissions controlling who can approve purchase orders, invoices, and payments separately, as dictated by company policy and structure.

Real-Time Visibility

With real-time visibility, staff members can see the current status of any purchase requisition, purchase order, or invoice.


With integrations, it’s possible to record approved invoices back to your accounting or ERP system through seamless integration.

What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

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