Accounts Payable Controls
/Most businesses understand the need for balancing controls with Accounts Receivable and have implemented the appropriate controls. We have seen in many cases however, where the same controls do not exist for Accounts Payable. The reasons are varied, but the same controls still need to exist. When no controls exist invoices can be entered twice and vendors paid multiple times or paid the wrong amount. Each mistake takes time, and in turn money, to correct.
Here are a few suggestions for implementing Accounts Payable Controls:
1. Minimize the number of people involved. A company may be large and perhaps need a number of people to handle all of the invoices, but the process still needs to be focused. One person who really understands the task is going to do a better job than two people who kind of understand the task.
2. Separate the Accounts Payable invoice entry from the Purchasing function. This will be impacted by the size of your company, but It's still good from a control stand point to separate this process.
3. Run Totals. When the process is started, run a total on the number of invoices that will be entered and the total amount of those invoices. Balance these two numbers against the purchase journal after the invoices have been entered into the system.
4. Use the actual Invoice Number whenever possible. This will help to keep duplicate numbers out of the system. If there is no invoice number, for instance a credit card statement, then it's it a good idea to date stamp the invoice number. This may look like Visa20140714.
5. Check-Off the Invoices. Always mark invoices as Entered after they have been processed into the system. Whether a paper file is maintained or the invoices are scanned and stored digitally, this can help provide proof that the invoices have been entered.
6. Look for the Abnormalities. When the Purchase Journal is run, learn to look for the abnormal conditions. This means that if there is typically a $100 a month charge from a vendor and now there's an invoice for $10,000, there may have been a mistake made. This is one of the main reasons to run a total on the amount of the invoices. It's also another reason to restrict the number of people involved in this process. After a while, an experienced person will recognize the abnormal situations and be able to make changes as needed.
7. Check the Work. Always double check the work. It is easier to correct a mistake before everything is processed and it takes a lot less time.
Summary
Minimize the number of people involved, run a total on the number of invoices and the total amount of those invoices, always use the vendor invoice number when available, compare your total to the purchase journal and double check all the work.