SOP: Supplier invoice approval and payment

How to adapt this template

• Replace every [bracketed] value with your own limits, terms and names.
• Tax rules differ by country. Fill in the [tax invoice requirements] and [record retention period] lines from your tax authority’s guidance or your accountant.
• Name one owner. That person keeps this document current.
• Test it with the person who pays invoices today and ask where it breaks.

Purpose

Make sure we pay only valid invoices, once, on time and with the right approval.

Scope

Covers all invoices from suppliers for goods and services. Does not cover payroll, tax payments or staff expenses. Follow [expenses SOP] for expenses.

Trigger

An invoice arrives by [email, post, supplier portal].

Roles

• Finance clerk: records and checks invoices, prepares payments.
• Budget holder: confirms the goods or services were received.
• Approver: approves payment within their limit.
• Finance manager (owner): handles exceptions, verifies bank detail changes and releases payments.
• Director: approves invoices above the top limit and any urgent payment. Does not release payments, except as the second person under step 12.

Steps

1. Finance clerk: Save the invoice to [shared invoice inbox / folder] on the day it arrives.
2. Finance clerk: Check the invoice shows what [tax invoice requirements] call for. Typical contents are the supplier’s name and address, invoice number, date, description, amount, tax amount and rate, and payment details, but your tax rules decide the list. Where the supplier charges tax, check their tax registration number is present and valid using [tax authority’s number checker].
3. Finance clerk: Search [accounting software] for the same invoice number and supplier. Also look for the same supplier, amount and date under a different number.
4. If the invoice is a duplicate, then reject it, tell the supplier and stop.
5. Finance clerk: Match the invoice to the purchase order or contract.
6. If price, quantity or tax differs from the order, then return it to the budget holder to resolve with the supplier. Otherwise continue.
7. Budget holder: Confirm in writing, by the [day] after the clerk asks, that the goods or services were received as invoiced.
8. Finance clerk: Enter the invoice in [accounting software] with the correct account, cost centre and due date.
9. Approver: Approve the invoice within their limit. Nobody approves an invoice for a supplier they set up or whose bank details they entered.
   • Up to [amount]: budget holder.
   • Up to [amount]: department head.
   • Above [amount]: [director].
10. If the supplier’s bank details are new or changed, then the finance manager confirms them by phone using a number already on file, never one printed on the invoice or in the email that asked for the change. Record who was called and when. Do not pay to the new details until this is done.
11. Finance clerk: Add the approved invoice to the next payment run, scheduled for [day of week].
12. Finance manager: Review the payment run against the approved invoices and release it. Whoever approved an invoice, or entered or changed the supplier’s bank details, must not also release that payment. For changed bank details, a second person who did not approve the invoice (for example [director]) confirms the release.
13. Finance clerk: Mark the invoice as paid, attach the payment proof and file it for [record retention period].

Checks before closing

• The invoice is not a duplicate and matches the order and receipt.
• Approval is recorded with name and date, within limit.
• Bank details were verified where new or changed.
• Payment amount and date match the entry.
• Invoice, approval and proof are stored together.

Exceptions

• Urgent payment: the [director] approves a one-off payment and records the reason. The finance manager or another person releases it, never the approver. Bank detail checks still apply.
• Disputed invoice: pause payment, tell the supplier in writing and agree a resolution date.
• Missing purchase order: the budget holder explains in writing before approval.
• Credit note received: match it to the original invoice and reduce the payment.
• Supplier asks to change bank details by email, or pushes for fast payment: treat as possible fraud. Follow step 10 and tell the finance manager.

Time and targets

Suggested targets, adjust to your terms:

• Invoice recorded: within [2] working days of receipt.
• Receipt confirmed by budget holder: within [2] working days of asking.
• Approval: within [3] working days.
• Payment: by the due date, usually [30] days.
• Review overdue and disputed invoices every [week].

Related

• [Purchasing SOP]
• [Expenses SOP]
• [Supplier onboarding checklist]

Review: [every 6 months]