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Accountants approve vendor payments on the invoice alone and later find over-billing, missed TDS, duplicate payments or late MSME payments.
Each invoice passes seven checks before payment: order exists, goods received, rate and quantity agree, GST invoice valid, TDS worked out, not already paid, due date known.
A payment checklist or register with PO, GRN and invoice numbers, the TDS section, MSME status and due date on each row.
Payments released only for valid, agreed and unpaid invoices, with holds documented for any that fail a check.
Before paying a vendor invoice, check seven things: the order exists, the goods or services arrived, rate and quantity agree, the GST invoice is valid, TDS is worked out, the bill is not already paid, and the due date is known, including any MSME limit. If any check fails, hold the payment and record why.
The seven checks at a glance
| # | Check | Document used | Red flag | Usual owner |
|---|---|---|---|---|
| 1 | Order exists | Purchase order or signed contract | No PO, or PO raised after the invoice | Purchase team |
| 2 | Goods or services received | GRN, service completion note | No GRN, or GRN shows rejections | Stores or user department |
| 3 | Rate and quantity agree | PO, GRN, invoice | Invoice rate above PO rate; billed quantity above accepted quantity | Accounts payable |
| 4 | GST invoice is valid | Tax invoice, GSTR-2B | Wrong GSTIN, missing HSN, supplier not in your GSTR-2B | Accounts payable or tax team |
| 5 | TDS worked out | Supplier master, nature of payment | Contractor or professional paid in full | Tax team |
| 6 | Not already paid | Supplier ledger, bank statement | Same invoice number or same amount and date already paid | Accounts payable |
| 7 | Due date known | Credit terms, MSME status | Registered micro or small supplier close to 45 days | Accounts payable |
On check 4: Section 16(2) of the CGST Act, 2017 allows input tax credit only if you hold a tax invoice, have received the goods or services, and the invoice appears in your GSTR-2B. A bad invoice is a tax cost, not only a paperwork problem.
On check 7: under the MSMED Act, 2006, buyers must pay registered micro and small suppliers within the agreed period, which cannot exceed 45 days, or within 15 days if nothing is agreed.
A worked example: a rate mismatch
A purchase order is raised for 100 units at ₹900 each, a total of ₹90,000. The goods arrive and the GRN accepts all 100 units. The invoice arrives at ₹1,000 a unit:
| Line | PO | Invoice |
|---|---|---|
| Quantity | 100 | 100 |
| Rate | ₹900 | ₹1,000 |
| Taxable value | ₹90,000 | ₹1,00,000 |
| GST at 18 percent | ₹16,200 | ₹18,000 |
| Total | ₹1,06,200 | ₹1,18,000 |
Checks 1 and 2 pass. Check 3 fails: the invoice is ₹10,000 above the agreed taxable value, or ₹11,800 including GST.
The right step is to hold payment and ask the purchase team which is correct. Either the supplier issues a corrected invoice or a credit note for ₹11,800, or someone with authority approves the price change in writing and the PO is amended. Do not “pay what is agreed” and leave the rest open; that leaves a ₹11,800 difference sitting in the supplier’s ledger for months.
What are two-way, three-way and four-way matching?
- Two-way matching: invoice against purchase order. Checks rate and ordered quantity.
- Three-way matching: invoice against purchase order and GRN. Adds what was actually received.
- Four-way matching: three-way plus an inspection or quality report. Pays only for goods that passed inspection.
Services usually use a two-way match plus a sign-off from the person who received the service, because there is no GRN.
Which checks can a small business do in a spreadsheet?
All seven. A simple register in Excel or Google Sheets with one row per invoice works well:
- Columns for supplier, GSTIN, PO number, GRN number, invoice number, invoice date, taxable value, GST, TDS section, MSME status, due date and status.
- A formula that flags any invoice number appearing twice for the same supplier (check 6).
- A filter on due date to see what must be paid this week (check 7).
- A monthly tick against GSTR-2B for check 4.
Tally and Zoho Books reports, such as bill-wise outstanding, give most of the data. The register is the place where someone records that each check was done.
What to read next
- What is three-way match explains the formal control in more depth.
- PO, GRN and invoice three-way matching in India shows how teams run it at volume.
- PO, GRN, delivery challan and invoice: what each proves covers the documents behind the checks.
- For how matching fits a wider process, see three-way matching in India.