Do You Have a Supplier Invoice Policy in Place?

A supplier invoice policy is one of those documents that every business should have. An effective policy will greatly reduce the amount of time related to the tasks of approving and processing vendor invoices, addressing exceptions, or storing, retaining and pulling documents for research, audit or litigation. If you don’t have one yet, our invoice policy template is a great place to start.

Build a Vendor Invoice Policy

9 top tips and a policy template


Why you need an invoice policy

When you first start out in business, chances are it was just yourself and a few close associates running the show. When it came to invoice processing, you shared an instinctive understanding of the process to follow and your company values in relation to purchases.

As you grow – and things get busier – this changes. There’s so much going on and keeping tabs on supplier invoices is just one of a thousand things that need your attention. Plus, as the team grows, the instinctive understanding of how things work gets lost. It means that confusion reigns and cost control and cashflow suffer.

An invoice policy helps you regain control. It helps you clearly define your accounts payable process. It means:

  • All employees are aware of the invoice policy lifecycle and what steps they need to take at each stage.
  • Back-up documentation attached to an invoice like account codes, approvals, or other notes is accounted for.
  • You will speed up processes and reduce the risk of late financial reporting and payment.
  • Your finance team will be able to easily find documents needed for research and auditing purposes.
  • Senior management will be able to better access invoice and supplier data.

An invoice policy should contain:

  • Statement of purpose
  • Company expectations and policy compliance
  • Areas of ambiguity

Beyond that, there are a number of other factors it could also cover. Let’s take a look at each of the big areas and the optional extras in turn:

  1. Introduction and statement of purpose: The opening section of your invoice policy sets out the purpose of the policy and who it applies to. It covers the basic guidelines and is factual and clear. The easier a policy is to understand, the easier it is for your employees to follow and enforce.
  2. Company expectations and policy compliance: This section explains your company’s expectations for managing the receipt and storage of all accounts payable documents, the responsibilities every employee has when they handle a supplier invoice for any reason, and what happens when someone does not comply with the policy.
  3. Areas of ambiguity: Your invoice policy gives you the ideal opportunity to explain any common areas of confusion. These might include who has delegation of authority, segregation of duties, what happens if there is a purchase price variance, and what happens if there’s a challenge to the policy.
  4. Additional areas to consider: The first three sections of your supplier invoice policy cover the basics. There is a wealth of other subject areas you could consider. These include creating purchase orders, sending invoices from AP to the appropriate party for action and back again, coding invoices, approving invoices, recording results of exception handling, retention periods, payment terms, and many more.


Invoice automation takes you to the next level

Having an invoice policy in place is the first step to gaining more control over your spend. Next, it’s time to automate your AP process. Automated invoicing software will give you more efficiency, put you in control of spend, and provide a clearer picture of where your money is going and where you might be able to reduce costs.

Want to learn more? Take our five-minute assessment to see if your current AP processes are posing a business risk.

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