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Does the fear of making a mistake on a bill payment often get to you? Have no fear! There are others in your position when it comes to an invoice check. But unfortunately, it affects even the largest multinational corporations.
After all, paying the incorrect invoice has to be worse than forgetting your sunscreen on a day at the beach. So, if invoice checking is an art, you must be an artist.
Therefore, let’s learn how to verify an invoice so that you never have to read up on the regulations surrounding accidental payments.
One of the regular accounts payable duties is verifying invoices, even for correct invoices. The invoices need to be double-reviewed for accuracy in substance and compliance with the Value Added Tax Act’s formal requirements.
How Does the Invoice Verification Process Work?
Accounts payable managers are often in charge of vetting invoices and invoice approval.
The primary objective of verifying an invoice is to stop money from being stolen via fraudulent payments.
During an invoice validation, you ensure the vendor is billing you for the services you used. The invoice is checked against the delivery notes and purchase order to guarantee correctness. Only when all of the information on an invoice agrees with its supporting documentation is the invoice paid.
If there are inconsistencies, the invoice is denied, and the supplier is asked to submit a revised version.
Types of Invoice Verification
Company size, structure, and procedure affect how the invoice verification process works. So, if you’re trying to figure out what kind of invoice verification is best for you, we’ll cover some of the most important ones.
The method used for invoice checking varies from business to business. However, the three techniques of invoice verification listed below are widely used by enterprises.
Let’s check out the big three for a correct invoice.
1. Invoices Without a Reference to a Purchase Order
When no PO is available, organizations occasionally check invoices directly with the accounts receivable manager, marital accountant, or general ledger accountant.
2. Invoices Created Based on Purchase Orders
During the purchase order (PO)-based invoice verification process, the invoice and the order placed are compared and matched by the accounts payable department.
In most cases, the authority that issued the order is responsible for carrying it out to minimize any potential communication breakdowns. The number of deliveries, even incomplete deliveries, is not taken into account by this technique. Instead, it considers the entire quantity and the price on the invoice.
3. Invoices Determined by the Goods Received
When items are delivered in stages, one viable choice for verifying invoices is to do so based on the goods’ receipt. This is an acceptable practice. However, as a result, different invoices are generated for each item purchased.
Invoice Verification Procedure
Invoices often follow a standard format that includes predefined parts designed to provide the appropriate information to the relevant people in the accounting department so that payment may be approved, processed, and sent to the right vendor in a timely way. On an invoice, you should make sure of the following seven things:
1. The Contact Details of the Supplier/Vendor
Information about the vendor, like their name, business name, and contact details such as phone number and email address should be easily accessible. A company’s accounting division will need this data so that payments may be routed appropriately. Invoice processing might be slowed if a necessary zip code or phone number is absent.
2. Verify the Billing Date
When determining whether or not an invoice is legitimate, it is necessary to examine the date it was issued. It is crucial in a proposed law. Furthermore, the gap between victory and defeat in legal battles involving transactions may.
Therefore, you must constantly double-check the invoice for its date. Besides that, it aids in the prevention of duplicate payments. Suppose the date on the invoice is incorrect. In that case, it will be considerably more challenging to locate it for auditing purposes in the future.
In addition, if the invoice’s date is incorrect, it might present a problem when figuring out the tax.
3. Details and Costs
The customer may verify that the goods or services being billed for are those that were discussed and agreed upon before the issuance of the invoice in this section. The details should match the specifications and pricing on the purchase order exactly.
Don’t take this as a rule against modifying anything, however. For example, suppose the customer realized mid-transaction that he required 55 units of a product instead of 58. The client’s accounting department will notice a discrepancy between the purchase order and the invoice; however, the difference is insignificant. The invoice has been approved by management before being sent to accounting for payment.
Another benefit of a full explanation is that it helps in planning. For example, let’s say that the customer has shown interest in learning how much the firm spent on a specific service a year from now. The customer has to make a note of the invoice number. Suppose the customer needs to go through a large number of vendor invoices to locate the correct one. In that case, a descriptive summary will come in handy.
4. Terms of Payment
The payment conditions outline the time frame in which the client’s finance team must pay the vendor. Common phrases include “net 30 days,” “net 45 days,” “net 60 days,” and “net 90 days.”
Inconsistencies between a client’s and a vendor’s payment conditions are a common source of friction.
Let’s look at an illustration.
Somewhere in America, Vicky has his own company. He sends his first bill to the corporate offices of a major builder. Vicky puts “net 30 days” on his invoice, but the business only pays its suppliers once every 60 days. So after Vicky calls his client, only then does he learn this rule (after the 30 days have passed).
When doing business with a new firm, suppliers must establish payment terms that everyone is comfortable with. For example, John may have demanded a 30% advance payment of his price before beginning his service. As a result, he would have sent two invoices: the first, upon initiating the transaction, for the 30% down payment, and the second, upon completion of the task, for the remaining 70%.
Payment conditions are also significant since they reveal to a customer the specific modes of payment that a supplier accepts. For instance, the payment conditions might specify whether or not the merchant will take PayPal or credit cards.
5. Ensure Accuracy of Billing
The most important part of verifying invoices is making sure they are correct. Proving that the invoice being processed is intended for your business is the first step in ensuring its accuracy. Unfortunately, it is common for suppliers to submit invoices to the incorrect Address.
Verifying the agreed-upon pricing for the services or goods is also part of this process. You should also double-check the total invoice amount to ensure that sales tax, applicable discounts, and total amount were correctly calculated.
6. Mark Invoice Due Date
You may better manage cash flow and pay bills on time by tracking their due dates. Additionally, your business will get financial advantages by keeping track of payment due dates. Avoiding late fines and qualifying for early bird discounts per the payment conditions is a huge money saver.
7. To Arrange Payment
After all of those above are complete, the accounts payable manager must authorize and set up the payment plan. That way, if there are problems with the payment, you have time to halt it.
As previously said, invoicing verification is a fundamental step that requires your undivided focus. However, there is almost no room for error at any stage since doing so might have catastrophic effects on the company’s finances.
Invoice Verification Checklist
Accounts payable routinely checks invoices as part of its duties (AP). So, naturally, invoices need to be reviewed for conformity with the requisite formalities.
- Full name and Address of the service provider
- Date of issue of the invoice
- Description of Goods & Services
- Applicable tax rates
- Gross Total Amount
- VAT Identification number or GST number
- Unique, consecutive invoice number
- Payment Terms
- Payment Details (Bank Details or UPI etc.)
1. Make Inconsistencies Clear
Mistakes on invoices happen more often than you would think. Also, let’s say you check the invoice and notice some errors. In such instances, getting clarification from the A/P/R clerk, project manager, or higher-ups is crucial. However, if problems persist, you should contact the seller.
2. Evidence-based Invoice Verification
If you discover the bill has not been paid. If you want to be sure, you should compare it to any other pertinent purchase documentation you have. The purchase order, price quote, and invoice are all examples of documents included.
3. Ensure that the Bill is Past Due
You should make sure the invoice hasn’t been paid before sending in the paperwork to be paid. An invoice number check in the “paid invoices” logs is the most reliable technique to get the answer to that question.
Required Documents (Supporting Documents) You Need to Verify an Invoice
- Include a valid business license number on the invoice.
- The price that was quoted for the same service or product
- Contract to Acquire Issuance
- Delivery order form duly signed off on with details
- Proof of payment for all claimed expenditures
So, that is it when it comes to verifying an invoice. However, the verification process changes from business to business. But it will help in receipt verification if you think we are missing out on some vital information for invoice checking.