diff --git a/src/components/MoneyReportHeader.tsx b/src/components/MoneyReportHeader.tsx
index 3d0cb8c079119..11678f8372485 100644
--- a/src/components/MoneyReportHeader.tsx
+++ b/src/components/MoneyReportHeader.tsx
@@ -352,8 +352,7 @@ function MoneyReportHeader({
 
     const [reportNameValuePairs] = useOnyx(`${ONYXKEYS.COLLECTION.REPORT_NAME_VALUE_PAIRS}${moneyRequestReport?.reportID}`, {canBeMissing: true});
     const getCanIOUBePaid = useCallback(
-        (onlyShowPayElsewhere = false, shouldCheckApprovedState = true) =>
-            canIOUBePaidAction(moneyRequestReport, chatReport, policy, transaction ? [transaction] : undefined, onlyShowPayElsewhere, undefined, undefined, shouldCheckApprovedState),
+        (onlyShowPayElsewhere = false) => canIOUBePaidAction(moneyRequestReport, chatReport, policy, transaction ? [transaction] : undefined, onlyShowPayElsewhere),
         [moneyRequestReport, chatReport, policy, transaction],
     );
 
diff --git a/src/components/ReportActionItem/MoneyRequestReportPreview/MoneyRequestReportPreviewContent.tsx b/src/components/ReportActionItem/MoneyRequestReportPreview/MoneyRequestReportPreviewContent.tsx
index c4b5569018aab..776fb12468ad4 100644
--- a/src/components/ReportActionItem/MoneyRequestReportPreview/MoneyRequestReportPreviewContent.tsx
+++ b/src/components/ReportActionItem/MoneyRequestReportPreview/MoneyRequestReportPreviewContent.tsx
@@ -171,8 +171,7 @@ function MoneyRequestReportPreviewContent({
     const hasViolations = hasViolationsReportUtils(iouReport?.reportID, transactionViolations, currentUserDetails.accountID, currentUserDetails.email ?? '');
 
     const getCanIOUBePaid = useCallback(
-        (shouldShowOnlyPayElsewhere = false, shouldCheckApprovedState = true) =>
-            canIOUBePaidIOUActions(iouReport, chatReport, policy, transactions, shouldShowOnlyPayElsewhere, undefined, undefined, shouldCheckApprovedState),
+        (shouldShowOnlyPayElsewhere = false) => canIOUBePaidIOUActions(iouReport, chatReport, policy, transactions, shouldShowOnlyPayElsewhere),
         [iouReport, chatReport, policy, transactions],
     );
 
@@ -181,7 +180,7 @@ function MoneyRequestReportPreviewContent({
     const shouldShowPayButton = isPaidAnimationRunning || canIOUBePaid || onlyShowPayElsewhere;
 
     const {nonHeldAmount, fullAmount, hasValidNonHeldAmount} = getNonHeldAndFullAmount(iouReport, shouldShowPayButton);
-    const canIOUBePaidAndApproved = useMemo(() => getCanIOUBePaid(false, false), [getCanIOUBePaid]);
+    const canIOUBePaidAndApproved = useMemo(() => getCanIOUBePaid(false), [getCanIOUBePaid]);
     const connectedIntegration = getConnectedIntegration(policy);
     const hasOnlyHeldExpenses = hasOnlyHeldExpensesReportUtils(iouReport?.reportID);
 
diff --git a/src/components/SelectionListWithSections/Search/ActionCell.tsx b/src/components/SelectionListWithSections/Search/ActionCell.tsx
index 6cedd17335941..b7e59148d8013 100644
--- a/src/components/SelectionListWithSections/Search/ActionCell.tsx
+++ b/src/components/SelectionListWithSections/Search/ActionCell.tsx
@@ -76,8 +76,8 @@ function ActionCell({
     const [iouReport, transactions] = useReportWithTransactionsAndViolations(reportID);
     const policy = usePolicy(policyID);
     const [chatReport] = useOnyx(`${ONYXKEYS.COLLECTION.REPORT}${iouReport?.chatReportID}`, {canBeMissing: true});
-    const canBePaid = canIOUBePaid(iouReport, chatReport, policy, transactions, false, undefined, undefined, true);
-    const shouldOnlyShowElsewhere = !canBePaid && canIOUBePaid(iouReport, chatReport, policy, transactions, true, undefined, undefined, true);
+    const canBePaid = canIOUBePaid(iouReport, chatReport, policy, transactions, false);
+    const shouldOnlyShowElsewhere = !canBePaid && canIOUBePaid(iouReport, chatReport, policy, transactions, true);
     const text = isChildListItem ? translate(actionTranslationsMap[CONST.SEARCH.ACTION_TYPES.VIEW]) : translate(actionTranslationsMap[action]);
     const shouldUseViewAction = action === CONST.SEARCH.ACTION_TYPES.VIEW || (parentAction === CONST.SEARCH.ACTION_TYPES.PAID && action === CONST.SEARCH.ACTION_TYPES.PAID);
 
