How to Approve Payments: A Practical Guide
A payment approval sheet is the document that answers a simple question before money leaves the business: has this payment been checked, and does someone with authority agree it should go? Every outgoing payment, supplier invoices, contractor fees, rent, subscriptions, should pass through an approval record. Businesses don’t usually lose money to dramatic fraud; they lose it to invoices paid twice, paid without checking, or paid to the wrong account.
This guide covers the approval record itself: the sheet that sits between “invoice received” and “payment sent.” It works alongside your invoice tracker and your accounting records, and it’s the control your auditors will ask for first.
Note: payment authorization rules, banking mandates, and record-keeping requirements vary by jurisdiction. Set your approval thresholds in writing and check your local regulations on financial documentation.
When to Use This
Use a payment approval sheet for every payment above your petty cash limit, in practice, every payment that leaves the bank account. No invoice is paid, no transfer is made, no cheque is signed without an approved sheet attached. The few exceptions (payroll, tax payments, loan repayments on fixed schedules) should be listed explicitly in your finance policy so the rule stays clear.
Start the sheet when the invoice arrives, not when it’s due. A supplier invoice dated 2 April with 30-day terms needs its approval recorded well before 2 May. The most common cause of late-payment penalties isn’t cash flow, it’s approvals sitting in someone’s inbox because the sheet was started too late.
One sheet per payment. Combining five supplier invoices onto one approval feels efficient until one of them is wrong and the whole batch has to be unpicked. Individual sheets keep the audit trail clean: this approval, this invoice, this amount, these signatures.
How to Fill It Out
Section 1: Payee details. The supplier or recipient’s full name, invoice number, invoice date, and the amount due with the currency. Verify these against the original invoice, not against a copy someone emailed in a hurry. Check the payee name matches your supplier records; fraudsters send fake invoices with near-identical company names, and the approval sheet is where that gets caught.
Section 2: Payment details. Amount to be paid, payment method (bank transfer, cheque), the account it will be paid from, the due date, and the supplier’s bank details as held in your records, not as printed on the invoice. Any change of bank details on an invoice should trigger a verification call to a known contact at the supplier before approval proceeds.
Section 3: Verification checks. Record that the three-way check has been done: the invoice matches the purchase order (or requisition), and the goods or services were received as described. Note who confirmed receipt, “Delivery confirmed by James O., warehouse, 9 April”, and flag any discrepancy: short delivery, wrong items, price higher than quoted. A payment approved against an unchecked invoice is how you pay for things you never received.
Section 4: Budget and coding. The cost centre or budget code, the expense category, and confirmation that budget remains. The approver isn’t just saying “yes, pay”, they’re saying “yes, pay, and charge it here.” Miscoded payments distort your management accounts for months.
Section 5: Approval signatures. Signature (or recorded electronic approval), printed name, date, and role for each required approver, in sequence. The preparer of the sheet should never be the final approver, the person who checked the invoice shouldn’t be the only person who signs it off. Set written thresholds: for example, department head up to $1,000, finance manager up to $10,000, director above that.
Section 6: Payment execution record. After payment, record the date paid, the transaction or cheque reference, and who executed it. This closes the loop: the sheet now shows request, check, approval, and execution. Attach the bank confirmation or remittance advice.
Common Mistakes
1. Approving without the three-way check. The signature goes on, but nobody matched the invoice to the order or confirmed delivery. This is the single most common payment control failure. The approval signature means “I have verified this,” not “this looks fine.”
2. The same person prepares and approves. When the person who receives the invoice also approves it, you’ve built a system where one dishonest or careless person can pay anything. Separation of duties isn’t bureaucracy, it’s the cheapest fraud insurance there is.
3. Trusting bank details printed on invoices. Invoice fraud works by sending a genuine-looking invoice with the fraudster’s account number. Always pay to the bank details in your own supplier records, and verify any change by phone using a number you already have, never the number on the suspicious invoice.
4. Rushing approvals at month-end. A stack of sheets signed in a hurry on the 30th is barely better than no approval at all. Spread the workload: start sheets when invoices arrive, and set a cut-off (e.g. approvals needed two working days before the payment run) so sign-off happens with attention, not panic.
Who Needs to Sign Off
The finance officer or accounts payable clerk prepares the sheet and records the verification checks. The budget holder or department head approves the spend. Above your threshold, a finance manager or director gives final approval. The person who executes the payment in the bank (often the finance manager or owner in a small firm) signs the execution record. At least two different people must be involved in every payment.
How Often to Review and Update
Review approval thresholds annually, a $1,000 limit set when you had six staff may be wrong at thirty. Reconcile approved-but-unpaid sheets against actual bank payments weekly so nothing approved slips through unpaid or gets paid twice. Audit a sample of completed sheets quarterly: are verification checks genuinely being done, or just ticked? Update the template whenever your payment methods or approval chain change.
Download the free Payment Approval Sheet template.
Disclaimer: this guide is general information, not financial or legal advice. Payment authorization, banking mandates, and financial record-keeping requirements vary by jurisdiction. Always check your local regulations and consult your accountant or bank about your approval procedures.