Fundamentals of Accounts Payable

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1 Fundamentals of Accounts Payable Mary S. Schaeffer

2 Chapter 1 The Foundation of the Accounts Payable Function... 1 Learning Objectives... 1 Introduction... 1 Why Accounts Payable Matters... 1 The Three Way Match: The Foundation of the Payment Process... 2 The Basic Documents... 2 The Fourth Document: The Advance Shipping Notice... 3 Check Request Form... 3 Blanket Purchase Orders... 3 The Basic Payment Tools... 4 Controls: Using More Than One Payment Type... 5 Payments Made Outside the Normal AP Process... 5 Review Questions... 7 Review Answers... 8 Chapter 2 Master Vendor File: Where the Process Should Begin... 9 Learning Objectives... 9 Introduction... 9 Responsibility for Master Vendor File... 9 The Ownership Quandary: Three Questions to Ask Before Requesting Ownership... 9 Data in the Master Vendor File Cleansing the Vendor File Entering Data into the Master Vendor File Naming Conventions More about the Naming Convention Vendor Contact Information When Contact Information Really Matters: Change of Bank Account Requests How Good Is Your Contact Information? Controls Around the Master Vendor File Fraud through the Master Vendor File The Master Vendor File Change Report Vendor Portals in Accounts Payable: What You Need to Know to Get Started What Is a Vendor Portal? What Do Portals Do? What Do Vendor Portals Do in AP? How Do You Get One? How Vendor Portals Can Help the ACH Change of Bank Account Problem How the Fraud Works Detecting the Fraud Using Vendor Portals Review Questions Review Answers Chapter 3 Invoice Processing Learning Objectives Introduction Invoices the Old Way A Word about Faxed Invoices Electronic Invoicing Self-Scanning An Efficient Process for Handling Invoices Sent by Three Simple Ways to Increase the Number of Invoices Received Electronically Protecting Your Organization against Those Deadly Second Invoices Why This Creates a Problem... 22

3 What You Can Do When an Electronic Invoice Is Not Enough: The Double Invoicing Problem The Problem The Solution Review Questions Review Answers Chapter 4 Checks: The Original (and Least Efficient) Payment Vehicle Learning Objectives Introduction Headaches Caused by Paper Checks Check Stock Check Printing Signatures Rubber Signature Stamps Voided Checks Eliminating Paper Checks: Continued Vigilance Required Five Alternatives to Paper Checks What Not to Do Ways to Minimize Paper Checks Review Questions Review Answers Chapter 5 Corporate Procurement Cards: Streamlining the Payment Process for Small Purchases Learning Objectives Introduction The Corporate Procurement Card Policy Cards and Departing Employees Rebates Common P-Card Problems Create Your Own Purchasing Cardholder Responsibility Agreement How P-cards Got A Bad Reputation: Fixing the Problem Bad P-card Practices the Policy Should Ban Review Questions Review Answers Chapter 6 Electronic Payments: The Most Efficient Payment Process Learning Objectives Introduction ACH Primer: Credits, Debits The Basics: ACH Credits The Basics: ACH Debits FAQs about ACH Starting an ACH Payment Program Start with the Bank Crawling before You Walk The Cash Flow Impact Getting Vendor Information Other Considerations Critical Issues to Evaluate when Considering a Move/or an Expansion of an ACH The Hidden Benefits Operational Issues Same Day ACH in the US What the New ACH Will Look Like A Phased in Approach Some Additional Questions ii

4 Concluding Thoughts The Changes from the Original Proposal Avoid These ACH Gotchas for ACH Success Extinguishing POs and Receivers Setup Time Involved Cash Flow Implications The Cash App Issue Review Questions Review Answers Chapter 7 Operational Issues: Invoice Handling and Processing Learning Objectives Introduction Weeding out Duplicate Invoices The Problem Gets Worse The Game Plan Invoices without Identifiers: No Name, No Purchase Order Number Put the Monkey Back on the Suppliers Back A Strong Mail Policy Systems Help Education A Plan to Ensure Discrepant Invoices Don t Create a Financial Debacle for Your Company The Game Plan Data to Include Other Invoice Challenges in a Paper World Review Questions Review Answers Chapter 8 Operational Issues: Payments Learning Objectives Introduction Early Payment Discounts Earning Every Discount Finding More Discounts A Five-Step Plan to Get Rid of Rush Checks Why the Fuss? The Action Plan Some Simple Ways to Reduce the Number of Rush Check Requests Talk to the Requester Insist on Mailing the Payment Better Yet, Insist on ACH Why Returning Checks Can Be a Problem An End Run around the Problem Need Checks Returned: Here s a Policy You Can Use Voided Checks: To Save or Not to Save The Voided Check Headache Best Practice Late Fees Review Questions Review Answers Chapter 9 Inaccurate Payments and Payment Auditing Learning Objectives Introduction Duplicate Payment Avoidance Best Practices Recover the Easy Overpayments Yourself before Hiring a Payment Auditor The States iii

