The invoice approval process in procurement is an excellent way to manage expenditures and manage payables within an organization. Many organizations still make use of manual invoicing approval processes, which in most cases, are slow, inefficient, and costly. Additionally, this may lead to inaccuracies and shortfalls, which can lead to cash problems.
The best way to deal with this problem is to digitize the entire invoice approval process as it would significantly increase efficiency and transparency.
Invoice approval involves evaluating and approving the invoice from a supplier right before payment is made. The approval process commences typically when the buyers get hold of the invoice from the supplier either physically or electronically. The invoice is typically screened, compared with the original purchase order, and approved if no discrepancies are detected. This invoice screening and approval process are usually conducted by the procurement unit or department. In small organizations, a procurement officer may exist within the finance unit.
Invoice Approval Process
In most cases, organizations have spelled out the invoice approval process for dealing with received invoices from different suppliers. However, for each organization, this process may be slightly different.
In general, invoices are processes in either two ways. Most organizations approve invoices using purchase orders while others make use of invoices alone. However, we are going to discuss approval using purchase orders. Below are all the processes involved from the creation of an invoice until its approval.
The supplier is responsible for the creation of an invoice. The purchase order received from the buyer serves as bases for the creation of an invoice. Therefore, all critical information must be captured on the invoice to be useful in the procurement process. Successfully created invoices are sent physically or electronically to the buyer.
Once the buyer receives the invoice from the supplier, it is categorized so as to collect all relevant documentation that is connected to the purchase. These documents may include purchase orders or requests initially developed at the beginning of the procurement process.
If for some reason, the invoice happens to fail during validation as a result of missing data or discrepancies, the invoice is returned to the supplier for correction. Once the correction is done, the invoice returns to the buyer for approval.
The moment an invoice corresponds to the purchase order through validation, the invoice is approved for payment. The approval is transferred to the accounts payable for subsequent payment.
The invoice approval is an essential process that helps to prevent discrepancies and errors within the procurement of goods and services. Before the approval of an invoice, other processes are carried out. First, the invoice must be generated, then validated, and finally approved. An invoice is closed the moment payment is made to the supplier.