When you hear the term “audit”, it tends to have a negative connotation. The fact of the matter is, an accounts payable audit is a process that can have very positive business-changing results, especially when best practices are included in the result package. Not only might you find a great deal of money “lost” in unrefined operational processes, but a good
When an accounts payable audit is completed, the types of overpayments that are identified in each category should be explained, and recommendations for how to prevent them going forward provided. In order help Controllers and CFOs better manage procure-to-pay processes, they must have insight into their own organization, as well as the latest accounts payable advice from the experts.
Narrowing the list of best practices is not an easy task, as it needs to cover everything from invoice handing to payment processing, and fraud to regulatory issues. In our experience, however, attending to these 25 critical items will make a significant impact on operational efficiency, and provide a clear audit trail.
- Get a W-9 From Every Vendor Before the First Invoice is Paid
- Limit Who Can Add New Vendors or Access the Master Vendor File, and Review Changes Annually
- Pay From Original Invoices
- Enter Invoices Individually and With Standardized Field Requirements
- Pay Invoices as Billed
- Standardize Invoice Number Creation and Entry
- Have a Process for Invoice Validation
- Centralize Processes
- Clearly Define Roles for Accountability, Authorization and Approval
- Never Have One Person Handling Payment Initiation, Payment Processing and Check Signing
- Standardize Invoice Handling: Establish a Single Delivery Point for Invoices and Provide Every New Vendor with Clear Instructions for Invoice Submission
- Have a System for Keeping Track of Vendor Discounts
- Automate Manual Processes as Much as Possible
- Routinely Check for Duplicate Payments
- Use Workflow Automation to Monitor Performance and Identify Issues
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Utilize
Management to Oversee all Payment Processes - Track Disputes and Resolutions
- Train, Cross-train, Educate and Rotate AP Staff
- Pay Electronically Whenever Possible Using a Dedicated PC for Online Banking Only (Turned Off When Not In Use)
- Consider Outsourcing Check Printing to Your Bank
- Utilize ACH Positive Pay, Blocks and Authorizations to Protect Against Unauthorized Transactions
- Limit Rushing Checks and Returning Checks
- Have a Follow-up Process for Uncashed Checks
- Reconcile Bank Accounts Daily
- Make an Accounts Payable Audit a Regular Part of Your Business Routine
When accounts payable issues are either unnoticed or ignored, it can lead to a downward spiral both with finances and vendor relations. Following best practices can help businesses avoid duplicate payments, identify fraud, take advantage of early payment discounts, and preserve relationships with employees as well as vendors. You can also expect a decrease in regulatory issues.
It is important to recognize that following these best practices does not make an organization immune to errors or even fraud. It will, however, help you maximize potential revenue and resolve any issues that arise more quickly. Having strong internal controls, appropriately segregated duties and state-of-the-art automation could be the best investment you ever make!