Step-by-Step Invoice Verification to Prevent Fraud and Errors

Payment fraud is only intensifying: according to the 2025 AFP Payments Fraud and Control Survey, 79% of organizations were targeted by payments fraud in 2024, with vendor impersonation and manipulated invoices among the most common tactics. With threats evolving faster than ever, the question is — can your invoice verification process truly hold up?

This guide is a tactical playbook for AP Managers and Controllers. We’ll walk through a step-by-step process for building a robust invoice verification workflow, complete with checklists and expert insights, to help you protect your business and streamline your operations.

What is Invoice Verification?

Think of invoice verification as the official gatekeeper for your company’s cash. It’s the structured process you follow to ensure a supplier’s invoice is accurate, legitimate, and ready for payment.

It’s a Core Financial Control

Verifying invoices is a critical financial control designed to protect your business from mistakes and outright fraud before any money is withdrawn from your bank account. Put another way, this process ensures accuracy, guarantees compliance, and effectively stops fraud.

How an Invoice Check Differs from a Formal Audit

It’s easy to confuse this with other invoice management functions, so let’s be clear. Verification is the preventative work you do before paying a bill. An audit is the detective work you conduct after the fact, examining past transactions to identify problems.

For high-growth finance teams, automating these complex AP workflows with Tipalti’s AP platform is the key to getting it right from the start.

The Different Types of Invoice Verification Methods

How do you actually check an invoice? You’ll quickly find that not all invoices are the same, and your process needs to be flexible enough to handle different situations. Nailing down these different approaches is how you build an efficient and enduring workflow for processing invoices.

The Gold Standard – Verification with a Purchase Order

For most business purchases, PO matching (also known as invoice matching) is the preferred method. It’s the foundation of any strong procurement-to-pay process, involving the matching of the supplier’s invoice against the internal purchase order (PO). There are various levels of PO matching, including two-way, three-way, or even four-way matching.

How to Handle Invoices Without a PO

But what about invoices that show up without a PO? They land in your inbox all the time for things like rent or utility bills. In these cases, the process shifts to validating the expense against a contract or an approved budget and routing it through a clear internal approval workflow.

Using Tolerance Levels for Efficiency

Here’s a real-world problem that can stop a manual process in its tracks. Say a PO is for $10,000, but the invoice arrives for $10,005 because of a small freight charge.

This is where you need to set tolerance thresholds. A smart, automated system enables you to build rules, such as “if the invoice is within 2% of the PO total, approve it automatically,” freeing your team to focus solely on significant discrepancies.

Required Documents for Invoice Verification

A robust verification process relies on a foundation of clear and consistent documents. When these supporting documents don’t align, it creates the exact kind of bottleneck that grinds your AP process to a halt.

The Purchase Order (PO) 

The purchase order begins the process. It is your company’s official, pre-approved record of what you agreed to buy. In any verification, the PO is your “source of truth,” the primary document you’ll use to check the supplier’s invoice.

The Goods Receipt Note (GRN) 

Did you actually get what you were billed for? For any physical items, the Goods Receipt Note (GRN), also known as a delivery note or receiving report, serves as proof of receipt. It’s the control point that ensures you’re not paying for “ghost shipments.”

The Supplier Invoice

The supplier invoice is the external document—the bill—that formally asks for payment. A proper invoice should always have a unique invoice number, a clear description of the items, and the total amount due. All this ensures the claim is accurate before you release any funds from your accounting system.

Contracts and Agreements

For ongoing services or complex projects, you’ll often have a master contract that governs the relationship. This document outlines the big-picture terms, like pricing structures and payment terms. 

When reviewing an invoice for services, refer back to this contract to ensure the billing aligns with the agreement.

What are the Steps in the Invoice Validation Process?

Building a consistent and repeatable process is how you turn invoice verification from a chaotic scramble into a disciplined financial control. This is your workflow for keeping clean financial records, stopping fraud, and ensuring accuracy.

Step 1: Confirm the Invoice is Legitimate

Before examining the numbers, verify that the invoices are from an approved supplier by checking them. A proper check here goes way beyond just a quick glance at the vendor name.

The single most important control is to validate the supplier’s details against the approved Vendor Master File in your ERP. 

Step 2: The Invoice Matching Process (2-Way vs. 3-Way)

Here, you’ll compare the invoice details against your internal documents to ensure everything aligns. This is where three-way matching becomes critical for any physical goods.

The two most common methods are 2-way and 3-way matching. A 2-way match compares the invoice to the purchase order and is your go-to for services. A 3-way match, the standard for physical goods, adds the goods receipt note to the mix.

Step 3: Validate All Amounts, Taxes, and Terms

Once the documents match, it’s time to check the math. This is a detailed check of the invoice data itself.

Your team should have a clear checklist for this step. Does the invoice amount match the PO? Are all quantities correct? You’ll want to recalculate the subtotals and confirm that any applicable sales tax, like GST or HST, has been applied correctly.

Step 4: The Critical Invoice Check for Duplicates

Paying the same bill twice is one of the most common and preventable ways to lose money. A truly automated system performs a multi-point check to “fingerprint” each invoice, checking for duplicate invoices. It flags any bill that has the same combination of Supplier + Invoice Number + Date + Amount.

Step 5: Route for Approval or Flag as an Exception

If an invoice has passed all your checks, it’s ready to be routed for final approval. In a modern AP system, this is an automated approval process where the invoice is sent to the right budget owner based on rules you’ve already set.

But what if a discrepancy was found? The invoice should be flagged as an exception. It’s then routed to you or another designated person for a manual investigation and follow-up with the supplier.

Step 6: Schedule the Verified Invoice for Payment

Once the invoice is fully verified and approved, it’s officially “okay to pay.” The final step is to schedule it for payment processing. This means adding it to a payment run that aligns with the invoice date.