diff --git a/src/libs/actions/IOU.ts b/src/libs/actions/IOU.ts
index 8582d2c49fb8b..efdc4819dd0ae 100644
--- a/src/libs/actions/IOU.ts
+++ b/src/libs/actions/IOU.ts
@@ -189,6 +189,7 @@ import {
     isPayAtEndExpenseReport as isPayAtEndExpenseReportReportUtils,
     isPayer as isPayerReportUtils,
     isPolicyExpenseChat as isPolicyExpenseChatReportUtil,
+    isProcessingReport,
     isReportApproved,
     isReportManager,
     isSelectedManagerMcTest,
@@ -10536,7 +10537,6 @@ function canIOUBePaid(
     onlyShowPayElsewhere = false,
     chatReportRNVP?: OnyxTypes.ReportNameValuePairs,
     invoiceReceiverPolicy?: OnyxTypes.Policy,
-    shouldCheckApprovedState = true,
 ) {
     const reportNameValuePairs = chatReportRNVP ?? allReportNameValuePairs?.[`${ONYXKEYS.COLLECTION.REPORT_NAME_VALUE_PAIRS}${chatReport?.reportID}`];
     const isChatReportArchived = isArchivedReport(reportNameValuePairs);
@@ -10577,23 +10577,29 @@ function canIOUBePaid(
         policy,
     );
 
-    const isOpenExpenseReport = isOpenExpenseReportReportUtils(iouReport);
-
     const {reimbursableSpend} = getMoneyRequestSpendBreakdown(iouReport);
     const isAutoReimbursable = policy?.reimbursementChoice === CONST.POLICY.REIMBURSEMENT_CHOICES.REIMBURSEMENT_YES ? false : canBeAutoReimbursed(iouReport, policy);
-    const shouldBeApproved = canApproveIOU(iouReport, policy, transactions);
     const isPayAtEndExpenseReport = isPayAtEndExpenseReportReportUtils(iouReport ?? undefined, transactions);
+    const isProcessing = isProcessingReport(iouReport);
+    const isApprovalEnabled = policy ? policy.approvalMode && policy.approvalMode !== CONST.POLICY.APPROVAL_MODE.OPTIONAL : false;
+    const isSubmittedWithoutApprovalsEnabled = !isApprovalEnabled && isProcessing;
+    const isApproved = isReportApproved({report: iouReport}) || isSubmittedWithoutApprovalsEnabled;
+    const isClosed = isClosedReportUtil(iouReport);
+    const isReportFinished = (isApproved || isClosed) && !iouReport?.isWaitingOnBankAccount;
+    const isIOU = isIOUReport(iouReport);
     const canShowMarkedAsPaidForNegativeAmount = onlyShowPayElsewhere && reimbursableSpend < 0;
 
+    if (isIOU && isPayer && !iouSettled && reimbursableSpend > 0) {
+        return true;
+    }
+
     return (
         isPayer &&
-        !isOpenExpenseReport &&
+        isReportFinished &&
         !iouSettled &&
-        !iouReport?.isWaitingOnBankAccount &&
         (reimbursableSpend > 0 || canShowMarkedAsPaidForNegativeAmount) &&
         !isChatReportArchived &&
         !isAutoReimbursable &&
-        (!shouldBeApproved || !shouldCheckApprovedState) &&
         !isPayAtEndExpenseReport &&
         (!isExpenseReport(iouReport) || arePaymentsEnabled(policy as OnyxEntry<OnyxTypes.Policy>))
     );
diff --git a/tests/actions/IOUTest.ts b/tests/actions/IOUTest.ts
index 0fd2d9541b773..96bf52945e7d1 100644
--- a/tests/actions/IOUTest.ts
+++ b/tests/actions/IOUTest.ts
@@ -5428,10 +5428,8 @@ describe('actions/IOU', () => {
                                     });
                                     resolve();
 
