Organizations need to purchase products and services to operate. Invoices and credit card bills for those items arrive and get paid. But should every invoice that arrives get paid?
Maybe not. What if the invoice isn’t accurate, or if the invoiced product or service was not delivered as promised?
We all work hard for our money, so when we spend some of it, we expect to get what was promised. All organizations need to consider these three questions before paying any vendor invoice or credit card bill:
- Were the invoiced products or services received as promised?
Establish a process to verify that invoiced products and services were received. For products, that means matching the products received to the purchase order, and checking that no products are damaged. Services are often provided under an agreement that describes the tasks or results that the organization can verify were delivered.
- Is the invoiced price accurate?
Check the invoice price against the approved purchase order or service agreement. The payment review and approval process should include verifying that the price on the invoice matches what was quoted by the vendor. Performing this verification requires that the organization gets an understanding of the cost up-front, and gets it in writing.
- Has this invoice already been paid?
An invoice logging, tracking, and cancelling process helps ensure that all invoices are paid on time, and are only paid once. This process also helps ensure that vendor discounts are considered when scheduling payments. Unpaid vendor invoices should be maintained separately from paid invoices, either physically or electronically.
Nonprofit organizations have one more question to ask:
- Were taxes from which your organization is exempt included on the invoice?
Nonprofits don’t pay income tax on net revenue. Nonprofits may also be exempt from other federal, state and local taxes, such as sales and excise. Providing a tax-exempt letter or other applicable document to the vendor is one way to get the exemption honored. Federal fuel excise taxes could be exempted by using a qualified fuel card program.
Invoicing and payment mistakes can be made by the vendor or by someone in the organization. Reduce costly errors by implementing processes to verify that invoices and credit card bills before they are paid. Organizations work hard for the money. Make sure the vendor has kept her promises before paying that invoice or credit card bill.