[Article] The Accounts Payable Function: Are There Cracks in Your Foundation?
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[Article] The Accounts Payable Function: Are There Cracks in Your Foundation?

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Rarely do people think about the foundation for their accounts payable function. This is unfortunate, for just like a building built on swamp land, an accounts payable function without a strong......

Rarely do people think about the foundation for their accounts payable function. This is unfortunate, for just like a building built on swamp land, an accounts payable function without a strong foundation will not be able to support a robust accounts payment process. With all the change affecting the account payable function in recent years as well as expected change in upcoming years, a strong foundation is critical. Let’s take a look the implications of a robust underpinning as well as five issues every professional should consider when evaluation their accounts payable function.

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  • 1. The Accounts Payable Function: Are There Cracks in Your Foundation? BY MARY S. SCHAEFFER, AP NOW’S PUBLISHER & EDITORIAL DIRECTOR Rarely do people think about the foundation for their accounts payable function. This is unfortunate, for just like a building built on swamp land, an accounts payable function without a strong foundation will not be able to support a robust accounts payment process. With all the change affecting the account payable function in recent years as well as expected change in upcoming years, a strong foundation is critical. Let’s take a look the implications of a robust underpinning as well as five issues every professional should consider when evaluation their accounts payable function. Why Is A Strong Foundation So Important? While the importance of a strong foundation is quite clear when it comes to a building, it may not be as obvious why it’s critical to the accounts payable function. For starters, the foundation of the department is the basis for everything else. It supports the entire process. If it is weak, problems like duplicate payments, fraud and segregation of duties issues can creep in. A weak foundation also may result in an inefficient accounts payable process, which results in additional expenses to run the accounts payable department. While these are not easily identifiable, they insidiously eat into the bottom line profitability of the organization. When extra time has to be spent manually checking work, the process becomes more costly. It also makes it more difficult to earn those lucrative early pay discounts. A solid footing also translates into one that makes it as simple as possible to comply with the myriad of regulatory issues facing every company. This is not to say that it will be easy. Nothing could be further from the truth. There’s no avoiding these requirements; they affect every organization. But if the accounts payable function is structured properly, the process of extracting the needed data will be manageable. ANYBILL.COM | INFO@ANYBILL.COM 1 1801 Pennsylvania Avenue, NW, Suite 700 | Washington, DC 20006 | W 202-682-6300 | F 202-833-2141
  • 2. THE ACCOUNTS PAYABLE FUNCTION: ARE THERE CRACKS IN YOUR FOUNDATION? What Does A Strong Foundation Mean A strong foundation in the accounts payable function is one that enables the staff to process invoices and make payments as efficiently as possible. This involves keeping operating costs to a minimum without sacrificing the controls that prevent fraud and duplicate payments. And of course, it also means making the needed regulatory information available for reporting in a timely manner. Specifically, a sturdy base means your staff understands the basics of how the accounts payable function should operate. This is something many people take for granted and unfortunately, it is not always the case. Periodically reviewing the basics to make sure everyone is on the same page is not a bad idea. Clearly a solid base includes strong and appropriate internal controls as well as the use of current best practices. Since practices are changing rapidly in the entire procure-to-pay function, especially with the introduction of technology and automation, it is critical that the best practices implemented be regularly evaluated as they are changing. Inclusion of current best practices is one good way to ensure a reliable footing. Testing the Strength of Your Foundation Most professionals assume their accounts payable function has a sturdy base, if they even give it a moment’s thought. Typically what happens with any business function is that it evolves over time. Some of the practices that are used are fine, but others are weak to start with or as new processes are introduced, older controls are weakened. What follows is a list of five issues every organization should consider when evaluating the strength of their accounts