“Did I check everything on this invoice?”
Invoice verification can be tedious, but it’s one of the most important controls in accounting. This guide covers everything from basic checks to advanced reconciliation techniques.
Why Invoice Verification Matters
In accounting, properly verifying invoices is crucial for three key reasons:
| Reason | Risk Prevented | Impact |
|---|
| Preventing overpayment | Paying more than owed | Direct financial loss |
| Preventing duplicate payment | Paying the same invoice twice | Cash flow impact |
| Tax credit eligibility | Non-compliant invoices | Tax penalty |
| Detecting fraud | Fictitious billing | Legal exposure |
The Cost of Inadequate Verification
| Issue | Frequency | Average Cost |
|---|
| Overpayment | 1-3% of invoices | $500-5,000 per incident |
| Duplicate payment | 0.5-1% of invoices | Full invoice amount |
| Fraud | Rare but costly | $10,000+ per incident |
| Audit findings | Variable | Remediation costs |
7 Essential Checkpoints for Every Invoice
When you receive an invoice, first check the formal requirements:
Checkpoint 1: Your Company Name
| Check | Why |
|---|
| Name spelled correctly | Legal accuracy |
| Correct entity | Right subsidiary |
| Current name | Not old name |
| Check | Why |
|---|
| Vendor name | Correct supplier |
| Registration number | Tax compliance |
| Contact information | Communication |
Checkpoint 3: Transaction Date
| Check | Why |
|---|
| Delivery/service date | Correct period |
| Invoice date | Timing verification |
| Payment due date | Cash management |
Checkpoint 4: Description of Transaction
| Check | Why |
|---|
| Items listed | What was purchased |
| Quantities | What was received |
| Unit prices | Agreed amounts |
Checkpoint 5: Total Amount
| Check | Why |
|---|
| Math correct | No calculation errors |
| Currency | Correct denomination |
| Discounts applied | Per agreement |
| Check | Why |
|---|
| Tax rate | Correct rate applied |
| Tax amount | Math correct |
| Tax breakdown | Audit compliance |
Checkpoint 7: Payment Details
| Check | Why |
|---|
| Due date | Per contract |
| Bank account | Correct destination |
| Payment method | As agreed |
Verification Checklist Template
Use this checklist for each invoice:
| # | Check Item | Status | Notes |
|---|
| 1 | Company name correct | □ | |
| 2 | Vendor verified | □ | |
| 3 | Date accurate | □ | |
| 4 | Items match order | □ | |
| 5 | Quantities correct | □ | |
| 6 | Prices per agreement | □ | |
| 7 | Math correct | □ | |
| 8 | Tax accurate | □ | |
| 9 | Payment info correct | □ | |
| 10 | No duplicates | □ | |
Advanced Verification: Reconciliation (Matching)
After checking the format, you must verify if the “substance” matches reality. This process is called Reconciliation (Totsugou).
Step 1: Match with Purchase Orders (PO)
| Compare | Check |
|---|
| Line items | Same products/services |
| Quantities | As ordered |
| Prices | Per agreement |
| Terms | Correct conditions |
Step 2: Match with Delivery Notes
| Compare | Check |
|---|
| Items received | Against invoice |
| Quantities | Actually delivered |
| Dates | When received |
| Condition | Any issues noted |
Step 3: Match with Receiving Reports
| Compare | Check |
|---|
| Internal confirmation | Goods received |
| Quality acceptance | No defects |
| Signature | Authorized receipt |
Step 4: Historical Comparison
| Compare | Look For |
|---|
| Previous invoices | Unusual amounts |
| Price trends | Unexpected changes |
| Volume patterns | Anomalies |
Is the amount abnormally high compared to previous months? AI can automatically detect such discrepancies.
Common Verification Problems
Problem 1: Missing Documents
| Issue | Solution |
|---|
| No PO found | Request from requester |
| No delivery note | Check with receiving |
| Lost paperwork | Check email records |
Problem 2: Discrepancies
| Type | Action |
|---|
| Price difference | Verify with vendor |
| Quantity mismatch | Check delivery records |
| Missing items | Hold payment, investigate |
Problem 3: Timing Issues
| Issue | Consideration |
|---|
| Invoice before delivery | Wait until receipt |
| Old invoice | Verify not duplicate |
| Rush payment request | Extra scrutiny |
5 Tips for Efficient Invoice Verification
Tip 1: Mandate Electronic Delivery (PDF)
| Paper | Digital |
|---|
| Risk of loss | Searchable archive |
| Hard to search | Easy retrieval |
| Physical storage | Cloud storage |
| Slow processing | Fast processing |
Tip 2: Standardize the Checklist
| Without Standard | With Standard |
|---|
| Each person checks differently | Consistent process |
| Things get missed | Complete coverage |
| Training takes time | Fast onboarding |
Tip 3: Implement Segregation of Duties
| Role | Responsibility |
|---|
| Requester | Initiates purchase |
| Receiver | Confirms delivery |
| Verifier | Checks invoice |
| Approver | Authorizes payment |
Tip 4: Set Time Limits
| Stage | Target Time |
|---|
| Initial review | Same day |
| Matching | 2 days |
| Resolution | 5 days |
| Approval | 7 days |
Tip 5: Use AI for Auto-Judgment
Manually checking every single invoice reaches its limit as volume grows. AI tools can automate format checks and reconciliation.
AI-Powered Verification with Totsugo
Totsugo reduces the time spent on verification by 90%.
Feature 1: Automatic Registration Number Validation
| Manual | Totsugo |
|---|
| Look up each number | Instant verification |
| 30 sec per invoice | Automatic |
| Human error possible | 100% accurate |
Feature 2: Auto-Matching with Order Data
| Manual | Totsugo |
|---|
| Open order system | Already matched |
| Search for PO | AI finds correspondence |
| Compare manually | Differences highlighted |
Feature 3: Historical Analysis
| Manual | Totsugo |
|---|
| Compare to last month | Automatic trend analysis |
| Calculate variance | Anomalies flagged |
| Remember patterns | AI learning |
Feature 4: Approve with Enter Key
Process “AI-confirmed” items rapidly using just your keyboard. No mouse clicks needed.
ROI of Automated Verification
For 200 invoices per month:
| Metric | Manual | AI-Assisted |
|---|
| Time per invoice | 5 min | 30 sec |
| Total monthly time | 16 hours | 1.5 hours |
| Error rate | 2% | <0.1% |
| Staff stress | High | Low |
Frequently Asked Questions
Q. What if an invoice fails multiple checks?
A. Hold payment and investigate. Contact the vendor if needed.
Q. How long should I keep verified invoices?
A. Typically 7 years for tax purposes. Check local regulations.
Q. Can AI verify handwritten invoices?
A. AI-OCR can read them, but accuracy is lower than printed.
Q. What about international invoices?
A. Same principles apply. Additional FX verification may be needed.
Summary
| Level | Focus | Time Investment |
|---|
| Basic | Format checks | Low |
| Intermediate | 3-way matching | Medium |
| Advanced | Historical analysis | High |
| AI-Assisted | All above + automation | Minimal |
Free yourself from the monthly chore of hunting down order records.
👉 Try Automated Verification with Totsugo
