Keep tabs on these seven key spend management performance indicators to measure how cost effective your procurement optimization efforts have been.
Key benefits of approval routing software
An automated approval workflow is key to optimizing your purchasing process. It enables you to fast-track simple to complex multi-level approval structures with improved transparency and informed decision-making at every touchpoint in your approval line.
But first, let’s address why manual and paper-based systems don’t meet organizational purchasing and expense management requirements—and how approval routing software can facilitate the internal controls you need.
The true cost of manual, outdated approval workflows
Manual and paper-based approval workflow processes account for most purchasing and expense management delays and inefficiencies. These delays slow down the purchasing process and create undue ripple effects such as:
- Unauthorized spending
- Stalled expense reimbursements
- Process bottlenecks that cause penalties for late payments.
Overall these eventualities stifle productivity and lead to employee frustration and increased costs. Not to mention, the path to approval holds many risks and possible blockers. These include:
Fragmented approval workflows
The importance of automated approval workflows cannot be overstated. With purchasing and expenses occurring at every level in a business, implementing sound practices for purchase requisitioning, expense claims and approvals is vital for effective spend management.
For instance, manual purchasing and expense management processes can become decentralized in remote workforces or organizations with multiple, dispersed branches. The result is a time-consuming and complex approval workflow, from justifying a purchase to outlining the selection process in multiple email threads, and then repeating it at every level until it is approved. If someone along the chain requests additional details or verification, it usually means the process starts all over again.
Error-prone, lost or stalled requisitions
Manual approval workflows require multiple email threads or paper-based processes that require signatures. Unattended emails, delayed responses, inadequate supporting documentation and human error are the primary reasons for stalled requisitions and bottlenecks.
Timely approvals can be derailed when the next manager in the approval line is on vacation or on sick leave. This is often where purchasing and expense reporting goes awry. The requester may even circumvent processes due to their impatience or frustration, which leads to untracked and unauthorized spending.
Manual approval processes are completely inept when it comes to ensuring that spend occurs with approved or contracted vendors.
With no oversight of whether or not a vendor is authorized, managers approve requests blindly and the resulting purchases occur with random suppliers. If this becomes a common occurrence, it completely diminishes the procurement team’s opportunities to save and gain more spend under management with contracted vendors that offer the best value.
Now that we’ve identified the primary contributors to delays and inefficiencies in approval workflows, let’s explore how automated approval routing software can optimize your purchasing and expense management processes.
The 8 benefits your business stands to gain with approval routing software
1. Automated approval routing
Modern automated approval workflows offer great ease-of-use, which helps you encourage healthy adoption levels and enables your employees to raise their productivity with the software.
With spend management or approval routing software, your employees can simply submit purchase requisitions or expense reports using the solution’s web interface or mobile app, and the automated approval workflow does all of the heavy lifting for them. Requests are routed for approval, internal controls are automated and all relevant approval data and actions are tracked along the way.
Approvals should escalate according to configured business rules, such as value and department, and ensure compliance with company procurement policies. From simple to multi-level structures, each requisition gets the right level of authorization, from the relevant approvers.
Invoice approval automation provides an additional layer of control. Your AP department can ensure timely payments and eliminate the risk of overpayment with exception alerts and three-way matching capabilities.
2. Spend visibility
What’s the status of a requisition? Who approved this purchase? Is this purchase within budget?
These are common, burdensome questions without adequate spend visibility. Approval routing software provides critical visibility into your organization’s spending processes.
Know the status of every requisition and all relevant data in seconds with access to detailed audit trails. Quickly see where requisitions are in relation to your budget. Create custom reports and analyze spend by:
- Or budget
This oversight and transparency promotes accountability and ultimately a cost-conscious spending culture.
While most businesses are starting to adopt an automated approval process, the prevailing remote work requirements have necessitated not only digitization, but mobility that enables productivity on any device, from any location. By deploying cloud-based approval routing software, you gain automated approval workflows and benefit from on-demand purchasing and expense management processes via a web interface and mobile app.
No more delays due to approvers being in different locations, or unavailable. Best-in-class approval routing solutions give you the ability to approve requests on your mobile device, wherever you are, or assign a proxy approver or out-of-office delegate to manage approvals in your absence.
With remote and dispersed workforces, internal collaboration is paramount to effective day-to-day operations. Approval workflow automation is a primary example of collaboration that helps to organize processes, delegate responsibilities and track entire transaction life cycles.
Prime examples of internal collaboration that can be supported by an automated approval process are:
- Building up a requisition
- Processing and authorizing a new supplier
- Soliciting additional verification
- Being notified of an exception
Digitizing these touchpoints with approval routing software will fast track and simplify processes while seamlessly connecting users, assigning responsibilities and mitigating risk.
5. Internal control
Approval workflow automation enables effective delegation of authority. This not only relieves top executives or managers of the burdens of approving routine purchases but distributes workloads, accelerates and improves decision-making and minimizes the risk of fraudulent purchases. You can set different permission levels for each manager and control who can view, edit, reject, review real-time budgets and approve requests.
Approval routing software enables the configuration of policies throughout all procurement processes. These risk-mitigating features ensure that all spending is procurement policy and budget compliant with mobile, email or in-app alerts and notifications that highlight any breaches or noncompliance.
7. Time savings
Approval routing software enables automated approval workflows to accelerate and streamline purchasing and expense management processes - cutting out tedious manual routing and data collection.
On average, organizations running at full optimization can improve requisitioning, expense claims and approvals by reducing processing times from over a week to less than a day. The time savings will boost productivity and empower employees to channel their time into more strategic initiatives. The productivity gains alone can lead to significant savings overall and even reduce the need for additional hires.
8. Cost savings
You’ll be hard-pressed to stop rogue, maverick, unauthorized or fraudulent spending without adequate technology, automation or spend visibility — you can’t manage what you can’t see.
Automated approval routing software will not only simplify processes and shed light on spending behavior, it will flag noncompliance and eliminate the need for corrective action as all spending will be authorized, and budget and policy compliant before it is incurred.
Create a responsible spending culture with automated approval routing software
Approval automation promotes accountability and transparency and the need for micromanagement is reduced as managers are at ease with delegating ownership of tasks. These factors combined significantly improve spending behavior.
Best in class approval routing software solutions are powered by agile routing engines that enable efficiency gains and measurable cost savings—ensuring you strike a perfect balance between efficiency and control.
Interested in seeing what approval routing software can do for your business? Schedule a custom demo of Fraxion to learn how its platform can drive accountability, efficiency and cost control.