Before approving an invoice for payment in the Accounts Payable process, what key steps should you take?

Introduction / Context:
Within the Accounts Payable function, approving invoices for payment is a control sensitive activity. Internal controls require that each invoice be validated before funds are released. Interviewers use questions like this to evaluate your understanding of the procure to pay cycle and your attention to detail.

Given Data / Assumptions:

• You are part of the Accounts Payable or finance team.
• Supplier invoices arrive after goods or services have been ordered and received.
• The organisation uses purchase orders and goods receipts where applicable.
• Invoices must be properly coded and approved before payment.

Concept / Approach:
Before approving an invoice, you should perform several checks: verify the invoice header, match with purchase orders and receipts, confirm that the invoice has proper internal approval, ensure that the expense is coded correctly, and confirm the payment terms and due dates. This process is usually called three way matching and forms the backbone of Accounts Payable controls.

Step-by-Step Solution:
Step 1: Review the invoice details, including supplier name, address, invoice number, date, description of goods or services, and tax information. Step 2: Perform a match with the related purchase order to ensure that quantity, price, and terms agree with what was originally ordered. Step 3: Check the goods receipt or service confirmation to confirm that the goods or services have actually been received or performed. Step 4: Verify that the invoice has been approved by the appropriate budget holder or manager as per company policy. Step 5: Confirm that the invoice is coded to the correct general ledger account and cost centre and that the due date is correctly captured before scheduling payment.

Verification / Alternative Check:
Running periodic ageing reports and vendor reconciliations can help confirm that invoices have been posted correctly and paid according to terms. Any discrepancies between supplier statements and the company ledger may indicate errors in approval or posting. Strong documentation and clear workflows provide additional assurance that each invoice was properly validated before payment.

Why Other Options Are Wrong:
Paying invoices immediately without checking supporting documents is risky and violates basic control principles. Approving based solely on supplier name ignores details such as amount, items, and contract terms, and can easily lead to overpayment or fraud. Rejecting every invoice by default and asking suppliers to resend the same information is inefficient and does not contribute to better control.

Common Pitfalls:
One common mistake is to skip matching for small value invoices, which can still accumulate into significant losses over time. Another is failing to check tax calculations or general ledger coding, leading to reporting errors. Pressure to clear backlogs quickly may tempt staff to reduce checks, but this can compromise the reliability of financial statements.

Final Answer:
Before approving an invoice for payment, you should verify invoice details, match with purchase order and receipt, confirm approvals, check coding and due dates before scheduling payment.