Step 1 - Set up Approval Tiers

Approval Policies are good practice

Simplified explanations of "tiers" in the context of your invoice approval workflow plan:

• Approval by Department and Invoice Size: Each department or team has a specific person responsible for approving invoices. Depending on the amount of the invoice, it is sent to the right person for review.

• Invoice Approval by Assigned Approver: Based on the department or invoice amount, the system sends the invoice to a specific approver. This ensures that the right person reviews and approves each invoice efficiently.

• Direct Invoice Review by Assigned Approvers: Each invoice is assigned to a designated person based on the department or amount. The assigned person reviews and approves the invoice in one step, ensuring smooth processing.

These explanations break down "tiers" into a more intuitive idea of levels, steps, or layers based on responsibility and invoice size.

Approval tiers are configurations that specify the conditions under which a particular approver can approve invoices. These configurations may include the range of invoice financial amounts that can be approved, as well as the category and/or role that the approver should belong to in order to be able to approve the invoices.

There are three tiers to organize the permission on who can approve what invoice.  (one tier is mandatory, and the others are optional)

How to organize 

One option to organize this: 

The person approving invoices should not be the same person who is approving payments. This is a security measure to prevent fraudulent routing of funds.

Second option to organize this:

Set a mandatory threshold for invoice approval: To make the approval process more efficient, consider setting a numerical cost threshold for approvals and allowing invoices for small amounts of money to be paid without the need for approvals.

Third option to organize this:

An invoice approval includes reviewing and approving invoices before the payment is processed against them. Usually, the invoice approval process starts when the company receives a supplier invoice, which is then checked by the person in the organization who is responsible for buying that particular product or service

Note: Category and Roles are optional 

Role examples:

Founder

Owner

Finance

Bookkeeping

Supervisor

Manager

Engineering

Manufacturing

Purchasing

Marketing

A approver will be assigned a tier

Things to note:

If a user is set to an approval tier for a certain amount, they will be able to approve all payments within that tier regardless of the role.

If a user is set to a role they will only be able to approve payments that are assigned to their role. 

Accounts Payable Invoice Approval Levels and Workflow

Who should approve invoices for payment in your company? A written company policy should set authorized approval levels by invoice amount and responsibility center. 

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The person with cost center budget responsibility should be an invoice payment approver. 

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The other approvers should be designated managers who supervise the AP worker.