Supplier invoice approval and payment
Invoice approval is the procedure auditors probe first, because it is where money leaves the business and where segregation of duties either exists or does not. It is also where a single person quietly becoming the only approver creates real risk.
- 1
Accounts Payable records the invoice in the finance system with supplier, date, amount, and invoice number.
Accounts Payable
Timing: Within two working days of receipt
Log it before assessing it. An unlogged invoice under review is an invoice that can be paid twice or not at all.
- 2
Accounts Payable checks the invoice against the purchase order and the goods or services receipt.
Accounts Payable
The three-way match. Confirm the amount, quantity, and that what was ordered was actually received.
All three match: go to step 4
Discrepancy or no purchase order: go to step 3
- 3
Accounts Payable raises the discrepancy with the Budget Owner and the supplier, and holds the invoice.
Accounts Payable
Held, not paid pending resolution and not paid partially. A partial payment on a disputed invoice makes reconciliation harder later.
Resolved, invoice valid: go to step 4
Invoice incorrect, credit note requested: go to step 9
- 4
Accounts Payable checks the invoice amount against the approval threshold.
Accounts Payable
Set your own thresholds. The principle that matters is that a higher amount requires a second, more senior approver.
Below the first threshold: go to step 5
At or above the first threshold: go to step 6
- 5
Budget Owner reviews and approves the invoice in the finance system.
Budget Owner
Timing: Within three working days
Approval is recorded in the system, not given verbally or in a chat message. An approval with no durable record does not satisfy an audit.
- 6
Budget Owner reviews and approves, then routes the invoice to the Finance Director for second approval.
Budget Owner
Both approvals recorded separately. The same person cannot provide both, and the system should prevent it rather than relying on people to remember.
- 7
Finance Director provides second approval for invoices at or above the threshold.
Finance Director
Timing: Within three working days
- 8
Accounts Payable schedules payment per the supplier's agreed terms and records the payment date and reference.
Accounts Payable
Never pay from bank details supplied in an email. Verify any change of supplier bank details by phoning a known contact on a number you already hold. This is the most common invoice fraud route and it works.
Payment made: the procedure ends
Bank details changed since last payment: go to step 10
- 9
Accounts Payable records the credit note against the original invoice and closes it as not payable.
Accounts Payable
Close the original explicitly. An abandoned disputed invoice reappears in the next reconciliation.
Closed: the procedure ends
- 10
Accounts Payable verifies the change of bank details by telephone with a known contact, using a number held on file rather than one from the email, and records who confirmed it and when.
Accounts Payable
No exceptions to this step regardless of how urgent the request appears. Urgency is the pressure tactic.
Verified: go to step 8
Cannot verify: go to step 3
Change these before you use it
- Set your own approval thresholds in step 4, and add a third tier if your business needs board approval above some amount.
- If you do not raise purchase orders, replace the three-way match in step 2 with a check against the contract or the agreed rate card.
- Name your actual finance system, because 'the finance system' is not a followable instruction.
- If you pay by direct debit or on a card for some suppliers, add that as its own branch rather than leaving it undocumented.
This is a starting point, not compliance advice. It is written to be adapted, and a procedure that touches access, money, or customer data needs to match how your business actually operates and whatever rules apply to you. Use it as a first draft to edit, not a policy to adopt.
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