[webinar] invoice processing in accounts payable: start the year strong

Invoice Processing in Accounts Payable:

Start the Year Strong Mary S. Schaeffer

Accounts Payable Now & Tomorrow

Agenda

O Background: Invoice Processing

O Best Practice Processing P2P

O Reality

O Step by Step

O Potential Problems

O Fixing broken controls

(c) 2013 CRYSTALLUS, Inc. and Mary S. Schaeffer 2

Background of the Control

Issue in Invoice Processing


Overview

O Start with the basic issue in accounts

payable

O Processing Invoices

O Control is all in the details

O Not a big picture issue


When the details are ignored O Duplicate payments

O Other erroneous payments

O Charges the vendor was supposed to pay

O Fraud easier to commit

O Inaccurate accruals

O Inaccurate financial and accounting records

O Remember: Your employees know where the

weaknesses in your system are


Keep in Mind

O Many of the problems eliminated by

automation


Dissecting the Invoice Handling Process:

How the Process Should Work

When The Invoice Arrives


The Ideal World: Part 1

O Invoice arrives in accounts payable

O Invoice is sent out for approval (or approvals

done online)

O Approval comes back promptly



O The three-way match is completed

O No discrepancies

O Invoice is scheduled for payment

or

O If there are discrepancies

O Discrepancies resolved before payment date

O Invoice scheduled for payment



O Payment is made on the due date

O Note: Late payments create additional

problems


A Word about Late Payments

O The Where’s My Money Calls

O The Second invoices

O Frayed vendor relationships

O The duplicate payment

O The honest mistake that leads to fraud


Dissecting the Invoice Handling Process:

The Reality

When The Invoice Arrives


Receipt of Invoice: Some Problems

O The floating invoice

O The invoice addressed to no one

O The invoice sent to the wrong person


Invoice Receipt

O Ideally centralized – one location

O One postal address

O One email address

O One fax number

O Used only for invoices

O Semi secluded spot – avoid tempting others e-

fax facility


If Invoices Sent to Purchasers First

O Possible approval delays

O Increase the chance of getting a second invoice

O More work for AP

O More he said, she said games

O E-Invoicing ends these problems – especially if

automatic escalations are included


Invoice Processing

O Standardized process

O Naming convention - rigid

O Some go as far to standardize the way the

desks are set up

O Probably the best control against duplicate

payments


The Accounts Payable Policy and Procedures Manual

O Written

O Detailed

O No detail too small

O Updated regularly

O Reviewed annually if no updates

O Shared with everyone who might need t


The Policy and Procedures Manual

O Reference Guide for existing processors

O Important for those once-a-year tasks

O Training Guide for new processors

O Relevant Excerpts shared

O Cut-off schedules


Invoice Number Control

O “Our system won’t allow us to enter

duplicate invoice numbers”

O Doesn’t provide the control you might think

O Don’t rely on it – exclusively


Invoice Numbers

O Pay close attention to

O Almost as important as dollar amount

O If invoice processing is automated, this is

not an issue


Invoices without Invoice Numbers

O Create a standardized routine that will create a unique invoice number

O Never use TINs as part of it

O Using the date can be problematic – except perhaps for phone bills

O New Best Practice: Return it with a polite letter


Invoices w/o PO #

O Invoices without PO # or name of

requistioner

O Make PO# or name of requisitioner a

requirement

O Return with polite letter “in order to get

vendors paid in a timely manner”


Disputed Invoices

O Identified

O Tracked

O Monitored for status

O Keep track of who is responsible for resolving

O Age the disputed invoices

O Who’s got the oldest invoice

O Report to management


When Disputed Invoices Are Ignored

O They don’t get handled in a timely manner

O AP’s reputation takes a hit

O Avoid the black hole reputation

O These invoices often get paid twice


Disputed Invoices: Reports

O Sort by processor, purchaser, vendor, locale, etc.

O Identify problems

O People

O Processes

O Vendors

O Evaluate

O Train and retrain


Invoices Arriving at the Last Minute: Part 1

O More a problem in a manual set up

O Rush payment request

O Full backup???

O Sometime missing

O Often requests for return to requisitioners



O Returning checks to requisitioners and Rush

payments – leading cause of duplicate

payments and potential fraud

O Poor practices

O Is the three-way match completed?



Best Practices

O Never return check to requisitioner

O Find ways to minimize these transactions

O Make payments by ACH rather than check

O Insist on full backup

O Either at the time the request is made or

O Within the next few days

O Extinguish PO and open receiver


What if There’s No Backup

O Process the payment

O Follow up and get backup afterwards

O Don’t forget, extinguish PO and receiver


New Issue: Invoices Sent Twice

O Invoices e-mailed or faxed

O Vendor wants to make sure it was received

O Sends by snail mail


Dealing with Duplicates

O Identify vendors likely to send twice

O Ask them not to

O Develop an ACT (Always Check Thoroughly)

list

O Automate invoice processing


Payments

O Efficient payment process translates

O Early pay discounts earned

O Avoid late fees

O Schedule payments so paid on time – not early

O Ideally – one payment vehicle per vendor

O Use best vehicle


Best Practice Mission Statement for AP

O Pay the right amount, to the right vendor at the right

time

O Lowes Home Improvement


How Invoice Automation Helps

O Human keying errors eliminated

O No processor playing games

O Faster processing

O Invoices sent for approval automatically

O Clear audit trail and hence

O Faster approvals


Questions/Comments

Share your thoughts and insights with

Mary Schaeffer by writing her at

[email protected]

Sign up for her free weekly ezine at

www.ap-now.com/ezinesignup.html


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About Mary Schaeffer Editorial Director & Publisher CRYSTALLUS, Inc. publisher Accounts Payable Now & Tomorrow newsletter

• Editor-at-Large CFO Publishing’s Learning Pro: AP Edition

• Nationally recognized accounts payable expert and consultant

• Frequent speaker at seminars, conferences and online events

• Regular contributor to the AICPA’s Corporate Finance Insider

• Creator of Institute of Financial Operations Accounts Payable Innovation Certificate program

• Writes a free weekly e-zine, e-AP News

• Author 16 business books including the Do-It-Yourself Accounts Payable Consultant

• M.B.A. Finance, NYU

• B.S. Math, York College


[webinar] invoice processing in accounts payable: start the year strong

Economy & Finance