Boost the Bottom Line with Accounts Payable Best Practices: Follow These Tips to Stop Bleeding Profits

In accounts payable (AP) departments around the world, mistakes are happening day after day. Suppliers are onboarded without proper vetting. Duplicate payments are made. Fraud occurs in the disbursement process. These mistakes often happen not despite, but because of, the very systems that were designed and put in place to automate and perfect the AP process. Reliance on automated invoice and payment processes often reduces the number and effectiveness of process controls. Best practices can significantly reduce the risk and exposure that come from not having a methodology in place to alert AP professionals to recovery available from duplicates, overpayments, and fraud. Surprisingly, even many of the largest companies in the world don't have these best practices in place. Best practices include: * Establishing and maintaining a clean vendor master file.  Having more transparent disbursement systems.  Implementing continuous monitoring of vendors and disbursements for potential fraud.  Conducting regular audits on all transactions to identify and recover overpayments due to duplicates, returns, rebates, pricing errors, contract noncompliance, sales tax errors, and more.  A CLEAN VENDOR MASTER LIST When only a basic supplier registration system is in place, companies place themselves at risk each time AP adds vendors and creates new records. Adding new companies to your vendor master list without proper vetting can expose an organization to compliance risks. Manual forms, validation, and entry processes substantially increase the risk of incomplete, fraudulent, or duplicate vendors being entered into the master list. Internal audits catch some discrepancies, but without robust and continuous monitoring controls in place, your master list is only clean as of the date of the last audit. The day after, new suppliers will be added, changes will be made, and, in no time, your master list is once again infected. A well-rounded approach to vendor management can be broken down into three steps. First, it begins with a thorough scrubbing of an organization's master list. Second, a robust registration process should guard against potential fraud. Third, continuous monitoring should automatically check the master list to ensure it contains accurate information. Technology helps automate much of this process by continually vetting vendors at a data-field level and pushing flagged changes to you for review. PREVENTING DISBURSEMENT ERRORS Companies often lose money because of the very systems put in place to automate their AP process. Many AP, treasury, and internal audit personnel operate under a misimpression of the strength of their monitoring controls. Yes, your enterprise resource planning (ERP) vendor may tell you it has configurable controls to avoid paying twice. But employees--in an effort to push an invoice through or soothe an upset supplier--will often add a character or a leading zero to an invoice number when it is keyed into the system to bypass the duplicate alert. When e-invoicing solutions are in place, it's common for the e-invoice to carry the incorrect invoice date, so a duplicate e-invoice or paper invoice will pass normal duplicate controls. ERP systems can't catch duplicate payments made from multiple ERP systems or situations where five invoices were paid in dollars but a sixth was paid in euros--something that should trigger a red flag. In addition, when overpayment errors occur, your ERP system won't analyze the root causes--whether human error, fraud, or duplicate records--and give you the information to fix them for good. Disbursement errors from duplicate payments, fraud, paid credit memos, sales tax errors, pricing errors, and more form a steady flow of outgoing cash. These errors are often preventable, and addressing them can save companies thousands, if not millions, of dollars while opening the door to transformative business decisions. …

Field of study: Business