Page 55 - Accounting Best Practices

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Accounts Payable Best Practices
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not automatically route the expense report to a supervisor for electronic
approval—either the person submitting the report or the accounts payable staff
must do this. Also, most e-mail systems do not allow for electronic approvals, so
this step may not be possible, in which case the only options are to route a paper
copy to a supervisor (which defeats the purpose of using e-mail) or to avoid the
approval step and just audit reports after the fact to ensure that they would have
been approved. Also, an e-mail transmission does not allow for an interactive
review of all expenses as they are entered, so the electronic form being used to
create the expense report should contain a text section that describes all travel
and entertainment expense reporting rules. Each person submitting an expense
report must read these rules to determine which expenses to report and which
back-up materials to submit. In addition, each person transmitting an expense
report must mail in all receipts that go with the expense report, without the trans-
mittal document that would be used with a more advanced expense reporting sys-
tem. Finally, payments are made by check, with entries being made manually into
the accounts payable system, rather than automatically with wire transfers. Thus,
this simplified system may not allow for supervisory approval, does not interac-
tively review all expenses, does not issue a transmittal document, and does not
automatically issue a payment. On the other hand, it is much easier and cheaper
to implement than a full-blown automated expense-reporting system.
As an example of how this simplified reporting system works, the accounts
payable department periodically issues a spreadsheet to all employees (by e-mail),
set up in an expense-reporting format. It shows where expenses are to be listed
and contains the key reporting rules within the body of the spreadsheet. When a
user completes the spreadsheet with actual data, the file is attached to an e-mail
addressed to the accounts payable department. All receipts are sent to the depart-
ment by mail, along with a paper copy of the expense report. The accounting staff
receives the e-mail, prints out the expense report, and then enters the data imme-
diately into the accounts payable database for payment. The staff has the option
of either issuing payment right away or waiting until the receipts are received.
Later, the internal auditing staff can review a selection of expense reports to see if
all reporting rules were followed.
This approach does not allow for as much control over expense reporting as
a fully interactive system, but it does allow most companies to quickly install a
partially automated system that improves the efficiency of the accounts payable
staff—usually in just a few days or weeks.

Cost: Installation time:

3–18 CENTRALIZE THE ACCOUNTS PAYABLE FUNCTION
A company with many subsidiaries or locations usually has a separate accounts
payable function located in each facility. This can be inefficient for several reasons.