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... 2 Payables Functions... 4 Payables Job Descriptions... 6 Chapter Summary... 6 Review Questions... 7 Review Answers... 8 Chapter 2 Invoice Processing... 9 Learning Objectives... 9 Introduction... 9 The Need for Precise Invoice Processing... 9 The Supplier Invoice Processing Procedure (Manual System)... 9 The Supplier Invoice Processing Procedure (Integrated System)... 14 Accounts Payable Credits Processing Procedure... 16 The Evaluated Receipts Processing Procedure... 17 The Check Payment Issuance Procedure... 19 Payment Alternatives... 21 The Void Checks Procedure... 22 Enhancements to Invoice Processing... 23 Direct Invoice Delivery... 23 Centralize Emailed Invoice Processing... 23 Return Incomplete Invoices... 24 Invoice Numbering Convention... 24 Request Aggregated Invoice... 24 Minimize Approvals... 24 Analyze Matching Discrepancies... 25 Monitor Invoice Disputes... 25 Automate Recurring Payments... 25 Restrict Manual Checks... 25 Analyze Manual Checks... 25 Restrict Manual Delivery of Checks... 26 Restrict Cash Advances... 26 Schedule Frequent Check Runs... 26 Use a Signature Stamp or Plate... 26 Reduce the Need for Second Signatures... 26 Encourage Use of ACH... 26 Clean the Payables Aging Report... 27 Search for Open Credits... 27 Reduce the Number of Suppliers... 27 Final Thoughts... 27 Chapter Summary... 28 Review Questions... 29 Review Answers... 30 Chapter 3 Types of Payments... 31 Learning Objectives... 31 Introduction... 31 Cash Payments (Petty Cash)... 31 Check Payments... 33 Foreign Check Clearing... 35
Float... 36 Advantages of Checks... 36 Disadvantages of Checks... 36 Bank Drafts... 37 Automated Clearing House Payments... 37 Advantages of ACH... 38 Impact on Float... 39 Global ACH... 39 Wire Transfers... 39 The Letter of Credit... 40 The Standby Letter of Credit... 41 Chapter Summary... 41 Review Questions... 43 Review Answers... 44 Chapter 4 Expense Reimbursement... 45 Learning Objectives... 45 Introduction... 45 The Need for Expense Reimbursement... 45 The Expense Report Submission Procedure (Manual System)... 45 The Online Expense Report Submission Procedure... 49 The Expense Report Review Procedure... 50 The Travel and Entertainment Policy... 51 Additional Expense Reimbursement Topics... 52 Form of Documentation... 53 Cash Advances... 53 Expense Report Auditing... 53 Expense Report Outsourcing... 54 Spend Management... 54 Employee Reviews... 54 Chapter Summary... 54 Review Questions... 55 Review Answers... 56 Chapter 5 Procurement Cards... 57 Learning Objectives... 57 Introduction... 57 When and How to Use Procurement Cards... 57 The Card Reconciliation Procedure... 58 The Lost Card Procedure... 63 Additional Procurement Card Topics... 65 Card Issuer Relations... 65 Card Rebates... 65 Cash Flow Management... 65 Card User Relations... 65 Departure of Card Users... 66 Chapter Summary... 66 Review Questions... 67 Review Answers... 68 Chapter 6 Use Taxes... 69 Learning Objectives... 69 Introduction... 69 Sales and Use Tax Overview... 69 Use Tax Systems... 70 Additional Use Tax Issues... 70 Use Tax Audits... 71 ii
Sales Tax Exemption Certificate... 71 Multiple Points of Use Certificate... 71 Chapter Summary... 72 Review Questions... 73 Review Answers... 74 Chapter 7 Finance Issues... 75 Learning Objectives... 75 Introduction... 75 Early Payment Discounts... 75 Payment Timing... 76 Supply Chain Financing... 77 Chapter Summary... 77 Review Questions... 78 Review Answers... 79 Chapter 8 Accounting for Payables... 81 Learning Objectives... 81 Introduction... 81 Routine Accounts Payable Entries... 81 Gross and Net Price Methods... 82 Period-End Accounts Payable Entries... 83 Applicable Accounts to Charge... 83 Chapter Summary... 85 Review Questions... 86 Review Answers... 87 Chapter 9 Closing Payables... 89 Learning Objectives... 89 Introduction... 89 Accounts Payable Accruals... 89 Expense Reports... 90 Issues with the Credit Card Close... 90 Accounts Payable Suspense Items... 91 Discrepancy Invoices... 92 Uncashed Checks... 92 Reconciling Accounts Payable... 92 Additional Year-End Tasks... 93 Closing the Ledger... 93 Chapter Summary... 94 Review Questions... 95 Review Answers... 96 Chapter 10 Department Management... 97 Learning Objectives... 97 Introduction... 97 Payables Manager Responsibilities... 97 Schedule of Activities... 97 Error Tracking System... 97 Process Reviews... 98 Queue Management... 99 Department Layout... 100 Skills Review and Training... 101 Measuring the Results of Training... 101 Consolidate Accounting... 102 Quality of the Work Environment... 102 Flexible Work Hours... 103 Job Sharing... 103 iii
