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Invoice handling for businesses

in the accounting and accounts payable space strong internal controls are the unsung heroes of any organization's accounting invoice processing safeguarding against the deadly Trio of Errors frauds and duplicate payments in a world where one slip of the hand can end up costing millions of dollars strong invoice processing is critical let's take a look at the components that will safeguard your organization including one discussed at the end that most don't even realize is actually a control component number one separation of Duties this is kind of the basic the underscoring if you will the foundation of strong internal controls not only across your invoice processing uh protocols but AC course your whole accounts payable and procur a pay space separation of duties means that no one person should be doing more than one leg of the the transaction from uh uh ordering the goods to making the payment so your invoice processes should do nothing but process invoices they should not be updating the master vendor file they should not be setting up new vendors in the vendor file they should not have anything to do with either making payments or the purchase order component number two a robust data entry protocol sometimes Rec refer to as a coding standard or naming naming uh template you'll use this and you'll give it to your processes so that they all enter the data exactly in the same manner by doing this if a duplicate copy of an invoice shows up and we know that that happens a lot if it shows up today and I processes it that's fine and then if it shows up a week from now and you process it you'll be much it be much more likely that you'll identify that as a duplicate invoice so even though we don't like to be kind of like control freaks in a can pable this is one place where it is critical that you're processes into the data exactly the way you uh tell them to the way you set it up and everybody does it the same and by the way your coding standard for your data entry should match the naming convention that you use when you're setting up new vendors and existing vendors in the master vendor file it'll make it much easier for your invoice processes uh to find the fendor that they're looking for component number three a comprehensive approval process now most accounts payable group grp are pretty good about sending invoices out for approval but sometimes they forget about approval levels uh sometimes people only have are only able to approve up to a certain dollar amount and then over that it has to be sent to somebody else and sometimes that little piece of the puzzle if you will um gets lost in the translation and people are approving invoices for payment that are for a larger dollar amount than they were actually given authority to to do usually by the board of directors okay component number four you want to use a best practice approach for processing invoices and a best practice approach for processing invoices means the uh proverbial three-way match you want to make sure that your folks are using the three-way match to make sure that what's on the invoice matches what was actually ordered as indicated on the purchase order and what was actually received as is indicated on the receiving documents and any annotations or notes to those receiving documents that your receiving staff may have made uh to indicate either a short shipment or damaged goods um Etc or partial shipment even okay component number five you want to make sure you you take a best practice approach to resolving invoice discrepancies and so that they are resolved in a timely manner for if they are not resolved in a timely manner uh then it is the the likelihood of your supply sending a second invoices increases exponentially because when they're not uh resolved in a timely manner that means they're not resolved before the due date and your payment isn't made and the supplier in looking for their payment will send out another copy of the invoice so you want to have a very strong protocol and approach for resolving discrepancies and that approach should also include somebody tracking the discrepant invoices and following up on a regular basis to make sure that the accounts payable team whoever is responsible for uh resolving that is resolving them for the longer they stay out there the more likely it is that a second invoice will get paid and that will get sent and that in increases your chances of making a duplicate payment which is you know not a good thing and as you know um most duplicate payments aren't returned all right let's let's let's move on uh component number six uh you want to establish a strong routine for weeding out duplicate invoices um as early in the process c as possible you don't want to write wait right until the end right before you're getting ready to make the payment because then you've wasted a lot of time sending the invoice out for the approval doing the three-way match finding it you know entering the data uh finding it in the M Defender file Etc and most accounts payable staffs are not uh don't have extra uh person power if you will so you don't want to waste valuable Human Resources handling an invoice that's going to turn out to be a duplicate and ultimately discarded of course discarding it is good because you don't make a duplicate payment but better not to spend the time in the first place handling it compon component number seven both before the payment is made and after the fact you want to have some routines in place that do some searching and some analysis looking for duplicate payments um if and when you find those duplicate payments obviously you want to recover the money but you also want to investigate what happened to determine um if you need to close close some loophole by updating your processes perhaps you don't have the strongest controls in place and therefore you need to go and change your processes a little bit to ensure that this duplicate payment doesn't happen over and over again because not always but sometimes when a duplicate payment is made um it's not just one duplicate payment that was made unfortunately it is numerous ones okay now um I promised you that there was something that I was going to share uh component or a control if you will that many people don't even think of as a control but here we go component number eight um and this is to pay in a timely manner this eliminates the need for your supplier to follow up and try and get payment and it eliminates then uh and then uh subsequently send a second invoice which you end up wasting a lot of time uh handling and sometimes a few of them slip through and you end up paying so paying in a timely manner um will go a long way to strengthening your your controls now there's no excuse for not having strong controls around your invoice processing uh when you don't it leads to all sorts of rookie mistakes mistakes like paying an invoice when the amount is lower on the invoice than it is on the purchase order um that may seem like a good thing but not really here's what I said about it on a recent broadcast rookie invoice processing mistake number two if an invoice shows up for an amount of money that is lower than what was on the purchase order you go ahead and just pay the lower amount now you may think oh good we saved a few dollars maybe they had the price wrong Etc um but this can create numerous problems for example uh they may it may have only been a partial invoice and they may have been billing you at the wrong price um then another invoice will show up for the remainder of the invoice and if you your Erp system won't take uh duplicate invoices with the same against the same purchase order number you may not be able to process basically if the purchase order if the invoice has a different price on it than the purchase order that should be a a sign that there is a problem and you need to investigate and figure out what it is you can watch the rest of that broadcast right now using the link that has appeared on your YouTube screen and is in the description as always I appreciate your likes your shares your comments and your subscribes thanks for watching