OK to Pay (July 2009)

The normal process of approving accounts payable is for someone who actually received the goods or services to indicate that the invoice is both correct and that the goods or services were appropriately received. Often, this is often indicated by the phrase “OK to Pay” or simply “OK” written on the invoice. But what do these words really mean? I’ve come to learn that it really depends upon whose initials appear beneath the phrase.

In some cases it means “I have reviewed this invoice, it is accurate in terms of what we agreed to pay, the goods or services have been received, are of good quality, and as a responsible member of the company, I approve payment.” Of course, none of those “other words” are actually written on the invoice, they are just implied. When one of these crosses my desk, they are almost always paid within terms.

In other cases, “it means, “I am scribbling my name at the bottom of this invoice to get it off my desk.” Just like in the first case, those words aren’t on the page either, but trust me, they are very much part of the message. These invoices almost always get challenged which delays the payment process.

The trick for the finance professional is to know who provides them with the first answer and who is providing the second. If you are part of the payment chain, from the CFO to the accounts payable staff, it’s your job to figure this out.

Let me give you two examples that actually came across my desk within the last month. The first was lease termination paperwork that offered a buyout price of $5,900. I challenged this number and after one voice mail, I got a message indicating that they could do it at $4,728. This saved my client $1,172. In another case, we were closing out a maintenance contract and being billed for a 30 day notification period. There were some extenuating circumstances, so I asked the person who had indicated that the invoice was “OK to Pay” if he had challenged it. It was pretty clear that he had not. Again, a quick phone call went to the vendor. They agreed to waive the 30 day notification period saving $1,443.

The point of these two examples isn’t to toot my own horn (frankly, reviewing invoices before payment is one of the simplest things that I do). But it is a good illustration how just being “on the ball” can translate into significant savings for the company.

If you’re part of the finance group, learn which people are diligent about approving invoices and which are just going through the motions. And if you’re one of those people responsible for approving invoices, spend a few minutes thinking about the invoice before you initial it for payment. You might be the one able to save your company money.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.


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