What are the most important controls to prevent errors in invoice reconciliation and payment?

1 Verify invoice details

The first control is to verify the accuracy and completeness of the invoice details before approving or paying it. This includes checking the invoice number, date, amount, currency, vendor name, address, bank account, and tax information. You should also compare the invoice with the purchase order, contract, or service agreement to ensure that the goods or services delivered match the specifications, quantity, and price agreed upon. If you find any discrepancies, errors, or missing information, you should contact the vendor and request a correction or clarification.

2 Match invoices with receipts

The second control is to match the invoices with the receipts or proofs of delivery that confirm that the goods or services were actually received by your business. This can be done manually or automatically using a software tool that scans and compares the documents. Matching invoices with receipts helps you avoid paying for duplicate, incomplete, or fraudulent invoices, and also helps you track your inventory, expenses, and liabilities. You should also review the receipts for any damages, defects, or quality issues that may affect your satisfaction or warranty claims.

3 Approve invoices with authorization

The third control is to approve the invoices with the appropriate level of authorization before paying them. This means that only the authorized personnel who have the knowledge and responsibility for the purchase or service can review and approve the invoice. This can be done using a signature, a stamp, a code, or an electronic workflow that records the approval date and name. Approving invoices with authorization helps you ensure that the invoices are valid, necessary, and within your budget, and also helps you prevent unauthorized or fraudulent payments.

4 Pay invoices on time

The fourth control is to pay the invoices on time according to the payment terms and conditions agreed with the vendor. This means that you should schedule and execute the payments within the due date, the grace period, or the discount period, depending on the invoice type and your cash flow situation. Paying invoices on time helps you avoid late fees, penalties, or interest charges, and also helps you maintain good relationships with your vendors and suppliers. You should also reconcile your bank statements with your payments to verify that the transactions are correct and complete.

5 Review invoice reports

The fifth control is to review the invoice reports that summarize and analyze the invoice data and activities. This means that you should generate and examine the reports on a regular basis, such as weekly, monthly, or quarterly, depending on your business size and complexity. Reviewing invoice reports helps you monitor your invoice performance, identify any trends, patterns, or anomalies, and evaluate your efficiency, profitability, and compliance. You should also use the reports to audit your invoice processes and controls, and make any adjustments or improvements as needed.

6 Train and communicate with staff

The sixth control is to train and communicate with your staff who are involved in the invoice reconciliation and payment processes. This means that you should provide them with the necessary skills, knowledge, and tools to perform their tasks effectively and accurately. You should also communicate with them the policies, procedures, and expectations for the invoice processes and controls, and provide them with feedback, support, and recognition. Training and communicating with your staff helps you ensure that they understand and follow the invoice processes and controls, and also helps you foster a culture of accountability, transparency, and collaboration.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?