5 Deposits Vendor Credits Benefits of an Overpayment Audit: It s Not Only about the Money Questions to Ask when Hiring a Payment Recovery Audit Firm References The Hourly Rate vs. Contingency fee Debate The Consultants Report Questions to Help You Select the Perfect Recovery Firm Review Questions Review Answers Chapter 10 Expense Reimbursement (Travel and Entertainment) Learning Objectives Introduction The Travel and Entertainment (T&E) Policy Manual Policy Enforcement The IRS and the Accountable Plan Status Accountable Plan Status Receipts Overall Conclusions Does This Mean More Work? Is Getting All Receipts Overkill? Change in T&E Receipt Requirements when Asking for Expense Changes Being Considered for T&E Receipts The Ugly Issue The Even Uglier Issue Why Some Companies Are Starting to Get Meal Receipts The Rationale Monitoring These Receipts Checking/Auditing T&E Reports Reimbursement Practices Recommended Approach Second Best Approach Per Diems IRS Optional Standard Mileage Reimbursement Rate Review Questions Review Answers Chapter 11 Check and Corporate Card Fraud: Detection and Prevention Learning Objectives Introduction Check Fraud Common Methods Used to Commit Check Fraud Who Is Responsible for the Losses? Reasonable Care: Preprinted Check Stock Examples of Not Exercising Ordinary Care Best Protection against Check Fraud: Positive Pay Positive Pay and Its Cousins Warning: Not Using Positive Pay?? Practices that Enable Internal Check Fraud P-card Fraud Types of P-card Fraud Simple Approach to Limit P-card Fraud Losses A 20-Step P-card Fraud Prevention Plan Review Questions Review Answers iv

6 Chapter 12 Electronic Payment Fraud Prevention and Detection Learning Objectives Introduction Electronic Payment Misconceptions Electronic Payment (ACH) Fraud The 48-Hour Rule Types of ACH Fraud Prevention Detection Wire Transfer Fraud Wire Transfer Information Requests Wire Transfer Fraud Prevention The BYOD Issue The Security Issue The Corporate Stance The Future for BYOD Developing Related Issues Review Questions Review Answers Chapter 13 Other Types of Fraud Affecting the Accounts Payable Function Learning Objectives Introduction Internal Fraud External Fraud An Ugly Issue: Employee Fraud Prevention The Big Problem Overriding Fraud Prevention/Detection Guidelines What Else The Role of Expense Reimbursement Fraud If You Suspect Fraud Tactics to Stop Travel & Entertainment Expense Shenanigans A Strong Travel & Entertainment Policy Prevents Trouble The Plan What Else Phony Billing Scheme Shenanigans How to Avoid Check Request Fraud and the Resulting Duplicate Payments Background Where Check Requests Cause Problems Recommended Check Request Practices Reducing the Number of Check Request Forms Review Questions Review Answers Chapter 14 The Accounts Payable Policy and Procedures Manual Learning Objectives Introduction Overview The Rationale for a Policy & Procedures Manual A Process to Keep It Updated Updating the Accounts Payable Policy & Procedures Manual When the Policy Needs to Be Changed Using the Manual Alternatives for Those Who Don t Have a Policy and Procedures Manual Is A Manual Really Necessary? A Word about the Travel Policy Review Questions Review Answers v

