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Avoiding Accounts Payable Errors: What to Watch Out for

9/6/2019

 
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. 
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​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.
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.
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    Author

    Successfully meeting the challenges inherent to new and smaller businesses provides me with a special type of satisfaction. 

    Supporting businesses that have the potential to become amazing – from both the perspective of owners and team members as well as their clients – is what I enjoy. 

    I hope to use this blog to provide information specific to businesses that are growing from small beginnings into exceptional companies.

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  • Home
  • Why Us?
    • Reviews
    • Open Positions
  • Client Services
  • Resources
    • Save on QBO Subscriptions!
    • Tax Refund Status
    • Gusto Year End Checklist
    • Videos >
      • Business Taxes >
        • 2019 Business Tax Highlights
        • 7 Ways Small Business Can Save On Tax
        • Taxes for S-Corp Owners
        • The IRS Loves Businesses
      • Personal Taxes >
        • 2019 Tax Highlights
        • Five Yearly Tax Essentials
        • 4 Common Tax Surprises
        • Retirement Can Be Taxing
        • Advance Child Tax Credit Reconciliation - 2022
        • Make the Most of Your Donations
        • Five Great Tax Secrets
        • Renting Your Property Tax Free
        • Ideas to Audit-Proof Your Tax Return
      • The Tax Cuts & Jobs Act >
        • The Tax Cuts & Jobs Act: What You Need to Do Now
        • The Tax Cuts & Jobs Act: Are Itemized Deductions A Thing of the Past?
        • The Tax Cuts & Jobs Act: The New Child Care Tax Credit
      • Tax Topics >
        • Tax Season is Coming!
        • The New World of Deductions: What Everyone Needs to Know
        • Proving Your Deductions
        • How to Fix a Mistake on Your Tax Return
        • How Long Should I Save It?
        • Tax Credit vs Tax Deduction
        • Understanding Effective Tax Rate
        • Understanding Marginal Tax Rate
      • Life Events >
        • Life Events: A New Birth
        • Life Events: Marriage
        • Life Events: Divorce
    • Articles >
      • Accounting & Bookkeeping >
        • How to Get the Most Out of Your Accounting Fees
        • The 10 Biggest Money Leaks in Your Accounting System
      • Business Factors >
        • IRS Rules for Classifying Workers
        • Checklist for a Healthy Cash Flow
        • 12 Ways to Improve Your Business Profits
        • 10 Step Annual Business Check-Up
      • Tax Topics >
        • Tax Guide for Self-Employeds
        • 15 Things Every Tax Payer Should Know
        • Disaster Casualty Losses
        • Travel & Entertainment Deductions
        • Tax Guide - A Deduction Checklist
        • What You Should Know About Tax Audits
    • Newsletters >
      • Newsletters - Monthly Editions >
        • Newsletter - Monthly Edition
      • Newsletters - Quarterly Editions >
        • Newsletter - 2019 Fall/Winter
        • Newsletter - 2019 Spring/Summer
    • How To's >
      • How To - Dext
      • How To - BILL
  • Blog
  • Appointments
    • Client Consultations