Skip links

How do you verify Payables?

Verifying payables entails several steps including gathering all relevant documents, authorization verification, and document reconciliation, amongst many others.

For businesses to thrive and carry out their day-to-day activities, they need to make purchases. These purchases may be of goods or services and the transaction can either be a cash or credit transaction.

When it is a credit transaction, it means that the company will pay the good or service provider at some point in the future. Thus, such transactions get added to a company’s accounts payable.

Businesses use the accounts payable to keep track of invoices and ensure timely payment of bills for goods or services received on credit.

With the increasingly complex and fast-paced nature of modern business transactions, particularly when these transactions occur at high volumes, managing accounts payable processes can be quite challenging. Thus verifying payables is an important step in ensuring seamless operations.

Before we look at how business organizations can verify their payables, let us have a clearer understanding of payables.

Read about: How to Find Predetermined Overhead Rate

What are payables?

Payables refer to monies a business corporation owes its suppliers for goods or services collected on credit. They are part of a company’s liability account and are recorded in the liabilities section of a company’s balance sheet and general ledger.

Payables otherwise referred to as accounts payable or AP are short-term obligations, hence they appear under current liabilities of a company. This implies that payables generally need to be settled within one year.

Payables are important figures in a company’s balance sheet because they provide insight into its financial health. Some of the ways auditors, analysts, and creditors use a brand’s payable information is by calculating its accounts payable turnover (APT) or account payable days.

The former is used to evaluate the frequency and ability of companies to pay off their debts while the latter determines a company’s liquidity by calculating the average time it takes the company to pay off its accounts payable balance.

A company’s payables will continue increasing as long as they keep receiving goods or services on credit. When the company pays off some part of the monies it owes, its payables balance decreases.

Hence, an increase in payables indicates the collection of more goods or services on credit by a business whereas a decrease indicates a meticulous payment of payables or a significant reduction in the use of credit when purchasing goods or services.

How do you verify payables?
How to verify payables

If left unchecked, payables can become a major source of financial complications, especially when a company has fraudulent employees or owners who may want to overstate the payables balance as a means of siphoning company resources.

Thus, verifying payables is a necessity as it ensures that the account payable processes accurately reflect what the company owes suppliers.

Read about: How to Claim Bonus Depreciation

How do you verify payables?

Payables can be verified by ensuring that there is proper and accurate documentation of payables. This is often done by matching invoices with purchase orders and confirming from suppliers that the amount recorded in the invoice sent matches that which the supplier recorded in their accounts receivable.

The major aim of verifying payables is to ensure that the company does not understate or overstate what it owes suppliers. It also ensures the legitimacy of the company’s current liabilities accruing from payables.

For instance, if Sam’s Bakery purchases baking supplies worth $300,000 on credit, verifying that this information is correct before adding the sum to its account payable would involve checking all invoices from the suppliers and comparing them with the purchase orders placed by the bakery.

Additionally, one can call the bakery’s suppliers to confirm if the recorded amount on their invoice matches the cost of items they had supplied to the bakery.

It is important to note that verifying payables and auditing payables are not the same thing. While the former focuses on the correctness of the payables and is part of the auditing process, the latter is a more encompassing process aimed at ensuring transparency and accuracy of the accounts payable.

Generally, auditing payables includes checking for completeness, validity, accuracy, compliance, and proper disclosure. Additionally, verifying payables is not as time-consuming as auditing payables.

Read about: How to do adjusting entries with examples

How to verify payables

Gather all relevant documents

This is the first step in the verification process of payables. All documents associated with payables for the period that need to be verified should be gathered.

Payable documents usually include purchase orders made by the company, invoices received from the supplier, and contracts between the company and the supplier.

Verify all authorizations

This involves checking that the purchase order, contact, or invoice has the right authorization. Most companies have modalities set in place to prevent fraud or errors in the payables process such as ensuring dual authorization of purchase orders.

For instance, the purchase order would have to include the signature of the company’s procurement officer and the approval stamp of the manager.

The invoice from the supplier should also be checked to ensure that it has all necessary authorizations such as stamps or signatures.

Review the purchase terms and conditions

Most credit purchases usually include terms and conditions upholding the transaction. This may include a sales discount for early payment or additional fees for late payment.

It may also include the specific period within which the purchase must be paid for. This ranges between a few days to some months from the day the invoice was issued.

A good review will ensure that sales discounts or any other benefits have been rightly applied.

Compare the document details

This step entails comparing the records from one source with another. For instance, if there is a purchase order for 10 computers, it should be compared with the invoice received from the computer suppliers. This ensures that the details in the purchase order match the invoice.

Confirm with suppliers

An additional step in verifying payables is confirming the purchase directly from the suppliers. This is done to ensure that the invoice received accurately captures the transactions. It mostly involves confirming delivery dates, product quantities, and prices.

Reconciliation of documents

This entails ensuring that all documents are accurate and all transactions that were carried out are well documented. All contracts, purchase orders, and invoices should be available and correspond with each other without any missing records.

Record the payables

Once a payable has been verified, the details are then recorded by making a journal entry in the company’s accounting books or other accounting systems used by the organization.

Read about: How to calculate bonus depreciation

How do you ensure the completeness of payables?

You can ensure completeness of payables by verifying that all documents and related payments are accurately recorded as at when due.

This usually includes ensuring that payables are recorded within the accounting period when they occurred, otherwise known as a cut-off test; ensuring that all recorded payables have corresponding purchase orders, invoices, or contracts i.e traceable paper trails; and that the details in order purchases match those of invoices and contracts i.e reconciliation of documents.

Read about: How to Record Adjusting Entry for Supplies with Examples

What are the procedures for payables?

The procedure for payables is the processes involved from order placement to fulfillment and eventual payment of the payable. It begins with receiving the purchase order from the purchase department and the invoice from the supplier.

Additional steps include validating the purchase order and invoice to ensure they convey the same transaction details and then approving the payable for payment to the supplier.

These payable procedures are carried out to avoid payment errors and mitigate the possibilities of fraud in expenditure.

Read about: GAAP for Revenue Recognition: Criteria and Examples


How do you verify payables? Payables can be verified by ensuring all the documents involved in a transaction are available and accessible, comparing and ensuring that the details in one document such as the purchase order match that of the invoice.

Additional steps in verifying payables include authorization verification, review of purchase terms, and confirmation of purchase from suppliers.

With the rise of digital transactions and automated accounting systems, the process of verifying payables has become a little less cumbersome as a myriad of accounting software can now carry out the verification process in minutes.

Verifying payables is important as it helps in preventing unintended errors, illegitimate payments, outright manipulation of records, and duplicate payments.

It also aids in ensuring that companies follow due process in making credit purchases and ensures compliance with laws and regulatory policies surrounding payables.

In addition to verifying payables, companies generally carry out yearly accounts payable audits to ensure that the brand is compliant and follows the necessary guidelines and requirements for the accounts payable.

When payables are accurately verified, it eases the auditing process as all documents needed for audits would have already been available due to the verification of payables.