7 Chapter 15 Regulatory Issues Affecting the Accounts Payable Function Learning Objectives Introduction Tax Information Reporting When 1099s Are Handled Incorrectly Best TIN Solicitation Practices Unclaimed Property: The Basics of Escheat Reporting and Remitting Minimizing Unclaimed Property The Dilemma for Those Currently Not in Compliance A Word about the No-Cost Option Sales and Use Tax Basics Definition of Sales and Use Tax Nexus Foreign Corrupt Practices Act Compliance Background Basics of FCPA What Constitutes a Violation? One Last Caveat Bribery under FCPA Exceptions What This Means for AP The Basics of OFAC Checking Impact on the Payment Function Silly Regulatory Mistakes Every Organization Should Avoid Review Questions Review Answers Chapter 16 Using Technology to Run a More Efficient Accounts Payable Function Learning Objectives Introduction Avoid These Pitfalls when Implementing an AP Technology Project Electronic Accounts Payable: Simple Tactics Any Company Can Use An Internal Control Plan to Help You Use Technology to Run an Efficient AP Operation Using Technology to Minimize Duplicate Payments Excel Tactics to Improve AP Efficiency Review Questions Review Answers Chapter 17 Internal Controls: The Glue That Holds the AP Function Together Learning Objectives Introduction Why Internal Controls Are So Important Fraud Duplicate Payments Regulatory Non-compliance Segregation of Duties: The Backbone of a Strong Internal Control Process The Common Problem Sample Segregation of Duties Chart It Matters So Much Implications for Accounts Payable What Gets Moved The Future Wakeup Call: Basic Controls Still Provide Much-Needed Protection Separation of Duties Consistent Enforcement Policies and Procedures Management Oversight vi

8 Internal Training Concluding Thoughts Control Breakdowns Created by Inappropriate Segregation of Duties Dissecting the Procure-to-Pay Process Where Controls Break Down New Best Practices that Tighten Controls and Reduce the Risk of External Fraud What Else Can You Do? Concluding Thoughts Review Questions Review Answers Chapter 18 Enhancing Productivity in Accounts Payable: The Ongoing Challenge Learning Objectives Introduction Productivity Tips: Simple Ways to a More Efficient AP Simple No-Cost Accounts Payable Productivity Enhancers Process Improvement Quick Tips that Make an Impact on the Bottom Line Going Paperless without a Budget Productivity Tips Enhancing Productivity: The Often-Overlooked Human Factor Review Questions Review Answers Chapter 19 Enhancing Payment Productivity: The Electronic Payment Challenge Learning Objectives Introduction Starting an Electronic Payment Program Laying the Groundwork The First Date The Big Rollout The Hardcore Holdouts The Remittance Information Don t Rest on Your Laurels How to Convince More Suppliers to Sign up for ACH Payments The Payment Frequency Issue The Benefits Approach The Lost Checks Opportunity A Helping Hand from Purchasing Addressing the Remittance Information Issue Additional Strategies Expanding Your Electronic Payment Program Overcoming Problems: Anticipate These ACH Gotchas for Electronic Payment Success Extinguishing POs and Receivers Setup Time Involved Cash Flow Implications The Cash App Issue Concluding Thoughts Review Questions Review Answers Chapter 20 Enhancing the Bottom Line: Where AP Can Bring in Cash Learning Objectives Introduction Early Payment Discounts Background The Timing Problem Making the Most of Your Discounts Earn All of Them while Finding Additional Opportunities vii

9 Earning Every Discount Finding More Discounts Recovering Unclaimed Property: When It Will Help and When It Will Hurt When to Recover Your Funds When to NOT Recover Your Funds Best Practice Approach A Plan for Ensuring the Recovery of all Open Vendor Credits What s The Problem? The Unclaimed Property Issue Recovering All Your Open Credits Concluding Thoughts Review Questions Review Answers Chapter 21 Vendor Relations: An Often Overlooked Issue in AP Learning Objectives Introduction New Vendors The Vendor Welcome Letter The Welcome Kit Handling Existing Vendors: The Periodic Update Handling Key Vendors Planning Ahead: Gathering Information Planning Ahead: Using the Data Where Should the Responsibility Lie? Vendor Calls into Accounts Payable Improving Vendor Relations When a Caller to AP Flips Out: Uncovering the Real Cause Taking a Customer-Service Approach to The AP Function Who are AP s Customers? Don t Become a Doormat Benefits of a Customer-Service Approach Review Questions Review Answers Chapter 22 The Future of the Accounts Payable Function Learning Objectives Introduction Granular-Level Changes in The Last Few Years The Regulatory Component The Fraud Component Implications of These Changes A Very Different Future of Accounts Payable The Role of Technology in AP Today and Tomorrow Review Questions Review Answers Glossary Index viii

Payables Management. 2 nd Edition. Steven M. Bragg

Payables Management. 2 nd Edition. Steven M. Bragg Payables Management 2 nd Edition Steven M. Bragg Chapter 1 Overview of Payables... 1 Learning Objectives... 1 Introduction... 1 Transaction Cycles... 1 Organizational Structure of the Accounting Department...