Why Invoice Approval Workflows are Critical for Fraud Prevention and Payment Accuracy

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According to a recent study by the Association of Certified Fraud Examiners (ACFE), organizations lose an average of 5% of their revenue annually to fraud, resulting in a total loss of billions of dollars worldwide. Manual invoice processes are a significant vulnerability; implementing an invoice approval workflow is no longer an option. These workflows offer businesses a systematic way to safeguard their finances, prevent costly errors, and ensure smooth operations. 

  

Key Takeaways  

  • Verifying and approving invoice payments is an important step in financial management that preserves the integrity of the finances.  
  • Approval is Important: It ensures financial transactions are accurate and authorized, protecting against fraud and unauthorized spending. 
  • Involves steps from receipt to payment authorization, which can be significantly improved with automation. 
  • Utilizing invoice automation and accounts payable approval software enhances the speed, accuracy, and efficiency of the approval process, leading to timely payments and better financial management. 

 

What is the invoice approval workflow?  

The invoice approval workflow is a series of steps that must be followed to authorize the payment of supplier invoices. The AP invoice approval workflow is a control mechanism that not only maintains transparency and accountability but also facilitates timely payments to suppliers.  

In the year 2020 alone, the US businesses lost nearly $2 billion in invoice fraud. Scammers pry on businesses that use manual invoice processing, leaving finance teams in the lurch. Please note that even if you already have an established workflow, you should audit and affirm that invoices are reviewed before payments are made. Additionally, a keen consideration for introducing AP automation that improves delays introduced in a manual approval process. 

  

How does an Invoice Approval Workflow look like?  

An invoice arrives at your company, usually as an email attachment. Here’s a typical invoice approval workflow that involves the following steps: 

 

  • Invoice Submission 

Vendors send invoices through email, supplier portals, or directly into an invoicing system. 

  • Preliminary Verification 

Automated systems or staff validate invoice details such as vendor information, amounts, and terms. 

  • Approval Routing 

The invoice is routed to relevant personnel for review, based on predefined rules or approval hierarchies. 

  • Three-Way Matching 

The invoice is matched against purchase orders and receipts to ensure consistency and accuracy. 

  • Final Approval 

Once all verifications are complete, the invoice is approved for payment. 

  • Payment Processing 

Approved invoices are sent for payment, ensuring deadlines and terms are met. 

  • Record Keeping 

All related documents and approvals are stored for compliance and future audits. 

 

Importance of Efficient Invoice Approval  

 

An efficient invoice approval process is instrumental in maintaining the financial integrity of an organization. By ensuring that each invoice is scrutinized and validated, businesses can significantly minimize the risk of errors that could lead to financial discrepancies. 

A clear and well-defined invoice approval process can prevent unnecessary or unauthorized spending, prevent financial losses, and avoid any potential discrepancies in the accounting books. Without an efficient invoice approval system in place, it can be hard to reconcile payments, keep track of approvals, or ensure timely payment to vendors.   

It gives you a bird-eye view of organizational spending with useful data to identify savings opportunities. All of this facilitates better spending management, reducing maverick spending and keeping budgets on track.  

Invoice approval workflows reinforce vendor compliance with your organization’s policies and contract terms. Automated compliance checks ensure invoices match purchase orders, contracts, and goods receipts — reducing payment errors and fraud risks. 

 

Improve Invoice Payments with Zenwork Payments 

 

Zenwork Payments helps businesses smoothen their accounts payable workflows with advanced automation tools. Here’s how Zenwork Payments improves the invoice approval process: 

 

  • Invoice Submission Options 

Zenwork Payments enables businesses to receive invoices in various formats, including email, supplier portals, and direct system uploads. Automated data capture ensures all AP information is recorded accurately. 

 

  • Custom Approvals 

Zenwork Payments allows businesses to define specific approval hierarchies for their team. Assigning roles and responsibilities ensures the right individuals are involved at the correct stage of the workflow. 

 

  • Integration with Accounting Software 

Two-way synchronization ensures that invoices are updated in your accounting software. This eliminates manual data entry, reduces errors, and keeps financial records consistent. 

 

  • Fraud Prevention Features 

By automating compliance checks, Zenwork Payments identifies discrepancies in invoice details, reducing the risk of fraud. The system ensures that invoices are verified against purchase orders and receipts for added security. 

 

  • Time and Cost Savings 

Automating repetitive tasks reduces operational costs and frees up time for teams to focus on strategic financial management. 

 

FAQ’s  

  • What is an invoice approval workflow?  

An invoice approval workflow is a structured process that ensures invoices are reviewed and authorized before payment, reducing errors and preventing fraud. 

 

  • How does AP automation improve invoice approval workflows?  

AP automation streamlines the approval process by automating data capture, compliance checks, and routing, resulting in faster, more accurate approvals. 

 

  • What are the risks of manual invoice processing?  

Manual processes are prone to errors, duplicate payments, and fraud. They can also lead to delayed approvals, damaging vendor relationships. 

 

  • How does automation prevent invoice fraud?  

Automation introduces systematic controls, real-time validation, and compliance checks, making it harder for fraudulent invoices to slip through the cracks. 

 

  • What are the benefits of vendor management tools in AP workflows?  

Vendor management tools ensure vendor compliance, streamline communication, and help businesses maintain accurate records for smoother workflows. 

 

  • Why is three-way matching important in invoice approval?  

Three-way matching ensures that invoices align with purchase orders and receipts, reducing errors and preventing unauthorized payments. 

 

Conclusion

As per the FBI, business email compromise (BEC) fraud, primarily through invoices and payments cost U.S. businesses nearly $2 billion in 2020 alone. Implementing AP automation is a vital step toward protecting your organization from fraud, streamlining accounts payable processes, and maintaining financial integrity.  

Connect with Zenwork Payments today to learn how automated workflows can save your business valuable time and resources while safeguarding your finances.