Authorization and Approval of Payments

How to Approve and Authorise Payments Correctly

Authorization and approval of payments are important steps in payment processing procedures. This process ensures that no money leaves the company without proper checks. It protects the business from fraud, errors, and unauthorised spending.

When a payment is requested, it must first be authorized by an employee who has the right to do so. This means they check that the invoice or payment instruction is correct and valid. They confirm that the amount is accurate, the supplier details are correct, and that services or goods were received.

After authorization, approval is required. Approval usually comes from someone higher up in the company, like a manager or finance officer. Their role is to give final permission for the payment to be made. Approval confirms that the payment fits within the company’s budget and follows company rules.

Steps in Authorization and Approval of Payments

1. Invoice Verification: Check the invoice against delivery notes and purchase orders.
2. Authorization: The responsible staff member signs or electronically approves the invoice.
3. Approval: A manager or authorised officer reviews and approves the payment.
4. Recording: All authorization and approval actions are recorded and filed for audit purposes.

Companies usually have formal limits that determine who can authorise or approve payments up to certain amounts. For example, a junior clerk might authorise payments up to R5,000, while anything above must be approved by a manager.

It is also important to keep a clear record of who authorized and approved each payment. This can be done through signatures, stamps, or electronic approval systems. These records help during audits and if there are any payment disputes.

In some companies, authorization and approval steps are done manually using paper documents. Others use electronic systems where payments are approved online. Regardless of the method, the rules must be followed strictly.

Following proper authorization and approval steps helps maintain good financial control. It reduces risks of overpayments, duplicate payments, or paying the wrong suppliers. It also builds trust with suppliers and within the company.

Remember, as a creditors clerk, your role includes making sure all documents are properly authorized before sending payments to the finance department. Never process payments without the required approvals. Always ask questions if something seems incorrect.