Best Practices – AP Approval Process

Dynamics 365 Finance

Microsoft Dynamics 365

Best Practices – AP Approval Process

Several Accounts Payable professionals were surveyed and they admitted to spending twenty percent of their work time managing approval. That’s one day out of every work week spent chasing sign-offs from other employees or departments. This inefficient use of resources is a waste of time and a cause
of frustration. There ought to be a better way to manage approvals. There is.


Why do most AP professionals find the approval process so difficult?

Often it’s because the approval channel is poorly defined or inadequately managed. Sometimes it results from tedious manual processes and a lack of automated controls.

When these processes depend on various employees, or when there is no segregation of duties, there is also an opening for error or fraud.


Approval channel best practices

Approval channels route purchase orders, expense vouchers, etc., to appropriate team leaders or managers for approval. Payment is authorized once the designated approver signs off on the order.

Having set up approval channels for thousands of AP professionals, we recommend the following best practices:

Create multi-level approvals:

It’s best to set up at least two levels of approval. You choose the criteria, but for instance, you might stipulate that invoices involving larger amounts must go to two different approvers. Set up your system so the process can proceed to payments only after double verification.


Have distinct approval channels for invoices and payments:

The person who approves invoices should be unassociated with the person who approves payments. This double verification will fortify your risk prevention strategy, prevent fraudulent approvals, and protect company funds.


Institute formalized approval procedures:

Make sure that everyone involved understands and follows the documented, formal organizational structure of your approval workflow. Clearly define the approver, their timeline for approval, and who the secondary approver would be in their absence.


Segregate duties: 

GAAP (Generally Accepted Accounting Principles) recommends segregating duties for accounting best practices. Individuals who create and maintain financial records for an organization’s transactions must be separate from the ones issuing or approving those transactions.


Build a purchase order approval workflow:

Set up internal rules for purchasing before placing an order. You can start by creating a requisition for internal approval that is authorized by a manager or finance department and then sent to the supplier.
Various workflow management systems allow setting up trigger-based actions to manage the workflow.

Get in touch with us to know the more benefits or adopt the best practice rapidly.


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