[Webinar] A More Efficient Accounts Payable Function: Implement These Simple Best Practices
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Transcript of [Webinar] A More Efficient Accounts Payable Function: Implement These Simple Best Practices
A More Efficient Accounts Payable Function:
Implement These Simple Best Practices
Mary Schaeffer
Publisher & Editorial Director AP Now
Author Fraud in Accounts Payable: How to
Prevent It + 15 other business books
Agenda
Changing best practices and the importance of identifying these changes;
The true bottom line cost of ignoring best practices;
Best practices along the entire procure-to-pay process;
The role technology is playing in the best practice arena; and
The future of best practices in AP
Closing Thoughts
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 2
AP Best Practices: Overview
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 3
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 4
Why Are Best Practices Changing
So Much
Technology changing the playing field
Huge regulatory impact
States budget deficits
IRS (tax gap and more)
Corporate Reporting
Increasing fraudulent approaches aimed at accounts payable
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 5
What Goes Wrong when AP
Issues Are Ignored
Duplicate payments http://ap-now.com/duplicatepaymentresources.html
Fraud increases – especially in troubled economic times
Dinged on S-Ox audit
Lost early payment discounts – probably your best investment alternative today
Low morale and turnover
Vendor relations become frayed as payments go out late
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 6
Best Practices – NOT!
Void Pantographs
Claiming funds from missingmoney.com if your organization is not reporting unclaimed property
Thinking only paying from an original invoice will protect you from duplicate payments
Never paying from a fax
Relying on boarding pass as proof trip was taken
Putting forms for vendors on your website (password protected Intranet still okay)
True Cost of Poor Practices
A duplicate or erroneous payment of $1,000
Net profit margin 1% - sales of $100,000
Net profit margin 5% - sales of $20,000
Highlight Fraud potential
More work in AP
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 7
Invoice Handling
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 8
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 9
Invoice Handling: Problems
The invoice hot potato
The AP black hole
Invoices addressed to no one
Tardy approvals
Discrepant invoices
Fraudulent invoices
Second copies
Not establishing delivery points for invoices
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 10
Invoice Handling: Best Practice
Standards:
Vendor name,
invoice number,
invoice number creation for invoices w/o invoice numbers
No excuse for not doing this
Best protection against duplicate payments
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 11
Invoice Handling: Low-Tech Solutions
All sent to one location Mail address Email address Fax number – dedicated for invoices only
Develop standard letters for common problems
No PO/Requisitioner: Return invoice
Invoice Amnesty Day (rarely used)
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 12
Invoice Processing: Staff
Everyone processes the same
– check and recheck
Detailed written instructions
All invoices entered – no
waiting for more information
Train, cross train, educate,
rotate
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 13
Invoice Handling: Technology Solutions
E-Invoicing
Escalating approvals
Track disputes/resolutions – so there are no black hole
invoices (or only a few)
Payments
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 14
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 15
Check Processing: Problems
Check fraud – still biggest type of fraud
Check costs
Check printing/signing/mailing
Rush checks
Returning checks to requisitioner
Uncashed checks
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 16
Check Processing: Solutions
Wherever possible: Pay electronically
Never return checks to requisitioner if you can possibly help it
Limit Rush checks
Make sure strong controls are in place through out the check production and signing cycle
Good follow up routines for uncashed checks
Consider outsourcing check printing to your bank
Use positive pay payee name positive pay
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Mary S. Schaeffer 17
Newest check fraud problem
Fraudulent checks returned by positive pay are being
represented as ACH debits – and making it through
Daily reconciliation of bank accounts, where no ACH blocks
are put in place
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 18
Electronic Payment Best Practices
Strong internal controls
Consistent with check practices
Make sure receivers and POs extinguished
ACH blocks – EVERYONE
ACH filters
Separate account, if feasible
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 19
Electronic Payments
Separate PC used for online banking only
No email
No surfing Internet
Nothing else
Turned off when not in use
Regulatory Issues
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 20
© 2012 Accounts Payable Now & Tomorrow and
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Regulatory Issues
1099/1042-S,
Unclaimed Property and
Sales and Use Tax)
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 22
Regulatory Issues
Don’t ignore – Feds and states all need more money and are targeting those not paying their fair share
Corporate reporting part of Healthcare Reform Act – likely to be repealed Probably coming back at some point
Government agencies to start withholding 3% of payments made to independent contractors in 2012
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 23
IRS Audits
For data collection
Focus:
Worker classification
Expense reimbursement
Exec comp
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When You’re Not Complying
If you are not currently handling
correctly, and an auditor shows up,
get professional help.
