Page 35 - Accounting Best Practices

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Accounts Payable Best Practices
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be any real check of authorization signatures when purchase requisitions are con-
verted into purchase orders, nor might there be any required signature when pur-
chase orders are issued to suppliers. In addition, the signature stamp used to sign
checks may not be properly controlled. In all these cases, if there were tight control
over the authorization used, there would only be a need for a single authorization.
For example, there should be an audit of all purchase orders to ensure that every
one of them has been signed, that every signature is by an authorized person, and
that the person signing is authorized to purchase what was ordered. This level of
control requires continual internal audits to ensure that the control point is working,
as well as continual follow-up and training of employees so that they know pre-
cisely how the control system is supposed to work. Only by instituting this degree
of control over authorizations can a company reduce the number of approvals to a
minimum.
Using tight control over approvals that are given early in the accounts payable
process results in a shorter processing cycle and fewer delays.

Cost: Installation time:

3–3 USE NEGATIVE ASSURANCE FOR
INVOICE APPROVALS
One of the most significant problems for the accounts payable staff is the contin-
uing delay in receiving approvals of supplier invoices from authorized employees
throughout the company. Invoices tend to sit on employee desks as low-priority
items, resulting in constant reminders by the accounting staff to turn in docu-
ments, as well as late payments and missed early-payment discounts.
This universal problem can be avoided through the use of negative assur-
ance. Under this approval system, invoice copies are sent to authorizing employ-
ees, and are automatically paid when due unless the employees tell the accounts
payable staff not to issue payment. By focusing only on those invoices that may
be incorrect, the accounting staff can process the vast majority of all submitted
invoices without cajoling anyone to submit an approved document.
The process can be streamlined even further by digitizing an incoming
invoice and e-mailing it to the authorizing employee. By doing so, employees can
be reached even when they are off-site, as long as they check their e-mail on a
regular basis. By linking these transmissions to workflow software, the account-
ing staff can designate how long an invoice can wait in a recipient’s e-mail box
before it is automatically routed to another authorized person, thereby ensuring
that someone will see every invoice and raise a red flag if a potential problem
exists.
Cost: Installation time: