Invoice Review for General Contracting
Invoice Review is the process of checking every vendor and subcontractor invoice for accuracy, contract compliance, and proper coding before it enters the approval and payment pipeline. It verifies that invoiced work or materials are actually received, that pricing and math are correct, and that required backup and compliance documents are attached. The process also checks job cost coding and budget impact so costs land in the right place and do not exceed approved commitments. When done well, invoice review prevents overpayments, disputes, and messy job cost reports while keeping vendors paid on time.
Receive and log vendor invoices
Step 1: Define accepted invoice submission methods
Confirm and document how vendors are allowed to submit invoices (for example, dedicated AP email inbox, online portal, or mailed hard copies). Make sure this information has been communicated to vendors during vendor setup.
Step 2: Check inboxes and physical mail regularly
At least once per business day, check the designated AP email inbox, portal queue, and physical mail location for new invoices. Move invoices from general inboxes into the AP workflow as soon as they are identified.
Step 3: Date-stamp each invoice upon receipt
On each invoice (physically or digitally), record the date it was received, not just the invoice date. This will be used to measure processing time and to manage payment terms.
Step 4: Create or update an invoice intake log
Enter basic information into an intake log or AP system: vendor name, invoice number, invoice date, amount, job number (if shown), and who submitted it. Assign a unique internal reference number if your system does not do this automatically.
Step 5: Identify associated job and project manager
If the invoice references a job, note the job number and project manager in the log. If it does not, use the description or prior invoices from that vendor to identify the correct job or general ledger account, and add this to the log.
Step 6: Store invoices in a “pending review” queue
Place physical invoices in a “Pending Review” folder and route digital invoices into a “Pending Review” electronic queue or folder. This queue is the starting point for the detailed review steps that follow.
Verify vendor information and job references
Step 1: Confirm vendor exists in accounting system
Search the accounting system for the vendor by name and compare it to the vendor name on the invoice. If no match is found, stop and follow the vendor setup process instead of creating an ad hoc vendor in the system.
Step 2: Check vendor legal name and address
Compare the name, remittance address, and tax ID (if shown) on the invoice against the vendor master record. If there are discrepancies, contact the vendor to confirm whether they have rebranded or changed address and update records if appropriate.
Step 3: Verify job number or job name
Look for a job number, job name, or purchase order number on the invoice. If not present, use the description of work or materials and prior records to determine which job it belongs to, and write the job number clearly on the invoice.
Step 4: Confirm related contract or PO exists
Check that there is an executed subcontract, purchase order, or service agreement for this vendor and this job. Note the contract or PO number on the invoice for later matching.
Step 5: Flag invoices with missing or unclear references
If you cannot confidently identify the correct job or contract, mark the invoice as “On Hold – Job/PO Verification Needed” in the log. Notify the project manager or purchasing to help clarify before proceeding.
Step 6: Update invoice log with verified job and vendor details
Once vendor and job references are confirmed, update the intake log so it shows the correct vendor record, job number, and contract or PO number for this invoice.
Match invoice to purchase order, subcontract, and receiving records
Step 1: Locate the related PO or subcontract
Using the contract or PO number identified earlier, pull up the corresponding document in your system or file. Confirm that the vendor and job on the invoice match the PO or subcontract.
Step 2: Compare invoice line items to PO or contract scope
Line by line, check that the descriptions, quantities, and unit prices on the invoice correspond to what is in the PO or subcontract (including change orders). Mark any lines that do not clearly match.
Step 3: Check receiving records for materials
For material invoices, pull up receiving tickets, delivery receipts, or field sign-offs. Confirm that quantities billed on the invoice have actually been delivered and accepted on site and that there are no obvious duplicates.
Step 4: For subcontractors, confirm progress with project team
For progress billings, confirm with the project manager or superintendent that the claimed percentage complete or quantities are reasonable and consistent with work in place. Use their input to flag any lines that appear overstated.
Step 5: Identify unmatched or over-billed items
List any invoice lines that have no matching PO/contract item, exceed ordered quantities, or are billed at times when no work was done. Mark these items for further investigation, not immediate approval.
Step 6: Record match status in log and on invoice
Annotate the invoice with notes such as “PO matched,” “Awaiting field confirmation,” or “Qty exceeds PO by 10%,” and update the log to show whether the invoice has passed the match step or requires follow-up.
Confirm quantities, unit pricing, taxes, and math accuracy
Step 1: Check quantities against approved documents
For each invoice line, compare the quantity billed to the quantity on the PO, subcontract, or approved field progress report. Note any lines where quantities do not match the agreed or confirmed amounts.
Step 2: Verify unit prices
Compare unit prices on the invoice to those listed in the PO, subcontract, or change order. Watch for subtle differences such as extra decimal places or different units (for example, per foot vs. per meter).
Step 3: Recalculate line extensions
Using a calculator or spreadsheet, multiply quantities by unit prices to confirm that each line extension is correct. Circle or highlight lines where the vendor’s math does not match your calculation.
Step 4: Review tax rates and taxable amounts
Check that sales or value-added tax is applied only to taxable items and at the correct rate for the job’s jurisdiction. Ensure that tax is not applied to exempt items such as labor where local rules require it.
Step 5: Verify subtotals, retention, and grand total
Add up line extensions, tax, retention, and any other charges or credits to confirm that the subtotal and grand total are accurate. Watch for rounding discrepancies and ensure retention percentages match contract terms.
Step 6: Document corrections needed and adjust if allowed
If there are minor math errors that your policy allows you to correct internally, adjust the invoice amounts in your system and note the correction. For larger discrepancies, flag the invoice and contact the vendor for a corrected invoice before proceeding.
Check cost coding and job cost allocations
Step 1: Review default cost coding proposed by system or project team
If your system or the project team has proposed cost codes on the invoice or PO, start by reviewing those codes. Compare them to the scope of work or materials described.
Step 2: Confirm appropriate job and phase
Ensure each line is coded to the correct job number and phase (for example, sitework, structure, interior finishes). If a cost belongs to general conditions or home office overhead, adjust accordingly.
Step 3: Assign cost codes and cost types for each line
For every invoice line, assign a specific cost code and cost type (labor, material, subcontract, equipment, other) based on what is actually being billed. Use the job-specific coding guide created during job cost setup.
Step 4: Split lines across codes if necessary
If one line on the invoice covers multiple scopes or phases, split the amount between the correct cost codes in your accounting entry. Document how you split the cost and why.
Step 5: Check for consistency with prior invoices
Compare coding used on prior invoices from the same vendor and job. If similar work or materials were coded differently before, determine which code is correct and standardize going forward.
Step 6: Record final coding on invoice and in system
Write the chosen cost codes on the invoice (if using paper) or enter them into the AP system. Double-check that every line has a valid cost code and cost type before moving to the next step.
Verify compliance documents, insurance, and lien waivers for invoice
Step 1: Check vendor compliance status in system
Look up the vendor’s compliance status (insurance, licenses, safety prequalification) in your tracking system or vendor file. Confirm that all required documents are current and not expired.
Step 2: Verify project-specific requirements
Review the project’s contract and compliance notes to see if this invoice requires specific documents, such as conditional lien waivers, certified payroll, or minority participation reports.
Step 3: Confirm lien waiver receipt for prior payments
If this is not the first payment to the vendor, check that signed lien waivers have been received for previous payment periods. Ensure that the waiver type (partial vs. final) matches the payment sequence.
Step 4: Request current-period lien waiver if required
If your process requires a conditional lien waiver with the current invoice, ensure it is included. If missing, request the correctly completed waiver from the vendor and place the invoice on hold until it is received.
Step 5: Check insurance and license expiration dates
Make sure that insurance certificates and required licenses will still be valid on the dates covered by this invoice’s work. If they are expired or will expire before work was performed, escalate to the project manager or safety team.
Step 6: Document compliance status and holds
On the invoice and in the log, note whether all compliance requirements are met. If something is missing, clearly mark the invoice as “On Hold – Compliance” and list what is needed to clear the hold.
Coordinate invoice discrepancies with project team and vendor
Step 1: List all discrepancies clearly
For each invoice with issues, write a short list of specific discrepancies: unmatched items, overbilled quantities, incorrect rates, missing backup, or compliance gaps. Be as concrete as possible so others can act on the list.
Step 2: Discuss field-related issues with project team
For disputes about work performed or quantities installed, send the invoice and discrepancy list to the project manager or superintendent. Ask them to confirm approved quantities or percent complete and to provide written guidance.