Watch out for the no-fee auditors –
you’ll end up paying a lot more!
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 25
Regulatory Best Practices Get a W-9 from everyone one before first payment is made – no
exceptions
Use TIN Matching Program as soon as you receive the W-9
Try and prevent someone outside AP telling you how to classify a worker – do it per the form (proper worker classification was an Obama initiative when he was a senator – this issue is likely to become front burner in the near future.)
Get regular updates on the rules – some go once a year
Master Vendor File
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 26
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 27
Sudden Master Vendor File Attention
Healthcare reform
W-9s from everyone
Where to start …. The Master Vendor File
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 28
Master Vendor File: Problems
Unlimited access
No naming standards
Vendors in several times
Vendors never de-activated
Segregation of duties issue
Coding standards don’t match invoice processing standards
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Master Vendor File: Solutions
Coding conventions to match invoice processing standards
Cleanse and de-activate regularly
Require W-9 before setting up vendor: avoid year end 1099
problems and B-Notices
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 30
Master Vendor File:
Controls and Fraud Prevention
Limits to who can add new
vendors and update the MVF –
appropriate segregation of duties
Review of all changes to the MVF
by high level executive regularly
Technology in AP
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 31
Huge Impact
20 Years ago: hand me down PCs
10 Years ago: fighting for Internet access
Today: heading into a paperless world
Tomorrow: completely automated invoice processing Diminished exception processing
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 32
New Technology in AP
Tablets Smartphones
Boarding passes What else???
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 33
What This Means
for You
Almost no manual invoice processing Exception processing will decrease due to
improved invoice accuracy AP staff will focus on more value add work Expect an increase in:
Regulatory issues Fraud prevention Integration with other areas
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 34
AP: Yesterday vs. Tomorrow
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 35
#5 Suppress Credits
Vendor statements with credits suppressed
Solution:
1) Use best practices so credits not created
2) Request statements and follow up on a timely basis
3) Hire an audit firm
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 36
Future of Best Practices in AP
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 37
AP Best Practices: Future
Changing
Continue to have their place
Strong internal controls
Efficient process
Regulatory compliance
Fraud resistance
Your Challenge:
Keeping up
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 38
Closing Thoughts
AP Best Practices continually changing
Stay on top of the issue
Detailed policy, strong internal controls, appropriate segregation of duties and automation will you run an efficient and effective accounts payable function.
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 39
Thank you/Questions
Questions always welcome.
To share your thoughts and insights
Mary Schaeffer
302 836 0540
Sign up for our free weekly ezine at
www.ap-now.com/ezinesignup.html
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 40
About Mary Schaeffer
Mary Schaeffer is a nationally recognized accounts payable expert. Following a career in finance she turned to writing and consulting. For the last 15 years she has been researching and writing newsletters for the accounts payable profession. Currently she is the Editorial Director & Publisher of Accounts Payable Now & Tomorrow, (www.ap-now.com) a fee-based newsletter published by CRYSTALLUS, Inc.
She also handles most of the firms consulting assignments (focused primarily on AP issues) often working with other well-regarded professionals. Her blog, at http://ap-now.com/blog/ is read by over 15,000 professionals each month.
Ms. Schaeffer is the author of over 15 business books including The CFO and Controllers’ Guide to Accounts Payable and the recently published Fraud in Accounts Payable: How to Prevent It. John Wiley & Sons is the publisher of most of her books.
She also is a regular contributor to the AICPA’s Corporate Finance Insider.
Ms. Schaeffer has a BS in Math from York College (CUNY) and a MBA in Finance from New York University.
She can be reached at [email protected]
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 41
Let Go and Gain Control
Visit www.anybill.com/ today!
© 2012 Accounts Payable Now & Tomorrow and
Mary S. Schaeffer 42