What is a purchase invoice?

A service firm receives a bill from the landlord of its office, and a wholesaler receives one for a delivery of goods. Both are purchase invoices. They arrive by post, by email or, more and more often, as a structured file through e-invoicing.

What is on it? The supplier name and details, an invoice number and date, a description of what was delivered, the amount with and without VAT, the payment terms and the bank account number. What exactly is required depends on the situation. Ask your accountant if in doubt, and request a corrected invoice if details are missing.

For your records the invoice does two things. It creates a debt to the supplier, which you track through accounts payable until you pay. And it helps determine the VAT you can reclaim in the VAT return, provided the conditions are met. A wrongly posted invoice can therefore lead to a wrong return.

Check before you post. Does the amount match the order? Has everything been delivered? For traded goods you compare the invoice with the order and the goods receipt, known as a three-way match. That way you do not pay for what never arrived. Watch also for duplicate invoices and for a bank account number that has suddenly changed.

Keep the invoice with the posting, so that you have the documents to hand in an audit. A fixed route from arrival through approval to payment stops invoices from being left lying around, and stops the supplier from having to chase you.