3 rd Annual Professional Development Conference Development District Association of Appalachia John G. Hulsey, CGFM

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1 3 rd Annual Professional Development Conference Development District Association of Appalachia John G. Hulsey, CGFM

2 Examine the true nature of accounts payable Determine how the accounts payable process affects other government departments Look at some best practices for invoices, checks, and vendor master files Examine the advances in the fight against check fraud

3 The True Nature of Accounts Payable

4 A current liability for unpaid bills Process of tracking all the accounts payable for an entity Also what the department is called that is assigned task of paying amounts owed in a timely manner

5 What is the AP Department? Responsible for paying the government s bills In a timely manner Correctly

6 Depends on what and how much work is assigned to the AP Department Recent survey results only function in common by all AP Department is invoice paying

7 33% (1/3) 30% 20% 10% Less than 9% 2 or less employees 3-5 employees 6-10 employees employees 20+ employees

8 Women Men 2/3 run by women Average age Women - 39 Men - 40 Experience Women 16.9 total years; 7.2 in AP Men 17.4 total years; 7 in AP

9 Minimum to no backlog No shoddy practices Takes full advantage of technology Develops policy and procedures manual Establishes excellent communication skills

11 3-way match Check pricing against PO and note on invoice Keep accurate records of purchase order and invoices Check invoice math and note on invoice

12 Proper segregation of duties Management approves all payments before they are made Schedule regular audits by independent auditors

13 Online wire transfers Improves cash flows Less expensive than traditional wire transfers and issuance of hard-copy checks

14 Online 3-way match Reduction of personnel time, thus reduces cost of A/P Only spits out exception items those that do not match Helps to reduce human errors

15 More efficient handling of A/P problems and queries Allows invoices needing approval to be sent electronically

16 Accounts payable is a diverse department Size of the department will vary Main purpose of department does not change to pay the government s bills Changes in technology creates new options and challenges for A/P

17 How Accounts Payable Affects Other Government Functions

18 Scarce resources need to our dollars

19 Take discounts on invoices 2/10, net 30 terms result in a 36% rate of return 1/10, net 30 results in an 18% rate of return Discount amounts may be small, but add up to BIG totals.

20 Research all un-cashed checks as early as 90 days Better vendor relations Lower amounts turned over to state as escheat property

21 Collect or use all credits as soon as possible Periodically request statements from all vendors Statements will show credits due

22 Electronically submit payments to vendors Reduce payment processing costs Use P-Card for small invoice amounts

23 Time is money Reduce expenses by reducing time on phone with vendors

24 Interactive Voice Response Units Assign one AP employee to answer requests from vendors

25 Welcome letters to new vendors Where invoice is to be sent Bill-to address AP contact information

26 Check amount differs from invoice Use of preprinted form Check appropriate boxes Send with check or

27 Internal Customers Other departments of government Do not know what AP does Do not know what AP needs to get checks issued

28 Share AP Policies and Procedures Manual List the Accounts Payable Department contact information on website Track errors to find root cause of problems Work with purchasing

29 Accounts Payable big number on balance sheet A/P wrong expenditures also wrong Affects not only external financial statements but also internal financial statements, such as budget comparisons

30 Best Accounts Payable Practices for Master Vendor Files

31 The heart of every A/P operation If overlooked, can lead to inefficiencies, duplicate payments and fraud

32 Contains vital information about A/P vendors Usually the responsibility of A/P Set up is determined by A/P software used

33 Provides detailed vendor information Vendor name (legal) and DBA Business address and Remit-to address Phone and Fax number Contact name address TIN/EIN W-9 on file?

34 Limit access to VMF except for lookup capabilities Limit input to VMF to select employees Set up vendors before any payments are made

35 Limit access to VMF except for lookup capabilities Limitless access = fraud waiting to happen Limitless access = where most fraud begins

36 Limit input to VMF to select employees Only one vendor file for A/P and Purchasing New vendor set-up and vendor file maintenance should be assigned to a few

Fundamentals of Accounts Payable

Fundamentals of Accounts Payable Mary S. Schaeffer Chapter 1 The Foundation of the Accounts Payable Function... 1 Learning Objectives... 1 Introduction... 1 Why Accounts Payable Matters... 1 The Three