Q: Why use an approval workflow for managing contracts, work orders, and invoices?
Approval workflows help protect your company and streamline work.
When working with any vendor, including freelancers and independent contractors, you need to have consistent processes in place to ensure that your company is legally protected, following compliance processes, and has internal visibility and transparency for cash flow. For example, 10-20% of companies misclassify independent contractors, which can lead to liabilities and penalties due to violations of tax and employment laws.
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Managing Work Orders and Invoices
Work Order (WOs) specify the details of a project. For example, these details would include all the project deliverables and the schedule for delivery. A WO is also sometimes referred to as a Purchase Order (PO) or Statement of Work (SOW) and is usually attached to a Master Services Agreement (MSA).
Using a WO approval process ensures that all projects have the proper authorization and review, as well as being within the company’s budget. By defining your approval workflow, you can streamline your approval process and rapidly complete the steps your company determines are necessary. Additionally, having an approval process helps your company with cost control, cash flow visibility, and enabling a faster month-end close for the accounting department.
Similarly, you’ll also want to have a review and approval workflow for invoices from your vendors. Liquid streamlines invoice reviews – invoices route automatically to each approver, with notifications alerting the approver.
There’s no one “right” approval workflow. Depending upon your company’s organizational structure and the relative roles and responsibilities of different roles, you may have a workflow as simple as two steps or have multiple approvers involved. And there may be different approvers for a contract vs. a work order vs. an invoice.
For example, the project manager, the department head, and legal/procurement department may need to approve a contract, while the project manager, department head, and finance department may need to authorize the work order and invoices. The approval process may also vary in terms of the number of approvals required, depending upon the expense involved.
A common approach is to establish a review workflow that varies based upon an average spend amount that different roles within the organization can authorize. For example, all expenditures under $1,000 may only require the immediate manager’s approval.
With Liquid, you can set the different roles for your organization, expenditure approval authority rules, and the approval flow. This approval flow setup will then apply automatically to all your Work Orders and invoices.
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Category: Compliance Freelancer Management Ask Liquid
Updated: January 3, 2021
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.