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, true)).toBe(true);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, false)).toBe(true);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, false)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true)).toBe(true);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false)).toBe(false);
                                 },
                             });
                         }),
@@ -5451,10 +5449,8 @@ describe('actions/IOU', () => {
                                     expect(expenseReport?.stateNum).toBe(0);
                                     expect(expenseReport?.statusNum).toBe(0);
 
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, false)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, false)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false)).toBe(false);
                                 },
                             });
                         }),
@@ -5481,10 +5477,8 @@ describe('actions/IOU', () => {
                                     expect(expenseReport?.stateNum).toBe(2);
                                     expect(expenseReport?.statusNum).toBe(2);
 
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, true)).toBe(true);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, false)).toBe(true);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, false)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true)).toBe(true);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false)).toBe(false);
                                 },
                             });
                         }),
@@ -5524,10 +5518,8 @@ describe('actions/IOU', () => {
                                     Onyx.disconnect(connection);
                                     chatReport = Object.values(allReports ?? {}).find((report) => report?.chatType === CONST.REPORT.CHAT_TYPE.POLICY_EXPENSE_CHAT);
 
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, false)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, false)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false)).toBe(false);
                                     resolve();
                                 },
                             });
@@ -5624,10 +5616,8 @@ describe('actions/IOU', () => {
                                         stateNum: 0,
                                     });
 
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, true)).toBe(true);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, false)).toBe(true);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, false)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true)).toBe(true);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false)).toBe(false);
                                     resolve();
                                 },
                             });
@@ -5672,10 +5662,8 @@ describe('actions/IOU', () => {
                                     // Report was submitted with some fail
                                     expect(expenseReport?.stateNum).toBe(0);
                                     expect(expenseReport?.statusNum).toBe(0);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true, undefined, undefined, false)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, true)).toBe(false);
-                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false, undefined, undefined, false)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], true)).toBe(false);
+                                    expect(canIOUBePaid(expenseReport, chatReport, policy, [], false)).toBe(false);
                                     resolve();
                                 },
                             });
@@ -6897,13 +6885,13 @@ describe('actions/IOU', () => {
     });
 
     describe('canIOUBePaid', () => {
-        it('should return false if the report has negative total and onlyShowPayElsewhere is false', () => {
+        it('should return false if the report has negative total and onlyShowPayElsewhere is false', async () => {
             const policyChat = createRandomReport(1, CONST.REPORT.CHAT_TYPE.POLICY_EXPENSE_CHAT);
             const fakePolicy: Policy = {
                 ...createRandomPolicy(Number('AA')),
                 id: 'AA',
                 type: CONST.POLICY.TYPE.TEAM,
-                approvalMode: CONST.POLICY.APPROVAL_MODE.BASIC,
+                approvalMode: CONST.POLICY.APPROVAL_MODE.OPTIONAL,
                 reimbursementChoice: CONST.POLICY.REIMBURSEMENT_CHOICES.REIMBURSEMENT_YES,
                 role: CONST.POLICY.ROLE.ADMIN,
             };
@@ -6920,8 +6908,10 @@ describe('actions/IOU', () => {
                 total: 100, // positive amount in the DB means negative amount in the UI
             };
 
-            expect(canIOUBePaid(fakeReport, policyChat, fakePolicy, [], false, undefined, undefined, false)).toBeFalsy();
-            expect(canIOUBePaid(fakeReport, policyChat, fakePolicy, [], true, undefined, undefined, false)).toBeTruthy();
+            await Onyx.merge(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy);
+
+            expect(canIOUBePaid(fakeReport, policyChat, fakePolicy, [], false)).toBeFalsy();
+            expect(canIOUBePaid(fakeReport, policyChat, fakePolicy, [], true)).toBeTruthy();
         });
     });