Many businesses still rely on manual labor to manage their financial approval workflow—which leads them to encounter surprising hidden costs. And though many businesses—and their accounting departments—are trying to get away from manual adjustments, it can be mystifying and daunting to transition away. After all, don’t processes run better when there’s a person making sure everything is working properly?
Not really. At least not in this case.
In fact, approvals done manually don’t just result in wasted time and labor, but could also end up costing you more. This is why a dynamic, flexible approvals process—one that takes into account metrics and current technology—is essential.
The hidden costs of manual labor
Imagine you processed 500 transactions last month. But in 12 separate instances–when a feature wasn’t working, some information was missing, or an adjustment was necessary–processing those transactions required manual intervention. In an initial cost-benefit analysis, this might not seem too bad, but remember, the people you send in to do manual interventions are often paid by the hour. If those changes are complicated, time & cost adds up. Is that really a cost you want your company to absorb regularly every quarter—and every year?
More issues occur when your manual process involves too many people. If you have a project with five or six people involved, and any one of them can make changes to the process, the resulting confusion is only part of the problem.
What is this costing you in real dollars? Are you fixing things over and over again? There’s a fine line between having too few employees take ownership of the approvals process and having too many people involved. With a manual approvals process, it’s far more likely you’ll have employees tripping over one another while they’re billing you by the hour for their work. That’s double the cost!
And, of course, let’s not forget the metrics. Very often, both projects and employees are evaluated on how fast things go through a workflow. Since this speed is often dependent on getting the proper approvals, a manual approach results in bottlenecks where crucial approvals are stuck in the workflow. Perhaps the approval authority is on vacation or trying to manually adjust a detail so everything moves faster. If they can’t improve the speed of the approvals, the project will take more time and likely cost more money. And in cases where timeliness is a factor—either because of a hard deadline or because it's an urgent request—the metrics will paint a very different picture of how well the project was executed.
Furthermore, a manual approvals workflow can do more than hurt your bottom line; it can be exhausting for your employees. There’s always a hunt for invoices and details need to be carefully checked. After the relevant stakeholders are found, there’s a waiting game. It’s even worse if the request is incomplete or rejected for some reason. Then it’s back to the drawing board to fix inaccurate details. Eventually, the talented employees you hired won’t want to waste their time fixing details in Excel or waiting for an email to move forward. So far from making your approvals process more trustworthy, the manual approach wastes time and labor, causes more mistakes, can lower morale, and, in the long run, even result in greater employee turnover.
How a dynamic approach can help
If your company is moving away from a manual system of approvals, it’s likely you’re keeping a close eye on when and how often manual adjustments are made. If your approval process is static, then you’re likely seeing more manual intervention than you’d like.
A static approval process is where all tasks are automatically assigned with little flexibility to change the procedure. It usually doesn’t take long to realize that with a static process, you’re still reliant on some kind of manual adjustment or intervention every time there’s an unexpected problem or necessary change. This is often when business owners realize a dynamic and customizable workflow will help their company move away from a manual financial approval process.
With a static process, you might need to write multiple approval requests when you need input from various departments. But with a dynamic process, you’d have the ability to route approval requests to multiple departments based on specific criteria. A list of approvers in a matrix means greater visibility regarding the approval process and an improved ability to track the request through the workflow.
In addition to flexibility, dynamic processes allow features to be customized and have specific alternate procedures when circumstances make that necessary. A dynamic process is particularly useful in the case of company mergers or reorganization, as you’ll be able to adjust the approvals workflow to incorporate new departments or procedures.
It’s hard to have a truly dynamic approvals process based mostly on manual intervention. Technology—specifically the right technology that works well with the processes, programs and software you already have—is essential.
Why technology matters
You might believe reducing the amount of paper your accounting department deals with is enough to increase efficiency, but think again.
Sure, every single paper copy is the result of manual labor, both in creating the document and making sure it goes through the workflow in an efficient manner. And going paperless is definitely a crucial element in updating your approvals process. But having a paperless software solution alone won’t help. All that technology, with its nifty features, still requires someone to manually move requests through the workflow. And having a hybrid workflow—part paper, part digital—will cause even more problems. If your workflow solution only automates certain steps, then your finance team still needs to manually adjust the process between each one.
The fact is, unless paperwork is eliminated and replaced with digital documents and invoices that can be found in one place, you can still expect administrative problems, lost invoices, miscommunication and employee frustration to increase.
The answer is automation. That means investing in the most comprehensive and practical technology solution your company can afford—one that will scale with your company's growth while also complementing the current technology you’re using. Because if you really want to eliminate the flaws in your approvals process (wrongly routed requests, no feedback or answers to questions, poor communication between vendors, employees and customers, poor visibility due to no tracking system, etc.), then automation is the answer.
Automated request initiation can ensure approval requests are properly formatted and include all necessary information, which can reduce the rate of rejected requests or duplicated requests. An automated platform can also create a centralized space for requests and standardize inconsistent approval procedures across departments.
Additionally, an automated system is more than just moving the financial approval process from paper to a computer. With an appropriate request management system, employees can create and send a request quicker, and the relevant approvers can evaluate the request sooner. This ideally leads to fewer missing documents and requests, less time managing and tracking down newer versions of files and documents, plus less confusion when dealing with a huge number of requests. Automation also means that standard project management procedures can be enforced in a similar manner every time.
While it might seem smart to have an employee monitoring all the details of your workflow, a manual approval process will actually end up costing you more in the long run. Automation, made possible by an ERP like NetSuite, can help you simplify, standardize and streamline your financial approval workflow in a cost-effective way.
This means an approval process that isn’t frustrating, outdated or labor-intensive, resulting in faster decision-making, improved collaboration between teams and reduced likelihood of human error. Plus, it frees up time and resources for other, more valuable tasks like evaluating performance trends, insights into what causes bottlenecks and new ways to improve customer satisfaction.
And isn’t that definition of “working smarter, not harder?”