Page 210 - Accounting Best Practices

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10–10 Eliminate Attaching Back-up Materials to Checks for Signing
10–10 ELIMINATE ATTACHING BACK-UP MATERIALS TO 199
CHECKS FOR SIGNING
A common cause for extra filing work is that many check-signers require back-up
documentation to accompany all checks presented to them for signing. They want
the extra information so they can tell exactly why a payment is being made. The
extra paperwork typically includes the complete packet of accounts payable doc-
uments: the supplier’s invoice, the company’s purchase order, and receiving doc-
umentation. To fulfill the wishes of the check-signers, the filing staff must extract
the accounts payable items from files, attach them to checks, wait for the checks
to be signed, and then detach them from the checks and file them away again. All
of this movement of paper also raises the risk that documents will be misfiled
during the process of taking them out of files and then putting them back in.
When this happens, an inordinate amount of time may be required to locate and
refile the missing documents. These activities can take up a considerable propor-
tion of the filing staff’s time.
The best practice that eliminates all of the aforementioned filing work is to
stop attaching accounts payable backup information to checks about to be signed.
Though this seems like a simple and obvious step, it can be a difficult one to con-
vince the check-signers to agree with. By eliminating the back-up materials, the
check-signers have no way of knowing what the company is paying for. The best
way to deal with this complaint is to set up control points earlier in the accounts
payable process, so that the check-signers are so comfortable with the level of
control that goes into creating a check, they no longer care about what they are
signing. Typically, the best control point is the purchase order. If no checks are
cut without a purchase order in hand approved by the correct manager, there is no
need for the additional control point of having one last review of the back-up
documents by the check-signer. It can take some time for a good purchase order
control system to be implemented; it is especially important that all exceptions be
rooted out of the accounts payable system so that all payments are authorized by
a purchase order. The check-signers may want proof of the efficacy of the new
system before they relinquish the back-up documentation, so the controller
should work with the internal audit staff to schedule a review of the purchase
order control system and make any changes that the auditors recommend, in
order to ensure that the new control system works properly. If these changes can
be made, there is no longer any need for back-up documentation for the check-
signers, and a significant proportion of filing time can therefore be eliminated.
Cost: Installation time: