In many cases, a simple glance at the invoice is all that is required to confirm payment. If the goods are the right quantity and the invoice total is accurate. However, the tax authorities do not see that as adequate. To help you, the entrepreneur, focus on what really matters during an invoice audit, we have compiled a summary of all the relevant information below.
Definition: Can you explain what an audit is?
The accounting team will double-check an invoice for accuracy and proper formatting during an audit. In most cases, an invoice is not sent out to a client until after it has been reviewed. This way, you won’t have to worry about any holdups caused by misfilled forms. The same holds true for miscalculated sums on the bill. In addition, the input tax was paid in full and there are no inconsistencies in the statement.
Formal and factual auditing
The amount invoiced shifts based on the cost of the merchandise being sold. That also holds true for checking invoices. A contrast is drawn between a factual and a formal audit. We will show you what these tests signify in detail below.
An audit of the facts is what?
The supplied products or services were accurately invoiced is checked in the factual invoice verification. In this case, we check it against the delivery note. The one who placed the order and received the services is the best candidate to verify the invoice’s accuracy.
Just what does it mean when anything gets audited officially?
Compliance with formal regulations can be guaranteed by auditing procedures. Making formal invoice verification a part of the input of incoming invoices makes a lot of sense. You can stop a wrong invoice from going through the system and rectify it this way. In this section, you may also inquire about a replacement invoice from the vendor.
Any and all things on an order-related invoice can be billed for. If you have only gotten some of your order, it is fine. A single order can include the costs of all interim deliveries and fulfil them all at once.
Each goods receipt must be invoiced individually if the invoice is related to the receipt of goods. Without an order number, the following accounts can be credited with a paid invoice:
Budget account Inventory account Ledger account
Which party does the inspection?
The auditing office could be the Internal Revenue Service or the State Auditor’s Office. If this is happening in the field of accounting, for instance, there may be connections to the fields of logistics and purchasing. In other words, information from logistics and purchasing is necessary for accounting purposes. If you’re a one-man show and handling your own books, you’re on your own when it comes to checking invoices.
Do businesses have to do audits?
In most cases, an audit is required. Although there is no legal requirement for you to verify the accuracy of the invoices, you are still responsible for any discrepancies that may appear on your end if you do not.
Don’ts to avoid
The blunders to avoid vary. Errors can be classified as:
Error in form: missing required details (e.g. missing invoice number.)
Content mistakes: frequently the result of misunderstandings between the vendor and the vendor’s service provider (e.g. errors regarding the quantity of the services)
Errors in computations: caused by improper use of accounting software
What should happen if an invoice is lacking required details?
The input tax deduction cannot proceed without the required data. You cannot claim an input tax credit if any of these requirements are not met. As a result, you may be stuck with a hefty input tax bill.
Example-based Methodology
We will demonstrate the procedures involved in a proper invoice verification using an example:
As a first step, verify that all required details are present on the invoice and that it complies with all applicable laws. The term “formal testing” is also used to describe this stage.
The next stage is the investigation of the facts. Find out if the services were performed as promised and free of any flaws here. In addition, you cross-reference the order of the invoice and the delivery note. You need to double check the individual pricing as well as the sum.
In Stage 3, we go on to the subsequent sectional examination. Consider seeking input from relevant parties before finalising an invoice. Differences and unanswered questions can be addressed head-on in this fashion.
At this point, the invoice is processed and made available to the customer. It is reasonable to involve a second person who can take over the release in this situation.
A computerised invoice verification system
The goal is to facilitate less strenuous labour. Simply put, because most options for electronic invoicing supply all features necessary for checking bills without further work from the user, automatically. For this situation, the following data is stored in the system:
a receipt invoice order form