payable function. After all, it’s all about your organization’s lifeblood—its money. So, it should be handled correctly. ++ APPROPRIATE SEGREGATION OF DUTIES PROVIDES THE BONES OF A GOOD FOUNDATION. For without taking segregation of duties into account, the likelihood is that the organization will inadvertently set up a situation where one person will handle more than one leg of the procure-to-pay function making fraud easier to perpetrate. This is a big issue for smaller accounts payable departments now. In the future even larger companies will face this dilemma as automation and technology impact the function resulting in smaller staffs. And, smaller staffs make it more difficult to incorporate appropriate checks and balances. ANYBILL.COM | INFO@ANYBILL.COM 2 1801 Pennsylvania Avenue, NW, Suite 700 | Washington, DC 20006 | W 202-682-6300 | F 202-833-2141
  • 3. THE ACCOUNTS PAYABLE FUNCTION: ARE THERE CRACKS IN YOUR FOUNDATION? ++ INADEQUATE TRAINING OF THE STAFF IS ANOTHER OVERSIGHT THAT WEAKENS THE FOUNDATION OF THE FUNCTION. Well-meaning personnel handle a process in the way they think it should be addressed not realizing they are doing something wrong. That’s why it is imperative that not only are new employees thoroughly trained but periodically, there is a review of the work of all processors. This ensures no changes have crept in weakening your foundation. Very few organizations regularly review their processors to make sure that no changes have been inadvertently introduced into their processes. Sometimes staffers will find what they think is a short cut not realizing they have created a problem elsewhere in the process. ++ UNFORTUNATELY, NEW PAYMENT FRAUDS HAVE BECOME A WAY OF LIFE IN THE BUSINESS WORLD TODAY. Keeping up with them is a critical part of the job for those who manage the accounts payable function. Once the frauds have been identified, it is crucial that processes are addressed to avoid and detect these problems. This is an ongoing problem that needs to be dealt with on a very regular basis; not once every year or two in a periodic review. ++ NOT MANY ORGANIZATIONS EVALUATE THEIR PROCESSES ONCE A YEAR TO MAKE SURE THEY ARE USING THE LATEST BEST PRACTICES. This has become an important part of building a strong foundation not only to deal with the frauds discussed above but also to take advantage of the latest advances in technology. They are revolutionizing the way accounts payable function is handled. ++ AS MENTIONED EARLIER IN THIS PAPER, TECHNOLOGY IS RADICALLY CHANGING THE ACCOUNTS PAYABLE PROCESS AT COMPANIES OF ALL SIZES, NOT JUST THE BIG CORPORATE ENTITIES. Any foundation can be strengthened by the inclusion of automation. For whether we like it or not, computers are more accurate and work more consistently than humans. The good news today is that the cost of that technology has plummeted putting it within the reach of just about every organization, regardless of size. Hopefully we’ve convinced you not to take basis of your department for granted. It needs attention and review if you don’t want to find it weakening to the point where it is costly and inefficient. How strong is the foundation for your accounts payable function? When was the last time you thoroughly examined all the issues affecting it? ANYBILL.COM | INFO@ANYBILL.COM 3 1801 Pennsylvania Avenue, NW, Suite 700 | Washington, DC 20006 | W 202-682-6300 | F 202-833-2141
  • 4. THE ACCOUNTS PAYABLE FUNCTION: ARE THERE CRACKS IN YOUR FOUNDATION? About the Author Mary S. Schaeffer, AP Now’s publisher and editorial director, is a nationally recognized accounts payable expert. She is the author of over 17 business books, including 101 Best Practices for Accounts Payable, as well as a monthly newsletter and a free weekly e-zine. Before turning to writing and consulting she worked in the corporate world as an Assistant Treasurer for the Equitable Life Assurance Society, a Financial Risk Manager for O&Y and a Corporate Cash Manager for Continental Grain. She speaks regularly at industry events, one-day seminars, conferences and online events. She has an MBA in Finance and a BS in Mathematics. © 2013 Mary S. Schaeffer and Accounts Payable Now & Tomorrow About Anybill Built on the premise that all payments are critical, Anybill was created in 2001 to transition any AP transaction to an automated solution. We combine our proprietary technology with unmatched customer service to deliver a complete Software-as-a-Service solution. Clients retain efficient workflows while gaining greater visibility and control, better cash flow management, streamlined approval processes, 24/7 accessibility, and increased auditor confidence. Anybill works with clients ranging from non-profit associations to some of the largest multinationals. We are headquartered in Washington, DC, and are SSAE 16 SOC compliant.  ANYBILL.COM | INFO@ANYBILL.COM 4 1801 Pennsylvania Avenue, NW, Suite 700 | Washington, DC 20006 | W 202-682-6300 | F 202-833-2141