AS | Ankit Sarawagi|Founder, CFOmatrix·July 2026·9 min read | Right-sized SOP |
- Two people, not ten. Finance does or checks the invoice; one other person (founder or department head) approves. Two sets of eyes is enough for everyday bills.
- Match before you pay. Three-way matching (PO, goods received, invoice) proves a bill is genuine. For small or routine spend, a two-way match is fine and you can skip the PO.
- Handle TDS at approval, before you schedule the payment, so the deduction, the net paid and the return all reconcile.
- Pay by maker-checker. One person prepares the payment, another releases it. Nobody, not even a one-person finance team, approves their own payment.
- Keep the trail in the tool. Attach invoice, PO and approval to the bill in Zoho Books. The audit trail is a byproduct, not extra work.
| 2 People in the baseline approval: finance plus one other | 3-way The match that proves a vendor bill is real | 1 tool The whole trail lives inside your accounting software |
| 1. The invoice-to-pay flow 2. Three-way matching, made simple 3. Approval and the TDS check | 4. The audit trail in Zoho Books 5. Lean version vs when to add a step 6. Frequently asked questions |
The Invoice-to-Pay Flow
The accounts payable process is one straight line from a vendor invoice landing in your inbox to a paid, recorded bill. The trick is to keep the line short. Here is the full flow, with who does each step and who approves it.
Notice there is no auto-approve-below-a-number free pass. Every spend gets a second pair of eyes; the threshold only decides who the second pair belongs to. The rules behind this flow (who can approve what, at which limit) live in the matching CFOmatrix payment and expense policy; this SOP is the process that puts those rules into practice.
Three-Way Matching, Made Simple
Three-way matching sounds like enterprise jargon, but the idea is plain: before you pay, three documents have to agree. If they do, the bill is genuine. If they do not, you hold and ask why.
You do not need a purchase order for every bill. Raise a PO for anything material, recurring, or where price and quantity must be locked before delivery, and run a three-way match on those. For low-value or one-off spend, skip the PO and use a two-way match: the invoice against proof the service was received and approved by the requester. Set one clear threshold for when a PO is required, and apply it every time.
Approval and the TDS Check
This is where control and tax both happen, and where founders most often over-engineer. Keep the approval to two people, route the sensitive items to the founder, and check TDS in the same breath before you schedule anything.
“Even a one-person finance team should never approve its own payment. Finance does the work, the founder or department head approves it, and the founder is the checker who releases payments in the bank. Two sets of eyes, always.”
Ankit Sarawagi, Founder, CFOmatrixTDS is a whole topic on its own; here it is just a gate in the AP flow. For the rates, sections and deposit dates, see our dedicated guide on vendor payments and TDS, and set up the vendor correctly first with the vendor onboarding SOP so the PAN, GST number and bank details are verified before the first bill.
The Audit Trail in Zoho Books
Startups rarely fail an audit because they did the wrong thing. They fail because they did the right thing and never recorded it. The fix is to keep the entire AP trail inside the accounting software, so the record builds itself as you work.
Approving a bill quickly over email, Slack or WhatsApp is fine for speed, but the approval only counts if it is captured back into the record. Save the message onto the bill or forward it into the tool so the trail stays complete and audit-defensible.
Lean Version vs When to Add a Step
The SOP above is already lean. As you scale, you add control without adding bureaucracy. Here is the contrast, so you keep the process right-sized for the team you have.
- One owner in finance runs the flow
- Two-person approval on every bill
- PO only for material or recurring spend
- Maker-checker on the bank
- Everything attached in Zoho Books
- Volume rises: add a formal PO system and mandatory GRN
- More departments: add budget-owner approval before finance
- More vendors: add a periodic vendor master review
- Bigger spend: tier approval limits per the SHA
The most common payment fraud is a fake email asking to change a vendor’s bank account. A bank-detail change is a sensitive item: it always needs founder approval and a call-back to a known vendor contact, never a reply to the email that requested it. Bake this into the AP SOP, not into someone’s good judgement on a busy day.
“A good accounts payable process is not about slowing money down. It is about making sure every payment is genuine, correctly taxed, and leaves a record, without a single extra signature you do not need.”
Ankit Sarawagi, CFOmatrixFrequently Asked Questions
What is the accounts payable process?
The accounts payable process, or invoice-to-pay, is the flow from receiving a vendor invoice to paying and recording it. The lean startup version: receive the invoice, match it to the purchase order and what was delivered, code it to the right account, get it approved by two people (finance plus one other), deduct TDS if applicable, schedule the payment, release it via maker-checker, and record it. Every step leaves a record, which is what makes it audit-defensible.
What is three-way matching?
Three-way matching means three documents must agree before you pay: the purchase order (what you agreed to buy and at what price), the goods received note or proof of service delivery (what you got), and the vendor invoice (what you are billed). If all three match on quantity and price, the bill is genuine. If not, you hold and investigate. For small or routine spend with no PO, a startup can use a two-way match: invoice against proof the service was received and approved.
Do I need a purchase order for every bill?
No. Raise a PO for anything material, recurring, or where price and quantity need to be locked before delivery, so you can run a three-way match. For low-value or one-off spend, skip the PO and use a two-way match: the invoice against evidence the goods or service were received and approved by the requester. Set a clear internal threshold for when a PO is required and apply it consistently.
Who approves vendor invoices?
Keep the chain short. The baseline is two people: the head of finance does or checks the invoice, and one other approver signs off, either the founder or the requesting department head. Sensitive items always go to the founder: new vendors, bank-detail changes and salary changes. Amounts above the limit set in your investment agreement or SHA go to the board. Nobody, not even a one-person finance team, approves their own payment.
How does TDS fit into the accounts payable process?
TDS is checked at the approval step, before you schedule the payment. When a bill falls under a TDS section (professional fees, contractors, rent, commission and similar), deduct the applicable rate, pay the vendor the net, and deposit the TDS with the government by the due date. Record the gross bill, TDS deducted and net paid in your accounting software so the liability and the return reconcile. Getting this right at the AP stage avoids interest, penalties and messy corrections later.
How do I keep an accounts payable audit trail?
Keep the whole trail inside your accounting software. Attach the invoice, PO and goods received note to the bill in Zoho Books (or QuickBooks), capture the approval in the tool, and use a maker-checker in the bank so one person prepares and another releases the payment. MCA now requires accounting software to have an audit trail (edit log) that stays on, and auditors check it. If you approve over email, Slack or WhatsApp, save that approval back onto the bill so the record is complete.
What is the difference between the accounts payable SOP and a payment approval policy?
The policy sets the rules: who can approve what, at which limit, and which items always need founder or board sign-off. The SOP is the process: the exact steps your team runs to turn a vendor invoice into a recorded, paid bill. You need both. The policy lives in the CFOmatrix policy library; this SOP is the day-to-day workflow that puts it into practice and leaves the audit trail behind as a byproduct.
This is general educational information for founders, current to mid-2026, drawing on the author’s experience building finance functions inside growing companies, and is not legal, tax or audit advice. TDS rates and sections, MCA audit-trail requirements and accounting rules change; verify the current position or consult a professional before acting on a specific matter.
Vendor Payments and TDS
Finance SOPs and Controls: The Founder’s Guide
AS | Founder, CFOmatrix | Finance Strategy & Equity Compliance CFOmatrix is a knowledge platform focused on how finance actually works inside growing companies. This SOP draws on hands-on experience setting up lean, audit-ready payables, approvals and controls for founders, so the paperwork protects the business without slowing it down. |