Collaborate on Invoice Ap for Non-profit Organizations with Ease Using airSlate SignNow

Invoice ap for non-profit organizations

the accounts payable invoice process has many many moving Parts it's so easy to get one or more of them wrong and even one tiny uh what seems like inconsequential misstep can create Havoc resulting in either a duplicate payment that is difficult if not impossible to retrieve a late payment a disgruntled supplier or even worse an unhappy manager we'll go through the steps and the best practices you should use every step of the way to make sure that this doesn't happen to you make sure you stick around until the end when we discuss one practice that will definitely make suppliers angry and angry suppliers tend to call management and complain about you so let's get started while we said that it doesn't matter how the invoices arrive you can do a lot to ensure that this step goes smoothly let's take a look at some best practices you can use in that regard and let's start off with what address you use what address are you going to give uh your vendors to send your invoices to well in today's world you want to have three addresses you want to have a postal address that is very precise you don't want the venders sending their invoices to your headquarters address for example so your address for where they send their the the invoices to should be something like ABC company uh 124 uh Main Street uh second floor or attention accounts payable or maybe even it would be a post office box maybe you're going to receive the invoices there you should also have an email address where your vendors can send their invoices and that should also be very specific it should not be an individuals um email accounts so it should be invoices at ABC company uh accounts payable at ABC company how whatever you whatever works for you um you also might want to have a fax although a fax number although faxes are on um the decline if you will um as far as being um a business tool but you might want to have uh a specific facts number that your emplo your vendors can use um if they want to fax it to you and ideally in an Ideal World you'll have that FAX facility hooked up to an eax facility so that paper fax gets converted into an electronic document now this may sound easy you send it out for approval and then move right on but sadly like most other tasks in accounts payable it doesn't always work the way you'd like sometimes approvers are busy work with me please I'm trying to be nice here and they don't approve invoices in a timely manner or they don't get to the approvals what can you do about it glad you asked we've got some tips that will help let's take a quick look at the three-way match what is the three-way match this is the process every accounts payable department should use to ensure that invoices that they are paying are accurate legitimate and have not been already paid as you know duplicate payment of invoices can be a problem and it's an even bigger problem now because we have so many supplies who are sending duplicate copies of invoices but I digress back to the three-way match okay the threeway match involves three documents the purchase order the receiving document and the invoice let's discuss each of them in a little bit of detail so you can understand what they are and what their role is in this much vaulted much talked about three-way match okay so the three documents the first document that starts the whole transaction if you will is the purchase order you'll sometimes see it abbreviated as po or PO number because they all have numbers and basically this is the document that your purchasing department will prepare and send over to the supplier placing the order okay the purchase order okay and it will delineate you know what they want to order should have price on it many times they'll have terms and conditions and it sets forth if you will the terms for the transaction or at least the terms for the trans trans action as far as your organization is concerned if the supplier doesn't agree with anything on it like let's say the price they should go back and forth with the purchasing department and the purchase order should be changed to reflect it so if your guy says the price is a dollar and the vendors say know the price is $2 the price on the purchase order should be changed to whatever they agree the price is okay that's purchase order receiving document sometimes also called packing slip you've all seen them when you've ordered things online and the stuff comes and there's a little piece of paper in the inside telling you what's in the box that you wanted I'm sure you've all noticed like if you've Ed from Amazon that little tiny piece of paper well in the business World it should be a bigger piece of paper when the goods come in what the folks on your receiving dock should do I'm not saying they necessarily do do it but they should make sure that what is on the packing slip or the receiving document is what they receive so if it says 15 widgets there should be 15 widgets in there if they are broken or there's any other problem with it it should be noted and of course then there's the good old invoice the invoice is basically the bill that the vendor sends asking for payment and it should match what was on the purchase order and match what was on the receiving documents so simple example if there were 100 widgets uded and supplier only had 75 the receiving document should show 75 but let's just assume for our first example that everything matches so when the invoice shows up in a can payable the can payable department then looks in the system for the purchasing order that goes along with it and hopefully the invoice had the purchase order number on it so that will make that a little bit easier and the receiving document they should match all three of them and when they all three match they set it up for payment now in most organizations before the three-way match is done that invoice is sent to purchasing for approval or to have who placed the order for approval you would think that that person would do the checking and make sure that it matched what was on the purchase order but that rarely happens or it doesn't happen that often and that's why the accounts payable department does the three-way match okay so you've got your three documents you've got your approval and hopefully if everything matches you can then set it up for payment and the vendor can be paid and