METRICS to Track

METRICS to Track

1. Invoice Productivity year on year targets, cost per invoice, processing by location, timely capture of industry discounts

2. Payment Efficiency Cash flow by days paid, payments by method used etc

3. Supplier Management Suppliers added by month, suppliers changed per month etc

4. Controls sharpen AP tools with duplicate invoicing metrics, accurately monitoring DSO data

How to Tighten the Process

Firstly, its important to realise that although automation software has to form part of the solution, by no means is it the best place to start. As the root cause of the issue usually lies to a greater or lesser degree on human error ensuring AP staff are fully trained, empowered, knowledgeable, efficient, and have enough time to work competently, should be any organisations starting and finishing position. In the meantime you should be addressing the following:

1. Eliminate duplicate suppliers from your master supplier file.Is it getting done..Is USG intimated of the same?

2. Paying at or near term will help prevent a supplier having to resendHow many vendors overdueDo we report out the list of Vendors who are overdue and hence proactively know from whom we can expect duplicates?3. Run a programme to identify exact amount payments to suppliers within 90 days.

4. Keep track of every invoice that enters accounts payable, including disputed invoices. Never simply send an invoice back to purchasing for reconciliation with a supplier.

5. Once youve located duplicate payments, keep track of the root causes. Ideally, run a weekly metrics check.

6. Should your organization install a new accounting system, make sure the old system is checked to see if the payment has already been made

7. Although they shouldnt, from time to time some suppliers will change the invoice number on a second send invoice, perhaps by adding a letter, like R for repeat, or the number 2, to indicate a second send. Regardless of why it can cause serious issues in regards to tracking and overpayment. Keep a file of repeat offenders.

8. Remember your Master Supplier File isnt sacred text if a supplier hasnt been used in over 18 months, they can be archived (not deleted).

9. Ideally, invest in a programme which will run a check on payments, prior to the send. Its far more effective and cheaper to pick up overpayments before they are made, than rely on audit firms to recover them on your behalf at a later date.

10. Periodically, hire a duplicate payment audit firm to search for duplicates which somehow still managed to find their way through.

Vendor Master Controls Because the accounts payable function is responsible for the proper disbursement of funds to the correct vendor, the accounts payable professional should ensure that the vendor has been validated before setup on the vendor master file.

1. Segregation of duties controls are exercised when granting system access to the vendor master file.

2. A vendor profile form is completed when required.

3. Inactive vendors are flagged or purged on an annual basis or other prescribed frequency.

4. Changes to vendor master files are accurate and reported for audit purposes.

5. Addresses of vendors are validated as accurate and reported for audit purposes.

6. Updates to employees on the vendor master file are accurate and complete.

7. Standard vendor naming conventions are applied.

8. Duplicate vendor remit to addresses are reviewed with appropriate action taken

Invoice Processing ControlsThe accounts payable function is responsible for the timely and accurate processing of invoices adhering to the internal controls. Controls could include but are not limited to those listed below:

1. Segregation-of-duties controls are exercised when granting system access to invoice processing functionality.

2. Vendors are paid once and only once.

3. Discounts are taken if appropriately approved.

4. Vendors are paid at the appropriate price in accordance with the terms and conditions of the contract.

5. Payments to contract labour vendors do not exceed the authorised amount.

6. Vendor invoices are paid upon validation of goods received and purchase order; blocked three-way match exceptions are not processed and are monitored by AP for clearing.

7. Purchases are authorised and in accordance with the company's approval levels. Third party support (invoices/contracts) is sent directly to AP.

8. Interface, EDI (Electronic Data Interchange) and spreadsheet upload transactions are accurately and completely transmitted to the ERP.

9. Transactions are accurately reflected in the general ledger; AP reconciliations for aging and clearing accounts are timely performed and reviewed.

10. Invoices are processed according to invoice payment terms.

11. EDI transactions are accurate and completely recorded in the organizations ERP system.

Disbursement ControlsAlong with payroll, accounts payable represents the largest percentage of disbursements within a company. It is critical to adhere to the following internal process controls to detect and prevent fraud within a timely manner.

1. Cheque requests should be routed to the appropriate personnel for review prior to payment release.

2. For audit purposes, disbursement activities should be traceable to the general ledger and bank statement.

3. Approved purchase orders, receiving transactions, and invoices must support requests for payment.

4. Vendor discounts should be taken according to company policy.

5. Disbursements must be recorded in the period the payment was made.

6. Expenses must be properly and accurately recorded in the accounting records during the period in which the liability was incurred.

7. Blank cheques should be properly stored and safeguarded in a secure area.

8. Proper accounting should be ensured for void or cancelled cheques.

9. Specific limits of signed authority must be established for bank accounts.

10. Banking and disbursement information must be safeguarded from loss or destruction.

11. Cheque accounts must be provided with a match pay, positive pay, or positive payee control that permits a preview of cheques presented to the bank for payment.

12. Cheque requests must be used for the proper purpose and are limited in value.

13. ACH accounts should have debit blocking capabilities to ensure that no authorised debits can be placed.

Current Practice: Issuing travel and entertainment reimbursement cheques

Best Practice: Include payment along with monthly salary