Step 3: Contact vendor for price or math corrections
If the issue is incorrect pricing or math, contact the vendor’s billing contact. Explain the specific lines in question and provide your calculations or contract rates for reference.
Step 4: Decide whether to request a revised invoice or short-pay
Based on company policy and the size of the discrepancy, decide with the project manager whether to ask the vendor to issue a revised invoice or to process a partial payment (short-pay) with clear communication.
Step 5: Document all communications and agreements
Record emails or call notes summarizing what was discussed and agreed upon with the project team and vendor. Save these notes in the invoice file or AP system.
Step 6: Update invoice status in log
Change the invoice’s status in the log to show whether it is “Pending revised invoice,” “Approved with short-pay,” or “Resolved and ready for approval routing.”
Confirm invoice is within budget, commitments, and change orders
Step 1: Check remaining PO or subcontract balance
In the accounting or project system, pull up the current commitment status for the relevant PO or subcontract. Confirm that the invoice amount plus prior billings will not exceed the total authorized value (including change orders).
Step 2: Compare to approved change orders
Verify that any billed change items are supported by fully approved change orders and that the amounts match those approvals. If field directives or verbal approvals exist but formal change orders are not yet processed, flag this for the project manager.
Step 3: Review cost-to-date versus budget for affected codes
Run a cost report for the job and look at the cost codes affected by this invoice. Check whether the new costs will push those codes over budget and by how much.
Step 4: Notify project manager of potential budget impacts
If paying this invoice will cause a significant budget overrun, send the project manager a summary of the situation and ask for confirmation or a plan (for example, budget transfer, contingency use).
Step 5: Adjust coding or hold items if necessary
If certain line items should not be charged to the current job or should be billed to a different budget or change order, adjust coding in the system or mark those lines for hold.
Step 6: Document budget and commitment checks
Note in the invoice record that the budget and commitment review was completed, including any concerns raised and responses received, so future reviewers understand the context.
Prepare invoice packet for approval routing
Step 1: Compile invoice and all supporting documents
Gather the reviewed invoice, PO or subcontract, receiving tickets, approved change orders, lien waivers, and any correspondence clarifying quantities or pricing. Ensure documents are clearly legible.
Step 2: Attach internal review notes
Include a cover sheet or comment section summarizing key points from your review: any corrections made, issues resolved, budget concerns, and items on hold if applicable.
Step 3: Ensure cost coding is visible
Make sure cost codes and cost types are clearly shown on the invoice, cover sheet, or AP entry printout so approvers can see where costs will land in the job cost report.
Step 4: Select correct approval route based on amount and type
Determine which approvers are required based on company policy for this vendor, amount, and job (for example, project manager, operations manager, finance manager). Set up the approval route in the system or note it on the packet.
Step 5: Submit packet into approval workflow
For digital systems, upload the documents and trigger the approval workflow. For paper-based processes, place the packet in the appropriate approval folder or deliver it to the first approver.
Step 6: Update log to “Sent for Approval”
Change the invoice’s status in the intake log to “Sent for Approval” and record the date and the first approver. This allows you to follow up if approvals are delayed.
Maintain invoice review records and tracking log
Step 1: Update tracking log at each stage
Whenever an invoice moves from one stage to another (received, under review, on hold, sent for approval, approved), update the tracking log with the new status and the date. Include brief notes on holds or special circumstances.
Step 2: File reviewed invoices systematically
Store digital invoices and support documents in a structured folder system or AP module using consistent naming (for example, Job-Vendor-InvoiceNumber-Date). For paper-based systems, file documents in labeled binders or file drawers by job and vendor.
Step 3: Monitor aging of invoices in review
Regularly run a report or review the log to find invoices that have been in “Pending Review” or “On Hold” status for longer than your target processing time. Investigate and push these forward where possible.
Step 4: Coordinate with AP and project teams on older items
For invoices that are stuck due to missing information or approvals, reach out to AP, project managers, or vendors to resolve outstanding issues. Document follow-up attempts in the log.
Step 5: Prepare periodic summary reports
On a weekly or bi-weekly basis, prepare a short summary of invoice volumes, amounts under review, and items on hold to share with finance and project leadership. Highlight any risk of late payment or cash flow impact.
Step 6: Archive closed invoices according to retention policy
When invoices are fully approved, paid, and no longer active, ensure they are archived in accordance with company document retention policies, ready for future reference or audit if needed.
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