everybody will be happy let's look at some of the best practices surrounding the three-way mat best practice number one and I realize that if you're in accounting or accounts payable this might fall outside your purview but it's something to really keep in in in mind you want to make sure right off the bat from the beginning that you get get off on the right foot this means that the purchase orders must be accurate every single time an accurate purchase order means one that's filled out completely and also one that the uh purchaser did not mindlessly check off standard terms and conditions of before sending it if the purchaser has made some special Arrangement if it's if it's for something as simple as extended payment terms that needs to be reflected on the purchase order for if it's not and if the vendor forgets about it and doesn't include it on the invoice there's no way the accounts payable team is going to know it when they when they pay the invoice and that wonderful negotiation that your purchasing department did is going to go up and smoke because the purchase order is going to match the invoice and the going to go ahead and pay so that's uh best practice number one best practice number two and again this might be outside the perview of uh accounting or accounts payable but you want to make sure the receiving uh uh practice the receiving doc does what they're supposed to do this means not just marking off Goods marking off Goods in when they're delivered and marking them received but actually verifying what's in and more importantly what's not in the shipment this may involve checking the quantity the quality um Etc and any discrepancies should be noted if you ordered 100 widgets and you only got 95 then you want to make a note that only 95 widgets were received so when the invoice shows up for 100 widgets your uh accounts payable staff can make the appropriate um adjustment okay uh best practice number three of course perform the three-way match before paying every single invoice um anytime there is a discrepancies uh investigate it and resolve it before you pay the invoice for many okay not necessarily everybody but many it is becoming a best practice to use technology to automate and streamline your accounts payable invoice processing or best practice number five Implement strong internal controls sometimes people think oh well we're doing the three-way match we don't have to worry about uh internal controls that's not not true they must be you must integrate internal controls strong internal controls along every aspect of your three-way Ma and do it with every single time before we continue let's take a quick look at the various payment options currently being used by many US organizations yes I believe many payments being made today with checks could be made with either cards or a do you agree is your organization trying to reduce the number of paper checks let us know in the comments below car are the perfect payment tool to handle small dollar invoices which may be clogging up your accounts payable used with the proper control you can eliminate a large number of invoices and then have your AP team spend their valuable processing time on larger dollar invoices there have been many new card product introductions in recent years so you might want to take a look at them when reviewing all the advantages of card programs keep in mind your suppliers needs as well while many are happy and even prefer to take cards for let's say $100 transaction you may find their Joy fading quickly if you try and get them to take it for a $100,000 invoice even with a reduced fee a payments have been growing in popularity as many recognize the drawbacks of paying with a papercheck a payments are electronic payments but they are not instantaneous it is important that you realize that they have been used successfully for years now for direct deposit of payroll and direct deposit of Social Security in growing numbers companies are now using them to pay their suppliers in fact in the US a payments in the B2B world now exceed 50% of the payments made while we celebrate Crossing this threshold the rest of the world looks at us incredulously as most make Almost 100% of their payments electronically I've had non us people people tell me things like I don't even know where my checkbook is and when Co hit our management said no more paper checks a can be used in place of many wire transfers as they are quite a bit less expensive and in place of paper checks as we've already discussed as you may have guessed not only has there been a lot of innovation in the payment world there's a lot more coming in the next few months and years I would be remiss if at this point I did not point out the danger of making duplicate payments saying you never make a duplicate payment is like saying you never make a mistake now you make think that this is no big deal since surely suppliers would return the duplicate payment sadly only a few do so here are a few tips you can use to avoid that nightmare I want to start off by Smashing that myth that vendors will return duplicate payments here's the secret most of them don't now a few will issue credits and then there's issues with credits as to whether your people find them they take them Etc but many of them don't they quietly put the money in their pockets and never say a word about them and then there were a few who pulled this little nasty trick that happened at one company where I worked the vendor got the duplicate payment and came in to see the Chief Operating Officer I don't remember exactly for what but whatever and he brought that check that second check that we had sent and he threw it on the office's desk and he said to him glad to see you doing so well glad to see you can afford to pay us twice okay as you can imagine what happened after the guy left was not pretty everyone has three opportunities three opportunities to prevent detect and recover duplicate payments but you've got to take action to do these so let's start I call it the before the during and the after that's my way of breaking these things down so let's start off with the before what can you do before you get that invoice and you process it well it's some very simple stuff okay you want to incorporate best practices make sure you have strong internal controls in your processes for handling invoices and making payments and those those processes should include strong internal controls and not limited to but including separation of Duties you also want to minimize or eliminate as many weak practices as you can let me you an idea about some of those weak practices returning checks to the person who placed the order the requisitioner as I like to call them petty cash boxes all of these are opportunities if you will for a duplicate payment let's talk about during what can you do during the processing of an invoice to ensure that you don't pay it twice or at least help minimize the chances of not paying it twice so I want to share with you a little story I was at a conference this was a few years ago and I was talking to a guy who was an AP director of a huge company and the reason I make such a big deal about it was a huge company because when you see the numbers that I'm going to talk about you're going to say what that wasn't an issue for them and he told me he shared with me that they just had a duplicate payment audit done and his company the last time they'd had an audit done which I think was two years prior the audit firm found $2 million this current audit they found $57,000 so 2 million might not a lot of money to a billion doll company and if 2 million wasn't a lot 57,000 was really not much so I was whole years if you will I said oh what did you do and he said oh you know all that stuff you talk about and what he meant was using things like rigid coding standards making sure that when invoices are processed that the standards that are used are rigid and you've spelled it out and you've given it to your processes so they all know exactly how you want want the data entered I like to say when it comes to data entry and accounts payable creativity is not desired not a desirable function if you will limiting the payment types for each vendor also will help so then you don't have to worry you made one payment with a check let's say and another one with a credit card you also don't want to allow the payment of invoices either on expense reports or through the petty cash box some companies will take it one step further and when they have what they consider consider a large payment and of course what is large is going to depend upon your individual company obviously a large payment at Apple is different than a large payment at the corner stationer store so whatever is large you want to double check those items to make sure that they've not already been paid I also like to tell people that they should if they've got Rush checks or items that were paid off a check request form because the invoice was lost that they might want to put them in a folder and then go back and research two three weeks later a month later to make sure that that invoice did not show up and get paid also you probably want to have some special proces and procedures in place for payments that are made through wi transfers because that's a whole another issue and also if you are having payments made outside AP you want to have some processes in place to make sure that those folks are using the same strong practices and controls that you use in accounts payable we see at a number of companies companies will have AC payments made outside AP maybe in treasury maybe elsewhere in accounting I want to say that that happens at about 20% of the companies and as more companies are increasing the number of a payments there's also a possibility of increasing that now we're going to talk about after the payments made because there are some things you can do that but first I want to say a big thank you to all our listeners who very thoughtfully give us thumbs up or likes on our recordings and if you have any other tips on preventing duplicate payments that I haven't shared feel free to put them in the Comon field or of course I always like to hear from people okay after the payments made the money's out the door but it doesn't have to be out the door forever if you paid twice which hopefully you didn't but add a minimum you want to audit your payments when I say at a minimum I hope everybody who's listening today is doing statement Audits and that's where you call your vendors and you ask them to send a statement showing all outstanding activity all open activity not just open invoices they're happy to tell you about the open invoices but you want to find out are there any open credits that we don't know about you want to get that money back obviously so if you haven't been doing that that's kind of a no-brainer and if you do find a credit on a statement that was due to a duplicate payment you want to investigate because you know what they say about where there's smoke there's fire or as I like to say where there's a duplicate payment once it might happen more than once and so you want to investigate what happened figure out was there a weakness in your controls and your processes and then fix it okay you want to close that loophole whatever it may be also you want to be very careful about those vendors who change the invoice number and many of them do some of them will just add like an a to the end of the invoice number for the first copy that they sent out and a B for the second copy but others are Chang the invoice number completely so you want to be very careful about those vendors and when you figure out who they are you want to make a special notice of them so that you can always check to make sure that you don't have them okay so be very careful about them and again when you find a duplicate you want to analyze what was wrong what went wrong in our system so that we made this payment now some of you hopefully not you but a few people out there might be sitting there thinking saying well we don't make duplicate payments our system won't allow it or whatever reason that you have let me just say this maybe you don't make duplicate payments often but saying you never make a duplicate payment is like saying you never make a mistake I like to say for my lips to Gods yes everybody does occasionally and by the way if it's only occasionally and your staff makes one you know take it into consideration that this is something that happens everywhere now if you still think hey she's making a big deal about nothing let me just point out one more issue to you A lot of times fraud in general starts off with an honest mistake so you pay someone twice they realize they got that second payment they don't return it God forbid and then they say aha maybe if we send invoices twice they'll pay twice and they start doing it so honest mistake