|
When you pay a bill in your business, are you 100 percent comfortable that the bill payment is correct and justified?
Is there ever a chance that that bill is fake or fraudulent? What about duplicates? With so many fake bills being mailed to businesses these days, it makes sense to think about controls you can put into place to reduce the risk that you might write a check out of your hard-earned profits that should never be written. Accounts Payable Controls In the accounting profession, the term “internal controls” refers to processes, procedures, and automations you can put into place to reduce errors. |
|
In accounts payable, there is a specific subset of rules and controls you can put into place to reduce risk in this area. Here are just a few ideas.
Approvals
All bills should be approved by the appropriate level of staff in your business. Sometimes a bill gets approved that is fake or shouldn’t be approved, especially in areas where the approver doesn’t have technical knowledge of what they are buying. Be sure to read the fine print on the bill and make sure you know what you are paying for.
Segregation of Duties
The person who pays the bill should be different from the person who submitted the bill. These people should be different from the one who signs the check. This reduces employee fraud.
Receipt Confirmation
A packing slip or other confirmation of receipt of the goods or services should be matched to the invoice, line item by line item.
Math Check
A prudent step is to check an invoice’s math, at least for reasonableness.
Duplicate Payments
If a vendor emails their bill as well as mails a hard copy, controls should be put in place (usually automated) to avoid duplicate payments on the same bill.
Vendor Reconciliation
If there are a significant number of transactions between you and a vendor, an accounts payable reconciliation should be performed each month via a statement.
Missing Check Numbers
Most systems provide a missing check numbers report that you can use to make sure all checks are accounted for.
Bank Reconciliation
A bank reconciliation is a sure way to see exactly what checks cleared your bank account.
Coding
Coding each transaction to the correct expense account, inventory, asset, or cost of goods sold account is an essential part of the process.
Income Statement Review
Each month, a review of the balances in your expense accounts as well as a disbursements ledger review for reasonableness can provide added peace of mind.
Purchase Order
Requiring purchase orders is another control you can add to your process. Purchase orders should be matched to packing slips and invoices before payment or approvals are made.
In-Depth Knowledge of Your Business’ Numbers
The more you get to know the numbers in your business, the greater chance you’ll have of accurate accounts payable handling.
If you’d like to discuss your accounts payable function with us and how it can be improved, we’re happy for you to reach out any time. Just give us a call or schedule a consultation.
Approvals
All bills should be approved by the appropriate level of staff in your business. Sometimes a bill gets approved that is fake or shouldn’t be approved, especially in areas where the approver doesn’t have technical knowledge of what they are buying. Be sure to read the fine print on the bill and make sure you know what you are paying for.
Segregation of Duties
The person who pays the bill should be different from the person who submitted the bill. These people should be different from the one who signs the check. This reduces employee fraud.
Receipt Confirmation
A packing slip or other confirmation of receipt of the goods or services should be matched to the invoice, line item by line item.
Math Check
A prudent step is to check an invoice’s math, at least for reasonableness.
Duplicate Payments
If a vendor emails their bill as well as mails a hard copy, controls should be put in place (usually automated) to avoid duplicate payments on the same bill.
Vendor Reconciliation
If there are a significant number of transactions between you and a vendor, an accounts payable reconciliation should be performed each month via a statement.
Missing Check Numbers
Most systems provide a missing check numbers report that you can use to make sure all checks are accounted for.
Bank Reconciliation
A bank reconciliation is a sure way to see exactly what checks cleared your bank account.
Coding
Coding each transaction to the correct expense account, inventory, asset, or cost of goods sold account is an essential part of the process.
Income Statement Review
Each month, a review of the balances in your expense accounts as well as a disbursements ledger review for reasonableness can provide added peace of mind.
Purchase Order
Requiring purchase orders is another control you can add to your process. Purchase orders should be matched to packing slips and invoices before payment or approvals are made.
In-Depth Knowledge of Your Business’ Numbers
The more you get to know the numbers in your business, the greater chance you’ll have of accurate accounts payable handling.
If you’d like to discuss your accounts payable function with us and how it can be improved, we’re happy for you to reach out any time. Just give us a call or schedule a consultation.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact us, your CPA or tax adviser for additional details.
QuickBooks and Other Discounts Available
Why pay more for software and services than necessary? Check out our Resources page for information on discounts available to our clients.
Why pay more for software and services than necessary? Check out our Resources page for information on discounts available to our clients.
|
|
|
RSS Feed
