In this article, we will explore exactly what invoice verification is, how it works and some of its benefits. Read on to learn more.
Invoice verification is the process of checking that an invoice matches the goods or services received and the agreed-upon terms. It ensures accurate payments by confirming the details are correct before approving the invoice.
Example: A company receives an invoice for 50 units of XPS 13 laptops but verifies the order records to confirm only 45 units were delivered. Invoice verification ensures the company only pays for the 45 laptops actually received.
Here are some of the benefits of using invoice verification:
Invoice verification helps businesses avoid overpaying or underpaying by confirming invoices match the goods or services received. This reduces errors and prevents unnecessary expenses.
By validating invoices, businesses can track spending more effectively and maintain better control over their budgets. This minimizes the risk of unauthorized payments.
Accurate and timely payments build trust and strengthen relationships with vendors. It shows professionalism and reliability in business dealings.
Verifying invoices can detect fraudulent charges or discrepancies early. This protects the business from financial losses and avoids potential conflicts with vendors.
Organized and verified invoices make audits easier and faster. It ensures compliance and provides clear records for financial reviews.
Use our 8-step invoice verification process to efficiently manage your invoices.
Review the invoice from the vendor to ensure it contains all necessary details, such as item descriptions, quantities, and pricing. This document will serve as the basis for verification.
Example: A vendor sends an invoice for 30 Logitech MX Master 3 mice at $75 each, totaling $2,250. The invoice includes item details, quantity, price, and payment terms.
Compare the invoice details with the corresponding purchase order to verify alignment on items, quantities, and costs. Ensure that the terms match what was agreed upon during the purchase.
Example: The purchase order shows a request for 30 Logitech MX Master 3 mice at $75 each. You confirm that the invoice matches the order exactly.
Match the items listed on the invoice with the goods or services actually received. Check delivery records or service confirmations to validate the invoice claims.
Example: The delivery receipt confirms only 28 Logitech MX Master 3 mice were delivered. This discrepancy is noted for correction.
Check if the invoice correctly applies any taxes, discounts, or other adjustments agreed upon in the purchase order. Ensure calculations are accurate.
Example: The invoice lists a 10% discount on the total cost, but the discount is missing from the final amount. This is flagged for revision.
Ensure the invoice includes the correct vendor name, address, and banking details. Incorrect information could delay payments or cause errors.
Example: The invoice shows the vendor's name as "Logitech Pro Supplies" instead of "Logitech Official Distributor." The discrepancy is clarified before proceeding.
Once all details are verified, approve the invoice for payment. Send it to the finance team or process it through the accounting system.
Example: After confirming all details are accurate for the 28 mice delivered, the invoice is updated to $2,100 and approved for payment.
Store the verified invoice in the business records for future reference and audits. Ensure it’s organized and accessible.
Example: The verified invoice is filed digitally under "Logitech Purchases" with a reference number for easy retrieval during audits.
If any errors or mismatches are found, communicate with the vendor to resolve them before proceeding with payment. Keep a record of all correspondence.
Example: You email the vendor to correct the invoice quantity from 30 to 28 and adjust the final total to reflect the proper amount.
ClearTech Solutions, a technology reseller, wants to streamline its payment process to avoid errors and maintain strong vendor relationships. Here's how they implemented our invoice verification process.
ClearTech Solutions receives an invoice from their supplier, TechPro Distributors, for 50 Lenovo ThinkPad X1 Carbon laptops, priced at $1,200 each. The invoice includes item descriptions, quantities, total cost, and payment terms.
The accounting team at ClearTech compares the invoice to their purchase order, which also specifies 50 Lenovo ThinkPad X1 Carbon laptops at $1,200 each. They confirm that the items and pricing are consistent with the original agreement.
ClearTech’s logistics team checks the delivery records and notices only 48 laptops were delivered. This discrepancy between the invoice and the delivery receipt is flagged for review.
The invoice shows a 5% bulk purchase discount, but the discount is calculated incorrectly, reducing the total by $2,500 instead of $3,000. ClearTech contacts the vendor to confirm and adjust the invoice total.
The invoice lists "TechPro Suppliers" instead of "TechPro Distributors." ClearTech verifies the vendor details and requests a corrected invoice to ensure accurate payment processing.
After resolving the issues, ClearTech approves a revised invoice reflecting 48 laptops at $1,200 each with the proper 5% discount applied. The finance team schedules the adjusted payment.
ClearTech stores the verified invoice and associated documents in their accounting software, labeled under "TechPro Transactions." This ensures easy access during financial reviews and audits.
ClearTech follows up with TechPro Distributors to clarify whether the remaining two laptops will be shipped or excluded from the purchase. They document the correspondence for reference.
We hope you now have a better understanding of how invoice verification works and the benefits it can bring to your business. If you enjoyed this article, you might also like our article on automated invoice reminders or our article on manual invoice.