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Requiring Backup Before Paying Things?

Copper Jode's Profile

Ok so I've worked in accounting departments for ten years in 3 different companies. Typically, there is a control process in place where AP has to enter a transaction with proper backup, like an invoice, before the expense or asset is posted and a check goes out the door. Sometimes it's not a simple invoice but something like a permit fee or a handyman who requires COD and can't be bothered to allow trade terms.

Anyways, recently I got in a sort of dispute with ownership of a business who just requested the AP department to write a check for a city permit fee of $10,000 just based on their email. I complained that the least they could do is provide the finance department or AP department with a snapshot of a city website or the application underlying the permit just to acknowledge or respect the basic control we have in place to require backup or some kind of documentation before sending cash out the door.

They said they'd get the permit and receipt from the city later, which is great but typically I thought we should get a document BEFORE writing the check.

They refused and basically after years of being pretty flexible (I even let people use screenshots or emails as backups sometimes) I honestly had a slight nervous breakdown. I tried googling whether I was being an unreasonable and picky accountant and it turns out I can't find any literature online to support how I felt on following this best practice.

So now I'm turning to the Internet to see if I'm being an unreasonable OCD stickler and if there is any literature out there or any other accountants with similar experience about financial controls and how I'm right that it's good to have some kind of documentation or backup before writing $10,000 checks.

Thanks.

Answers

K M
Title: Accountant
Company: Not Disclosed
(Accountant, Not Disclosed) |

Need some info to be able to respond:
when you said the "ownership" - do you mean the 100% shareholder of the business?

Anonymous
(Account Manager) |

Flexibility is important in being a team player. You can hold them accountable for the back-up at a later date. Your CPA/Auditor should be able to steer you in the right direction, and even help communicate the importance of GAAP to ownership.

Anonymous
(Accountant) |

I would have just paid it. I've worked for many organizations(large and small) as well. Obviously backup is important but the owner authorized the payment and the payee and business purpose seem appropriate. You should have done the support digging or worried about support at a later date. High quality support for a $10k payment to the city in the grand scheme of things isn't worth fighting over and isn't in most cases a material risk to financial reporting. Remember - your controls are in place to help prevent fraud and to help prevent material misstatements. It was a 10k payment to the city... seems reasonable to me.

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