The Case for a Better Approval Workflow in Accounts Payable
by The Ottimate Editorial Team
Chasing down invoice approvals can be a real pain. And it’s a pain many finance teams know all too well. In fact, a recent survey found that more than half of finance professionals feel their approval workflows don’t perform well.
Informal approval processes like email threads, verbal OKs, and sticky notes might work for a while. But as businesses grow and manage more and more invoices, these practices can’t keep up. Yet, while teams want more control, many hesitate to formalize approval processes because they fear it’ll slow people down or feel like unnecessary bureaucracy.
But here’s the truth: structured approval workflows aren’t about red tape. When done well, they bring clarity rather than complexity into every dollar you spend.
In this post, we’ll explore why unstructured approvals are dragging finance teams down and how a formalized approval workflow in accounts payable is exactly what you need to turn things around.
The real cost of unstructured invoice approvals
When you’re in the thick of daily finance operations, informal approval processes might seem “good enough.” Sure, they’re inconvenient. But beyond that, there’s not much harm…right?
Wrong.
Unstructured invoice approval processes create a ton of hidden risks and costs that quickly add up. Here are some of the most common (and costly) pains.
Delays and confusion
When workflows live in inboxes or hallway conversations, no one is sure who needs to sign off next. This confusion frustrates internal teams and vendors and it slows everything down.
Missed early payment discounts
When approvals (and payments) are delayed, you miss opportunities to save money and maintain strong vendor relationships, which directly impacts cash flow.
Duplicate spend
Without a formalized approval workflow in accounts payable, invoices can sneak in twice or get paid without proper oversight. These errors might go unnoticed until month-end close or when an audit rolls around, at which point they’re a pain to fix.
Rogue purchases with no accountability
When visibility is limited, employees can make purchases without proper authorization. This leads to overspending, budget surprises (not the good kind!), and strained financial control.
Audit headaches
Emails get deleted or buried in inboxes, verbal approvals are forgotten, and sticky notes get trashed. So when an auditor has a question about an invoice or approval, finding the answer is a stressful scramble.
Inefficient use of finance resources
There’s a lot of labor involved with chasing down approvals. That’s time that could be spent on analysis and strategy.
Clearly, informal invoice approval processes come with more risks than many teams realize. Fortunately, there’s a better way.
The impact of structured approval workflows in accounts payable
Informal approval processes can slow finance teams to a crawl. A well-structured approval workflow in accounts payable does the opposite.
Sure, it’s easy to assume formalized workflows are nothing more than red tape. But in reality, a structured approval workflow in accounts payable empowers finance teams to balance agility with governance. Teams can move faster, maintain control, and mitigate risk all at once.
Here are some of the biggest reasons finance teams are making the shift.
Clarity
Everyone knows their role, responsibility, and approval threshold. There’s no more guessing about who signs off on what, when. Clear expectations eliminate confusion and keep invoices moving.
Speed
With predefined approval routing, invoices automatically flow to the right approver at the right time. That means approvals (and payments) stay on track and finance teams don’t have to waste time chasing people down.
Visibility and accountability
A clear audit trail shows who approved what, when. That means audits are less of a pain, and unauthorized spending is a lot easier to spot before it becomes a problem.
Insight
With structured approval workflows in place, finance leaders have insight into where spend is coming from, where it inflates, and where things get stuck. Teams can use these insights to proactively improve and optimize.
We’ve said it once, but it’s worth repeating: formalized approval workflows aren’t red tape. They create agility, transparency, and control, which is exactly what modern finance teams need to thrive and scale. They also strengthen internal controls in accounts payable, ensuring every dollar is reviewed, authorized, and traceable.
How to build a modern approval culture
Building a modern approval workflow in accounts payable can deliver big benefits to organizations. But if informal approvals are what your organization is used to, the shift can feel daunting and you may be met with resistance.
Fortunately, making the transition doesn’t have to be overwhelming. Below are spend approval best practices to help you build a modern, scalable workflow and get everyone on board.
Define your AP approval hierarchy with clear limits by role or spend threshold
Not all invoices need the same levels of approval. Be sure to set clear approval tiers based on factors like spend amount, vendor risk, department, or location. Establishing an AP approval hierarchy eliminates guesswork and ensures the right people review the right invoices.
Provides centralized visibility to stakeholders
Centralize your approval workflow so department leaders, AP teams, and executives can see invoice status, ownership, and spend impact in real time. When everyone is using a single source of truth, work will happen faster and with fewer errors.
Align finance and operations around shared accountability
Approvals aren’t just a finance task. Be sure to involve stakeholders from around the business, set expectations early, and reinforce shared responsibility for spend.
Automate low-risk approvals and escalate exceptions
Manually reviewing every invoice simply isn’t scaleable, especially for organizations with high volumes. Lean in to finance approval automation by automating routine, low value approvals, and only escalating exceptions for closer review. Your teams will be more efficient without sacrificing control.
Communicate the value
The purpose of modern approval workflows is to make life easier, not add additional layers of bureaucracy. When faced with resistance, lead with value. When stakeholders understand what’s in it for them – including greater time-savings, less chaos, and protected budgets – they’re more likely to get on board.
The ripple effect of better approval workflows
Clearly, a modern approval workflow can transform the way invoices are routed at your organization. But making the transition also creates a ripple effect that’s felt by internal teams and vendors alike.
Here are a few of the most meaningful outcomes.
More accurate, reliable AP data
All approvals are documented, which means finance teams can actually trust the data behind every payment. Reliable data means cleaner books, fewer surprises down the road, and better decision-making.
Vendors get paid on time
When approvals aren’t held up in inboxes or on sticky notes, vendors are more likely to get paid on time. This builds stronger vendor relationships and may increase negotiation power.
Department heads have real time visibility into their spend
With a centralized approval workflow, department heads can monitor budgets and spending in real time. Rather than reactively addressing issues after money has already been spent, they can proactively plan and make adjustments as needed.
Auditors get what they need
A documented approval trail means fewer headaches during audit season. Every invoice has a history, and every approval has full context. This means less stress for auditors and finance teams alike.
A strong approval workflow in accounts payable isn’t about adding compliance for compliance’s sake. It’s about improving internal controls in accounts payable and creating a culture of transparency, accountability, and trust. Teams can move faster and be more effective in their roles, all while protecting the company’s bottom line.
It’s time to take control of your approval workflow
If approval workflows seem like unnecessary bureaucracy, it may be time to look again. The truth is, they’re the hidden infrastructure of financial control.
If your team’s invoice approvals still live in inboxes, handwritten notes, and hallway conversations, the risks are bigger than they might appear. You’re risking delays and errors, adding extra work, and making decisions without the full picture.
Making the switch to structured approval workflows doesn’t have to be overwhelming. Ottimate helps finance teams streamline approvals, eliminate friction, and maintain control – all without adding complexity for complexity’s sake.
Ready to modernize your approval workflow in accounts payable? Schedule a demo to see how Ottimate can help.