can sometimes lead to fraud so which is why you want to stay on top of this issue these discounts are really important to the organizations that are offering them so it is critical you understand what they are and how they work early payment discounts are exactly what they claim to be a discount for paying early let's take a look at the nitty-gritty of how early payment discounts work for starters not every supplier offers them typically they are negotiated during the initial stages of the business relationship they should always be included in the terms and conditions some suppliers offer them as a matter of course and others don't offer them at all this is one of those situations of if you don't ask you don't get so ask all they can say is no for the purposes of this talk we're going to focus on the most common discount offit the discount does not have to be this numbers but just I want to make the example and I want to make sure that you understand it so it's two 10 net30 it is typically written the number two a slash sign the number 10 net the number 30 this means that a full payment is due on the 30th day after the invoice date however if the invoice is paid within 10 days of the invoice date the customer can take a 2% discount hence the two10 so if you had an invoice of $100 the C customer has a choice of either paying $100 on the 30th day or $98 if he pays it in day 1 through 10 up to the 10th day the $98 payment is arrived at by taking 2% of a100 which is $2 and subtracting it from the total amount of $100 any payment after the 10th day up until the 30th day should be the full $100 there are no partial disc discounts in the early payment discount world you'll sometimes see the term early payment discount or early pay discount abbreviated as epd now you may be looking at this simple example and wondering why would anybody make a big deal about this she's talking about $2 so the answer is twofold first of all the smaller dollar amounts add up and secondly for most organizations early payment discounts represent the best best financial alternative they have the 210 net30 converts to a 36% rate of return for most organizations unless you're out there collecting money with a baseball bat which I'm thinking you're not if you're listening to this this is probably the highest rate of return your company can get with absolutely no risk I'll skip the math for now but perhaps we'll do another broadcast showing it so if you're interested let us know in the comments below so as many companies would like to get more early payment discounts your suppliers are not such a big fan of it okay so it's up to you to fet out these opportunities here are three quick ways to do that so number one pretty simple make sure you earn all the early payment discounts you're entitled to this means identifying those vendors who offer early payment discounts and then fast tracking the processing for those so that you're able to get them paid within the 10th date for many organizations it is difficult to get an invoice processed approved and scheduled for payment in such a short time but that's what you need to do you need to also stay on top of your approvers because that's often where the holdup is and make sure they understand that approving quickly is important in this case okay that's tip number one tip number two many times offering an early payment discount will be a standard within a particular industry so if you have a vendor that is offering bring you an early payment discount look at all the other vendors in the same industry that you are doing business with and then approach them and ask them if they offer early payment discounts some will some won't again they don't like it so they're not going to volunteer the information but if you approach them they may relent tip number three you want to train your processes to look at invoices closely and if it's on one invoice that you get where you normally don't get it know that this vendor is properly offering it to others so ask so if you're doing business with vendor you know XYZ and they don't off if you early payment discounts and you typically don't get one and one of your processes knows that one invoice comes through and it's showing an early payment discount this means that they might be offering it to some of their other customers and so you want to ask see if you can get to be one of them again if you don't ask you won't get uh discrepancies when they're doing the three-way match they need to be resolved and they need to to be resolved quickly let's take a brief but deep dive into how you can do that what do you do with the data related to the accounts payable process three-way matches that go wrong I.E when you match the invoice against the purchase order and the receiving document and they don't match there's a wealth of business intelligence in that data if you choose to collect and analyze it and I'm sure you're going to realize that I'm going to recommend that you do that it can and should be used to drive process improvements across your entire procur to pay chain not just the accounts payable fun and let's talk about tracking discrepant invoices you absolutely should be tracking them you can do it in your Erp system if you have the functionality to do that but many Erp systems don't have the functionality and so someone usually the accounts payable manager does it in a separate spreadsheet you can just do it in a simple Excel spreadsheet and you want to do this for a number of reasons obviously you want to get the invoices discrepancies resolved but you also want to do it in a timely manner because if you don't do it in a timely manner and the due date passes the vendor will send a second invoice so you'll have one copy of the invoice and then you'll get another copy of the invoice and if it still is not resolved by let's say 60 days if payment was due with 30 days you'll get still another copy of the invoice and maybe you'll get more than them so a lot of extra work a lot of extra invoices and occasionally some of those invoices get paid twice those second and third copies and we absolutely don't want to do it so here's how you can do it let's assume that the accounts payable manager the director of accounts payable maybe an assistant controller is going to do it and what you're going to do is you're going to take a spreadsheet and you're going to keep track of the discrepant invoices and who's supposed to resolve them now I'm not going to