Step 7: Archive Everything for a Clean Audit Trail

The job isn’t done until the paperwork is filed. Proper archiving of all associated documents: the invoice, the PO, the GRN, and the proof of approval, creates an easily searchable audit trail for every single transaction.

Common Challenges in Invoice Verification

In an ideal world, every invoice would be perfect. However, as any AP Manager knows, the reality is far more complex. The verification process is often where the friction in your procure-to-pay cycle becomes most apparent.

The Daily Grind of Inaccurate Invoices

The most common challenge is simply dealing with inaccurate or incomplete data. An invoice shows up with a missing PO number or an incorrect price. Each of these exceptions halts your process, forcing someone on your team to conduct a time-consuming manual investigation.

The Growing Threat of Invoice Fraud

Beyond simple mistakes, you’re facing an active and growing threat from criminals. Is your manual verification process strong enough to catch a single-digit change in a bank account number?

Managing Discrepancies and Vendor Disputes

Even with your best suppliers, discrepancies can still occur. Resolving these disputes is a delicate process of back-and-forth emails and phone calls that can strain important supplier relationships.

The Chaos of the Month-End Close

All of these challenges are put under a magnifying glass during peak periods. The intense pressure to close the books can force your team to rush. This is precisely when a costly error or a clever fraudulent payment is most likely to slip through.

Survive Your Next Month-End Close

The pressure of the month-end close, the risk of fraud, and the daily grind of manual work can be overwhelming. Our AP Survival Guide provides a practical playbook for finance leaders to navigate these challenges, strengthen controls, and reclaim their time.

Best Practices for Efficient Invoice Verification

How do you turn a chaotic bottleneck into a streamlined financial control? It takes a combination of disciplined processes and the right technology.

Start with a Standardized Checklist

Consistency is your best friend. The foundation of a solid process is a formal invoice verification checklist that your team uses for every single invoice. This is your standard operating procedure, ensuring that no step is ever skipped.

Automate Your Matching and Validation

While a checklist is essential, the real key to efficiency lies in automation. The goal is to shift your team’s focus to a “management by exception” model. An automated system that performs matching enables the vast majority of your bills to be processed without requiring anyone to manually handle them.

Maintain a Clean Vendor Master File

Your Vendor Master File is one of your most critical AP assets. Enforcing a strict, formal process for adding new vendors and for approving any changes to their banking details is one of the most powerful internal controls you can implement.

Think Like an Auditor

Finally, you should always assume that every transaction will be scrutinized in a future audit. A best-practice verification process is fully auditable from start to finish.

Role of Technology in Invoice Verification

While discipline is the foundation of a strong verification workflow, technology is the engine that makes it run efficiently at scale. Modern accounts payable software utilizes advanced technology to automate tedious tasks and syncs seamlessly with your ERP, ensuring that your invoice data is accurate.

Tipalti’s ERP Sync Resolution Agent helps sync to your ERP in seconds, diagnose connection problems, and provides you with solutions.

Moving Beyond Basic Optical Character Recognition (OCR)

Today’s platforms utilize artificial intelligence to accomplish much more than simply extract text from a page. An AI-powered system, such as Tipalti AI Agents, is context-aware, adaptive, and understands user intent. With this, they can learn over time and autonomously execute workflows.

The Power of Automated PO Matching

Instead of someone manually comparing every line item, software, such as Tipalti’s PO Matching Agent, can perform 2-way and 3-way matching in seconds and be configured with customizable tolerance thresholds.

Electronic Data Interchange (EDI)

For businesses with very high-volume suppliers, the ultimate form of automation is Electronic Data Interchange (EDI). With EDI, the “invoice” is a structured data file sent directly from your supplier’s system to yours, allowing for 100% accurate, completely touchless processing. Moreover, AI agents like Tipalti’s Duplicate Bill Detection Agent detect duplicate payments early to help prevent overpayments and fraud.

How This Empowers You as an AP Manager

This technology is transformative for an AP manager. The right platform, with features like Tipalti’s Smart Scan and automated matching, dramatically reduces manual work and endless back-and-forth.

Benefits of Effective Invoice Verification

Implementing a robust invoice verification process delivers tangible benefits that strengthen the financial health of the entire organization. Here are some of the main positive ripple effects.

1. Improving Financial Accuracy and Cash Flow Control

A disciplined verification process is the bedrock of accurate financial reporting. By ensuring every invoice is correct before it’s booked into your ERP, you create a reliable foundation for your financial statements and enable more precise cash flow forecasting.

2. Preventing Fraud and Eliminating Costly Payment Errors

A rigorous matching and approval workflow is your primary defense against external invoice fraud and common internal mistakes, such as duplicate payments. It directly protects your company’s bottom line.

3. Strengthening Key Supplier Relationships

Few things damage a supplier relationship faster than late or incorrect payments. A streamlined verification system allows you to pay your vendors accurately and on time, every time, making you a preferred customer.

4. Enhancing Financial Control and Operational Efficiency

Ultimately, a robust verification process provides you with greater control over your business. It transforms your accounts payable from a manual cost center into a highly efficient, automated, and scalable business function.

Make Invoice Verification One Less Thing to Worry About

A disciplined invoice verification process is the bedrock of a healthy accounts payable function. It’s your primary control for ensuring accuracy, mitigating risk, and building a foundation of financial integrity. While manual checklists are a good starting point, the key to achieving both speed and control in a growing business is to transition to an automated validation system.

By embracing technology that can automate PO matching, validate supplier details, and enforce your financial controls, you can transform this complex process into a source of efficiency. A trusted AP automation platform with deep PO matching capabilities empowers you to scale, freeing your team to focus on the strategic work that truly matters.