Permanent Part-Time Work... 103 Chapter Summary... 104 Review Questions... 105 Review Answers... 106 Chapter 11 Payables Controls... 107 Learning Objectives... 107 Introduction... 107 Accounts Payable Processing Controls... 107 Verify Obligation to Pay... 107 Data Entry... 108 Payment... 109 Alternative Accounts Payable Control Systems... 111 Control System for Manual Accounts Payable... 111 Control System for Computerized Accounts Payable... 111 Additional Payables Controls Trend Analysis... 111 Additional Payables Controls Fraud Related... 112 Additional Payables Controls Periodic Actions... 113 Expense Report Processing Controls... 114 Expense Report Submission... 114 Expense Report Examination... 114 Alternative Expense Report Control Systems... 114 Control System for Manual Expense Reporting... 114 Control System for Computerized Expense Reporting... 115 Additional Expense Report Controls Fraud Related... 115 Additional Expense Report Controls Periodic Actions... 116 In-Process Procurement Card Controls... 116 Purchasing... 116 Reconcile Card Statements... 116 Approve Card Reconciliations... 117 Alternative Procurement Card Control Systems... 117 Procurement Card Control System without a Transaction Log... 117 Procurement Card Control System with a Transaction Log... 118 Additional Procurement Card Controls Fraud Related... 118 Additional Procurement Card Controls Periodic Actions... 119 Petty Cash Controls... 119 Fund Petty Cash... 119 Disburse Petty Cash... 120 Document Petty Cash Expenditures... 120 Additional Petty Cash Controls Fraud Related... 120 Payables Policies... 121 Payables Policies... 121 Expense Report Policies... 122 Procurement Card Policies... 122 Petty Cash Policies... 123 Chapter Summary... 123 Review Questions... 124 Review Answers... 125 Chapter 12 Payables Fraud... 127 Learning Objectives... 127 Introduction... 127 Personal Purchases... 127 Refunds of Personal Purchases... 127 Fake Suppliers... 127 Supplier Overbillings... 128 Unauthorized Shipments... 128 Supplier-Staff Collusion... 128 Authorization Limit Avoidance... 128 iv
Petty Cash Theft... 128 Redirected Payments... 129 Check Fraud... 129 Check Theft... 129 ACH Debits... 129 Keystroke Logging... 129 The Need for Controls Reviews... 130 Summary... 130 Review Questions... 131 Review Answers... 132 Chapter 13 Payables Technology... 133 Learning Objectives... 133 Introduction... 133 The Payment Factory... 133 Automated Expense Report Submissions... 134 Automated Payables Matching... 134 The Reverse Lockbox... 134 Supplier Portals... 135 Automated W-9 Forms... 135 Chapter Summary... 136 Review Questions... 137 Review Answers... 138 Chapter 14 Payables Record Keeping... 139 Learning Objectives... 139 Introduction... 139 The Vendor Master File... 139 Vendor Master File Usage... 140 Supplier Naming Conventions... 140 Vendor Master File Errors... 141 Duplicate Record Detection and Prevention... 142 TIN Matching... 143 The Payables Filing System... 143 Off-site Storage... 143 Document Imaging... 144 Document Destruction... 144 Chapter Summary... 145 Review Questions... 146 Review Answers... 147 Chapter 15 Government Reporting... 149 Learning Objectives... 149 Introduction... 149 The Form 1099-MISC... 149 Treatment of Incorrect Filings... 151 The Form W-9... 152 Backup Withholdings... 154 Form 1099 Administrative Issues... 154 Form W-9 Administrative Issues... 154 Chapter Summary... 156 Review Questions... 157 Review Answers... 158 Chapter 16 Unclaimed Property... 159 Learning Objectives... 159 Introduction... 159 The Unclaimed Property Liability... 159 Uncashed Checks... 159 v
Treatment of Credits... 160 Due Diligence Letters... 160 The Dormancy Period... 161 The Unclaimed Property Audit... 161 Document Retention Policy... 162 Filing Unclaimed Property Reports... 163 Claiming Unclaimed Property... 163 Chapter Summary... 164 Review Questions... 165 Review Answers... 166 Chapter 17 Cost Recovery... 167 Learning Objectives... 167 Introduction... 167 Internal Cost Recovery Targets... 167 Advertising Expenditures... 167 Allowances... 167 Contracts... 167 Duplicate Payments... 168 Freight Billings... 168 Health Plan Enrollment... 168 Legal Billings... 168 Spend Compliance... 168 Supplier Credits... 169 Telecommunications Billings... 169 Unclaimed Property... 169 Unreturned Deposits... 169 Internal Cost Recovery Staff... 169 Recovery Auditors... 170 Cost-Benefit of Cost Recovery Activities... 171 Cost Recovery Timing... 172 Fertile Ground for Cost Recovery Efforts... 172 Chapter Summary... 173 Review Questions... 174 Review Answers... 175 Chapter 18 Payables Measurements... 177 Learning Objectives... 177 Introduction... 177 Days Payables Outstanding... 177 Supplier Billed Price Variance... 178 Transaction Error Rate... 179 Full-Time Equivalent Measurements... 179 FTEs per $1 Million of Revenue... 180 Staff Cost per FTE... 180 Line Items per FTE... 180 Paperless Measurements... 180 Percent of Paperless Invoices... 180 Percent of Paperless Payments... 181 Additional Payables Measurements... 181 Chapter Summary... 181 Review Questions... 183 Review Answers... 184 Glossary... 185 Index... 189 vi