start ranting and raving about the fact that most of the time the responsibility for resolving discrepant invoices lies in accounts payable when accounts payable is the group or the person who has the least amount of information be that as it may but it's usually An accounts payable and you're going to create this spreadsheet and you're going to have columns across the top and you're going to try and capture every possible piece of information so you'll have the invoice the date the date that you got it who was the purchaser who was the supplier who was the AP person and any of the relevant people who were associated with this then you're going to put common reasons why the match might fail let's say inaccurate invoice pricing error you know there's a million other reasons you know what they are and a lot of them will be peculiar to your organization you're also going to date this you're going to date when the invoice came in when the problem was identified when the emails were sent out either to purchasing or to your supplier to try and get it resolved and you're going to keep track of this you can use this for two reasons number one for tracking purposes to make sure that you get these discrepancies resolved in a decent amount of time quickly so you don't get those second invoices that I talked about and also for analytical purposes so that you can try and use them as I'm about to describe you're going to have a comment field also in this and you are also going to put dates down when the problem was identified how long it took different people to respond and when it was resolved okay and you want to make sure your invoices don't languish and you also want to collect this data now periodically and what I mean by periodically will depend upon your organization if you only have one or two discrepant invoices let's say a month well this is going to work for you but I suspect if you like 99 and 3/4% of the people who I encounter this is not the case so periodically it could be weekly it could be monthly it could be quarterly depending upon what your work flow is what are the work you're doing and the nature of your business you're going to pull the spreadsheet out and you're going to review it and you're going to sort the data and try and identify common problems so for example you might sort the data and review by reason reason for the discrepancy which by the way you're going to enter onto the spreadsheet afterwards when the item is resolved so a little extra work maybe in keeping the spreadsheet up maybe then you'll discover that one of your processes in AP has an inordinate amount of the problems or perhaps you're having poor purchase orders come out of a particular unit in purchasing whatever you're going to review this data so now you've identified the problem and you need to take action now I would strongly suggest that you start with any problems that may be in AP so that when people start pointing fingers and saying well did you look in your own house you have some data to back it up and say yes we did and we fixed our problems so if the problem is in accounts payable is it with one person one group you want to talk to that person maybe even if it's just like one particular processor and maybe their manager and see what's the problem do we need more training maybe that person was new and didn't get adequate training maybe you had an automation solution and the training that you was given was you know good for six of the people on your staff but this one person didn't understand something or maybe they're sloppy and they just need to take more care but be very careful about assuming you know that somebody is sloppy maybe getting two screens for your processes maybe that would help I was on a call this morning where I heard people are talking about getting three screens and if you people even getting four screens so you can see where we're going with that okay so that's you know once you've narrowed down your AP issue now let's say the problem was inaccurate purchase orders let's say that's what you discovered was the problem maybe in this place the supplier is notifying purchasing of pricing errors and rather than issuing a corrected purchase order the purchasing person figures a accounts payable will catch it well that's not acceptable that creates more work for a and it also increases the chances that maybe something will slip through and you'll pay more than you should so maybe there's one area in purchasing maybe one location is making all the mistakes and in that case maybe there was more training that's needed so there are many different reasons once you identify the reason then you can talk very tactfully I might add to the group involved and try and get that fixed so that the errors related to that particular cause are I want to say eliminated but you know from my lips to God's ears okay now if the problem is with the invoices you need to tread very carefully because you don't want to offend the supplier especially if it's a large supplier and this might be something thing that you might have to work with purchasing and maybe approach them together and it could be honestly that you'll talk to them and nothing changes and you know you can't make them do something I mean maybe you cannot do business with them but I doubt that the organization is going to decide not to do business with them because accounts payable isn't happy with the invoices that they sent just a sad fact of life so keep in mind that even after you talk to them you may not be able to fix the problem and if you can't okay this doesn't mean you know just give up just make a note of who that vendor is you won't have a lot of them there'll only be a few that will fall into this category and then once you know who they are you always double and triple check their invoices yes it's extra work but you don't want to pay them twice clearly that's an unacceptable outcome you may think that if you do everything that is explained here all your invoices should sail through and you'd have no errors duplicate payments frauds unhappy suppliers or even unhappy management sadly it's not that simple and invoice errors still have a way of sneaking in when they do let's hope they are not simple things that you should have caught we recently did a short video on rookie invoice mistakes that you'll want to avoid watch it right now using the link that has appeared on your YouTube screen and is in the description below good luck