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A/P transaction processing: Do you Check the Math?

Kathleen Reardon's Profile


within your A/P depts how many of you have the A/P associate or clerk check the math on all line items for every invoice?  I have worked for 6 companies at this point and managed A/P in most positions.  Generally, we check any invoice that is not or does not seem to be generated by an ERP system.   Is that most common practice?


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

If every invoice is entered with qty and price per, then all the accounting systems I know will do the math. Thus all invoices regardless of origin are checked.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

If you are processing inventory vendor invoices, you are likely to be working at line item level. However, if you have a PO or Receiving Report in the system, the lines should already exist, you are simply confirming them and checking visually that totals agree between vendor invoice and your computer screen.
If you are processing expenses invoices like office supplies, are you working at line level or invoice total level? Most clients I know will process these types of invoices at the total level, thus line item checking would have to be tested.
I would also suggest invoice value may be a factor-if too small, is it worth checking?

Topic Expert
Randy Miller
Title: Partner
Company: CFO Edge
(Partner, CFO Edge) |

I always have them check the math. I once caught a loan servicing company that had tweaked their reporting program so that it printed the correct remittance rate on the report, but calculated the payments due to us at 1/8 of a point lower. They were skimming about $5,000 per month.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

For inventory items, we rely on the system as unit of measure and quantity is entered and the calculation is compared to the PO. For non-inventory items, we rely more on matching to the PO. These items could be at risk, but we do check math where there is not a PO or the invoice is "irregular."

Tim Kane
Title: Principal
Company: Tim Kane, CPA
(Principal, Tim Kane, CPA) |


With items that are on PO’s as line items the probability of finding any money is not likely to be worth the time it takes to check. For non-ERP invoices the probability is higher, but the dollars probably aren’t as large. The basic formula you can use is: [(time to check) x (AP clerck cost)] divided by [(probability of an error) x (error as a percent of invoice total)]. Here is a sample calculation. Cost: If it takes 5 minutes to check an invoice and you pay someone $24 per hour with benefits your cost is $2 per invoice (or $4 if you count that you have pulled them away from doing something else). Benefit: If there is a 1% chance of an error and the average error is 25% of the invoice total your expected benefit is 0.25% of the invoice total. So 4.00/0.0025 = 1,000. The cost/benefit would only be in your favor on invoices over $1,000.

I would also suggest hiring a recovery audit firm to look at your payables for overpayments. They typically charge a percentage of money recovered, so there is no risk to you. Then analyze their results to determine where you should focus your efforts on prevention. The good ones will give you suggestions based on what they have seen in their audit. There are national firms that do this. Or you could find someone local who does this (like me in MN).

Regards, Tim


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