Required Checks for Approving Incoming Invoices

OK, you are an AP Specialist and have received an invoice either by mail, email or handed to you by an anxious vendor at the reception desk. In any case, it is your responsibility to address the issues required for approving the invoice and attaining disposition on getting it paid. Ultimately, incoming invoices always touch sensitive areas of your company: cash flow; reputation; and, internal organizational pressures (“…I need this product or service to complete my project!…”). Therefore, a range of verification steps are needed before the invoice gets paid.

  • Duplicate Checking – Vendors often submit invoices multiple times attempting to obtain prompt payment. If previously submitted and/or already paid, processing and/or paying is a major waste of time and money. This initial check is the most common of all checks and if discovered, the vendor should be notified of an error.
  • Invoice Accuracy – Invoices contain a lot of information: due dates; amounts ordered; order detail; amounts due; etc. Verifying the accuracy of this data is vital. Did your company even order the product or services detailed in the invoice?
  • Purchase Order (PO) Mapping – Verifying the invoice against the PO is a great way to verify accuracy since the PO has ALL of the data already. Do we pay exactly for what we ordered? Does the invoice include any additional goods or services that were not ordered and are not needed? Is the order approved?
  • Verification of Receipt – Finding out whether the goods have been delivered is a must. Very often, the payment is done only when the goods or services have been received. So waiting and checking for goods receipt is mandatory in many organizations.

There are other more sophisticated checks that can be done when the invoice has been processed and provided with additional information. Such verifications not only determine the need to pay, but also clarify the accounting and payment options.

  • Special Vendor Treatment – Checking whether the supplier is “whitelisted” or on a special list helps organizations that prefer working with reliable suppliers in order to reward the quality of their work (i.e. accelerated payment of invoices). Sometimes, there are critically important suppliers whose products and services have to be paid immediately. Supplier’s white list can help speed up the payment process.
  • Budget Compliance – Checking whether the expenses are within budget of the organization, department or project is a great check. With the development of budgeting, the organization needs to make sure that the project or department budget will not be exceeded. If paying the invoice is not within budget, either the payment should be postponed or the goods/services rejected (when not yet received).
  • Contract Compliance – Verifying the invoice against contract terms and conditions is somewhat common, but difficult to find the right information. In some situations, especially when dealing with services, the buyer is billed in accordance with the previously concluded [executed] contract. On the one hand, you need to make sure that the sum of the contract is not exceeded; on the other, you need to check whether the invoice corresponds to the services and/or goods that have been ordered.

Obviously, the checks list given above is not exhaustive. Surely, not all the checks are required in every organization. It is extremely important to understand the checks and methods for your organization, regardless of if you are automated or not. THERE IS NO SUBSTITUTE FOR KNOWING YOUR BUSINESS PROCESS!

I’m sure that building an effective system of invoice verification with a maximally optimized payment process is the main objective in building invoice approval and payment process in the organization. Such software as Conterra FIM is designed to help you simplify these processes and make them efficient.

The Orienge team and I are always ready to listen to your specifics and help you with this process! Please feel free to contact me directly dshields@orienge.com or contact a member of the Orienge team at 917-727-3278 or office@orienge.com.

email