Set up vendors before any payments are madeIf not, vendor file incomplete1099’s could be impossible to prepare and

government could be assessed fines and penalties

Set up vendors before any payments are madeWithhold first payment until W9 received

No standards result in vendors in A/P multiple times – with different names.

Consider John Henry Smith, Jr. John Henry Smith, Jr. John H. Smith, Jr. Smith, Jr., John H. Smith, Jr., John Henry

Who Am I

Include LLC or Inc. or Corp if part of name

Exclude articles (A or The) if part of name

For individuals, decide if prefixes are to be included and use consistently

No periodsOne space after each initialNo apostrophesConsistent use of abbreviationsAmerican could be Am or Amer

Best Accounts Payable practice is to have a standard for coding names and INVOICE NUMBERSSet a policy and communicate that policy

Limiting access also limits ability to make changes to the master files

Changes should not be made by data entry personnel

System should automatically generate report detailing changesViewed by Accounts Payable manager or other

management

Why cleanup vendor master files?

Unused VMF take up valuable space on systemWhy keep vendor info from 10-20 years ago?Misspelled then – misspelled nowDuplicate names then – duplicate names now

1. Restrict access to the VMF so that only one person (plus a back-up) can set up or change vendor records

2. Obtain a W-9 form PRIOR to vendor set-up and payment

3. Validate the TIN and vendor name using the IRS TIN matching system

https://la2.www4.irs.gov/PeopleBooks/CRMPROD/Training/3pdev/index.htm

4. Validate vendor address and phone number prior to vendor set-up

5. Check vendors with Federal Bureau of Industry and Security’s lists of excluded persons and companies

6. Establish and enforce policy for data entry formats

7. Only pay employees through A/P for accountable plan transactions

8. Purge vendors with no activity for 15 months9. Audit changes to vendor master files10.Written procedure manual to cover every

aspect of VMF maintenance

Best Accounts Payable

Practices for Invoices

Drives Accounts Payable checks

Can bog down entire process if

invoices are not handled

correctly

Best Practice

A/P should maintain listing of all invoice approvers

Acceptable Practice

List of who can approve what purchases

Worst Practice

A/P allows anyone to approve invoices

Round and round and round we go

Where it stops –nobody knows

o BEST PRACTICE – Invoice should be routed initially to Accounts Payable• A/P logs invoice in• A/P sends to appropriate approver, if necessary

oMake use of technology• Scan those invoices in and send via email to

appropriate approver

o Invoice first sent to Accounts Payable also is a control against employee fraud• Invoices cannot be altered

WORST PRACTICETo have no policy on this

issue

World isn’t perfectTerms on invoice do not match PO terms

Partial shipments

Damaged goods are delivered

Prices on invoice do not match PO prices

Related charges included or excluded

Sales tax charged

BEST PRACTICE3-way match of invoice, PO and receiving report

Resolve differences

Price difference – take lower price

Require PO to be filled out completely BEFORE purchase is made

BEST PRACTICE – Have a policy and CONSISTENTLY use the policy

No right or wrong way to code invoices

In checking for duplicate payments –run by invoice numbers

Best Accounts Payable

Practices for Checks

Resource: www.doveconsulting.com

https://www.frbservices.org/files/communications/pdf/research/2013_payments_study_summary.pdf

Communicate check schedule including cut-off points

Print A/P checks on laser printerEliminates expensive check stock

Special paper can be used that is sequentially numbered and has safety features

Keep log of sequentially numbered safety paper

Limit number of people who can print checksPreprinted check stock should be kept under

lock and key and also log kept of checks used

BEST PRACTICES varies by size of governmentSmall dollar checks Two signatures best – one signature plate

and one manual

Large dollar checks Two manual signatures required

Person who signs checks should not reconcile bank statement

Internal audits

Positive pay

• Secure, locked location• Access severely limited• Reinforced closet with substantial

lock• Sufficient segregation of duties

• Those with access cannot print checks

• Those with access cannot reconcile bank statement

BEST PRACTICE Written policy that checks will be MAILED to the

Pay-To address If check is not mailed, maintain log:

Check number, payee, dollar amount

Date check was issued, date check paid

Name and signature of person picking up the check

HOW checks should be mailed Sealed envelope directly to Post

Office or mail room

Good Internal Control

Signed A/P checks mailed by someone other than the ones printing and signing checks

Source: JP Morgan Chase

500 million checks forged annuallyLosses expected to grow 2.5% annuallyRanks second to embezzlement on crimes

hurting America’s top 1,000 companies

o Limit only to emergencieso Same people consistently have same

emergencieso Eliminate duplicate payments by thoroughly

checking files before rush check is issued

John G. Hulsey, CGFM jhulsey@uga.edu