As digitization is taking over the world, businesses are implementing it in finance operations as well. It is not only convenient but also secure to process financial data using modern technology. Accounting and bookkeeping are also getting new updates due to changes in ways of working. Now, firms have access to accounting automation software for bookkeeping and accounting. A Payment approval system, on the other hand, is responsible for managing the financial operations and workflows on the go. It takes care of pending payments, processes the amounts automatically and most importantly, streamlines the payment process. This blog is all about payment workflows and will discuss the payment approval system in detail.
What is a Payment Approval System?
Before diving deep, let’s first understand what the payment approval system is in the first place. A payment approval system is a computer program or software which lets the management approve the payments for all different business operations. It is a secure way of processing organizational funds as it allows business owners or managers to control the expenses and maintain the priority of each payment. This approval system allows the handling of operations across different levels in an organization. Compared to traditional systems, these programs are more reliable and secure as they create transparency in payment processing operations.
How Does the Payment Approval System Work?
The payment approval system is a modern approach to processing all the finances. It streamlines the payment workflows by the organization’s policy of managing funds. At first, the system needs to have all payment requests to be present in the company’s online portal or corporate platform. All the requests from each department must include all the information with proper reasoning for the payment. The managers or the people running the organization will review the payment request and approve only the ones which are legit and necessary. The accounts payable department keeps the track record of each request making the company’s finances in structure. Using this payment approval system, firms can follow a complete workflow while maintaining the balance between their profit and loss cycles.
The 4-Step Payment Approval Cycle
The payment approval workflows are the operations that help organizations and vendors authorize each payment as per the policies. This significantly improves the transparency and credibility of each payment. There are four crucial steps in the payment approval cycle:
Initiating the Payment
The step one is payment initiation. In this step, the organizational departments or workforce initiate a payment request. This can be started by an employee working for the firm or a vendor who needs the charge of the goods or act of assistanc it provides to the business. In both cases, a request will be generated in the payment approval system. This request is forwarded to the accounting department by the digital system automatically without any manual effort.
Reviewing
In step 2, the payment that was automatically forwarded by the system is reviewed by more than one authorized individual of the firm. The accounting department performs this process and the accounts payable clerk asks for approvals from the managers. This process ensures that the request for payment is legit and all the transfer of finances is in accordance with the company’s policy. Also, documentation is a significant part of this step, as the accounting and bookkeeping team keep the record of each transfer request in a digital document uploaded to the cloud for transparency of operations.
Processing
In step 3, the payment approval system, after verifying the request from the respective departments, approves the request. It generates a transaction request from the organizational finance system to the banking solution to transfer the specified amount for the reason in the request. The finance department approves it and an invoice keeps the record of all the finances moved in this process.
Reconciling
The last step in the payment approval workflow is reconciling the payment. Once the system processes all the transactions, it is necessary to reconcile each one. This operation ensures that all the movement of finances is made correctly and after complete evaluation from the managers and other authorities. It also increases the credibility of transaction documentation from the accounting department. In the long run, firm owners can extract valuable insights from their transaction data and make better decisions for any new tasks.
Final Thoughts
Using a payment approval system for processing business payments has become a necessity in modern times. Firms can take a lot of advantages from this approach as it fulfills all the needs of accounting and bookkeeping professionals in a fast and efficient manner. The payment approval workflow is a great example of promoting transparency in business operations and the movement of finances.