In accounts payable what is meant by placing an invoice on hold and why is this done?

Introduction / Context:
Invoice holds are an important control feature in accounts payable and in ERP systems such as Oracle and SAP. The question asks what it means when an invoice is placed on hold and why this is done. Understanding this concept shows that you know how companies prevent incorrect or unauthorised payments while still keeping a record of the invoice for later resolution.

Given Data / Assumptions:

• An invoice from a supplier has been received and entered into the system.
• There is some problem or missing information such as price mismatch, quantity difference, missing approval or incomplete documentation.
• The organisation wants to stop payment temporarily without deleting the invoice.
• The hold will be reviewed and removed once the issue is resolved.

Concept / Approach:
Placing an invoice on hold means marking it in the system so that it is excluded from payment runs and sometimes from posting to the ledger until certain conditions are met. Common reasons include discrepancies between the invoice and purchase order, disputes about quality or quantity, missing goods receipt, or lack of proper approval. The hold status allows accounts payable staff to track the invoice, investigate the issue and then release the hold when everything is corrected. It is a temporary control, not a permanent write off or deletion.

Step-by-Step Solution:
Step 1: Recognise that an invoice hold is used when there is doubt or an issue with the invoice but it is still being reviewed.Step 2: Understand that placing the invoice on hold prevents it from being selected for payment during automatic payment runs.Step 3: Note that the invoice remains in the system with a hold reason recorded so that staff can follow up with the supplier or internal department.Step 4: Once supporting documents are received or discrepancies resolved, the hold is released and the invoice can be scheduled for payment.Step 5: Compare these facts with the options and choose the one that describes a temporary block due to discrepancy or pending approval.

Verification / Alternative check:
Imagine an invoice where the price billed is higher than the price on the purchase order. The accounts payable clerk would not want to pay it immediately but also must not lose track of it. By placing the invoice on hold the organisation ensures that no payment goes out until the buyer clarifies the price with the supplier. When confirmation is obtained the invoice can be corrected or a credit note issued and the hold removed. This practical scenario matches the description given in option A.

Why Other Options Are Wrong:
Option B claims that invoice on hold means the invoice has been paid twice and must be reversed, which describes a payment error situation, not a hold status. Option C suggests that an invoice on hold will never be paid and must be written off as a loss, which would only apply in extreme disputes and would not be called a hold. Option D states that the invoice has been lost and removed from the system, which is the opposite of what a hold is meant to accomplish. A hold is used to keep the invoice visible but blocked, not to delete it.

Common Pitfalls:
Some learners think that placing an invoice on hold is equivalent to cancelling it, but in reality holds are temporary and reversible. Another mistake is to process payments manually for held invoices bypassing the control, which defeats the purpose of the hold and can lead to overpayments or payments without approval. In exams and interviews, emphasise that invoice on hold means a temporary block on payment due to discrepancies or approvals, with the invoice kept in the system for follow up.

Final Answer:
Invoice on hold means that the invoice is temporarily blocked from payment or posting because of a discrepancy or pending approval, and it will be released for normal processing once the issue is resolved.