What is invoice verification?

If you’re like most businesses, you probably receive and pay dozens, if not hundreds, of invoices each month.

How sure are you that every one of these is legitimate, accurate, and relates to goods or services ordered and received?

If your answer is “100%,” then you’ve got nothing to worry about.

More likely, though, there is at least a shred of doubt in your mind that your business could be paying invoices that are, at best, inaccurate and, at worst, fraudulent.

If that’s the case, it's probably a good idea for you to implement some form of invoice verification process.

In this article, we’re going to show you how.

We’ll dive into the “why” behind invoice verification, a simple five-step process to follow, and best practices for a more efficient invoice verification process.

What is invoice verification? 

Invoice verification is an accounts payable process designed to check the invoices your AP team receives against a set of criteria that helps you ensure that any invoice you send for payment:

• Matches up against an existing purchase order
• Includes the necessary details as set out in your accounts payable policy
• Is accurate with respect to the original order as well as your supplier agreements

What kinds of invoice verification exist? 

While the broad idea of invoice verification looks similar across all organizations (checking a received invoice against certain criteria), the exact process can differ depending on the level of depth you want to go.

For instance, some businesses implement a simple 2-way invoice matching process (matching the invoice against a purchase order number)

Others go a step further and use 3-way matching (also matching the invoice against goods received note. Some even add a quality inspection to the list (known as 4-way matching).

Others will have separate policies and processes depending on what is available to match against.

Here’s a common example of a tiered invoice verification policy:

• The invoice doesn’t have a reference to a purchase order: Accounts payable must check directly with the AP manager or general ledger accountant.
• The invoice has a reference to a purchase order: Accounts payable must match that to a PO number in the AP system.
• The invoice is determined by the goods received (when items are delivered in stages): Accounts payable must match against a PO number, and the goods received notes for each delivery must be attached to the final invoice. 

Why should businesses implement invoice verification? 

Any additional process that you add to existing policies inevitably introduces a layer of bureaucracy and serves to impede the ability of your team to work efficiently.

That doesn’t mean that such a process shouldn’t be introduced, but it does warrant asking the question:

What are the benefits of implementing invoice verification?

Invoice verification provides some important financial security benefits, helping accounts payable teams to:

• Prevent payment errors like double payments
• Detect fraud and maintain financial integrity
• Hold vendors accountable to contractual agreements
• Maintain compliance with financial regulations and standards
• Improve spend visibility 

How to complete invoice verification: 5 steps 

Invoice verification is a nice, simple process.

While it varies slightly from company to company (depending, for example, on the invoice matching process you choose to implement), the broad steps outlined below are a great starting point for developing your own process.

1. Confirm and verify key invoice details 

Your first step is to check that the invoice includes the necessary details according to your own internal policies.

For example, you might check that:

• The vendor’s name is present
• There is a valid address for the supplier
• A billing date has been included
• A purchase order number is present 

2. Take note of the invoice due date 

Having confirmed that the necessary information is present on the invoice in question, take a look at the invoice due date.

You’ll want to note this down in your AP software and perhaps check it against the vendor agreement to make sure the invoice is in line with contractual expectations.

This is an important step for ensuring invoices are paid on time and for taking advantage of possible early payment discounts.

3. Complete your invoice matching process 

Here, you’re going to match the invoice against other specified documents, depending on your particular matching process.

There are basically three options here:

1. Two-way matching: You match the invoice against a purchase order number in your PO system
2. Three-way matching: You match the invoice against a PO number as well as a goods receipt.
3. Four-way matching: You match the invoice against a purchase order, goods received note, and quality inspection.

4. Follow your invoice approval workflow 

Step four, again, depends on your internal policies.

The broad idea here is to follow your company’s approval workflow.

This might include getting a sign-off from procurement or having the AP manager approve an invoice for payment. 

If the invoice is below a certain value or comes from a pre-approved vendor, there might be no approval required at all.

5. Schedule the invoice for payment 

Finally, you’ll schedule the invoice for payment in your AP automation platform, so it can be paid out before the invoice due date, preventing any late payment fees.

Common challenges with invoice verification 

Invoice verification is a simple process, but it's not one that’s without its challenges.

Here are a few of the most common. Take note of them and educate your team to help avoid them in the first place for a smooth verification process:

• Missing documents (no purchase order, for example)
• Discrepancies between invoices and purchase orders (in terms of amounts billed, for instance),
• Missing information on the invoice (e.g., no vendor address) 
• Duplicate invoices 
• Fraudulent invoices from vendors that appear to be legitimate

Best practices for efficient invoice verification 

Before we sign off and let you get to work on your own invoice verification process, let's take a look at a few helpful best practices for helping your AP team work smarter, not harder.

1. Establish and distribute clear AP policies  

Make sure that whatever your final process looks like, it's documented clearly and easily accessible to all team members.

This can be a simple Google Doc or in a more advanced workplace wiki tool like Notion or Slite.

The idea is that it's a shareable online document that everyone can access and that you can update as required without having multiple outdated versions of the policy circulating.

2. Conduct regular process audits 

Conducting audits on your accounts payable processes is always a good idea, and the invoice verification process is no exception.

Decide on a regular cadence for running audits (once a quarter or even annually), and assign the job to a senior member of the AP team.

Then, you’re simply going to have that person review, at random, that the process has been followed correctly across multiple instances and report back.

3. Invest in ongoing team training 

Regular team development is a wise idea in general, but it's especially important in the financial realm where regulations can change and pursuant policy or process adjustments are required.

A good idea here would be to run a quarterly training session with the full AP team, review current processes in light of any changes that have occurred over the last three months, and provide an opportunity for team members to suggest improvements.

This last point can be especially helpful in getting team buy-in. Your employees are much more likely to follow processes to the letter if they were involved in creating them in the first place! 

4. Automate aspects of the invoice verification process 

We mentioned earlier that any verification process inevitably works against the goal of efficiency.

But with accounts payable automation software, you can actually benefit from the best of both worlds: AP processes that are secure and promote fraud detection and accuracy while also allowing your team to work quickly.

Invoice verification, for example, can be automated in such software.

Here’s what it looks like:

• An invoice is received and automatically imported into your AP automation solution
• The purchase order number is identified on the invoice and matched against the PO in your system
• Details such as items billed and amounts are matched against the purchase order
• The invoice is marked as verified and then routed to the appropriate authority based on your approval workflow 
• That person approves the invoice for payment, and it is routed back to an AP team member to schedule payment

How to save time and automate your invoice verification process 

Invoice verification is crucial for ensuring financial accuracy and preventing fraud. 

Like all processes, however, it can be time-consuming.

To streamline this workflow, implementing accounts payable automation software is essential. 

With automation, invoices are verified quickly and accurately, reducing the risk of not only fraud but human error. 

‍Learn more about how AP teams spend 50% less time on manual processes using BILL.