GE Capital Accounts Payables Module
Learning Goals <ul><li>The endeavor is to help the New Hire induct to the Accounts Payable process  </li></ul><ul><li>with...
Accounts Payable  Overview In this topic, you will learn to: Explain the Origin of Accounts Payable
Exchange began when mankind first engaged in transfer, that is, when two parties  with surplus resorted to barter obtainin...
Four stages in the provision of satisfaction Stage 1 Obtaining  Resources Stage 2 Producing  Goods & Services Stage 3 Maki...
Let’s understand the process of Payables!!! I want to buy a few things  for home! Joan rushes to the market...
Let me pick  up all these!!! The bill is made by the  counter person for $136.25 Joan gives a credit card to pay  the bill
<ul><li>The bill is immediately honored by the credit card issuer. </li></ul><ul><li>It would take more time for Joan to m...
Sourcing - The process of  purchasing In this topic, you will learn to: Discuss the Procurement process
Sourcing is the first phase in the Procurement process, where information is gathered and research is done in order to ena...
Steps in Purchasing <ul><li>The different steps in Purchasing are: </li></ul><ul><li>Requisition -  This is a request for ...
Bid - This refers to accepting quotes from potential suppliers over a predetermined period of time. Catalog - Product info...
Sourcing Process
Highlevel Process Maps In this topic, you will learn to: Describe the Accounts Payable process flow
Process of purchasing Multiple options for the purchaser...requiring multiple processing. Buyer orders goods  or services ...
Products and Services AP processes invoices raised for products and services! Products:   Goods like medical equipment, co...
Requirement  for materials / services  arises  Vendor  ships materials Approve invoice for payment Payables department  ve...
Buy to Pay - Without PO Requirement  for materials / services  arises  Vendor  ships materials Requisition  sent to Sourci...
Accounts Payable  - Critical Documents In this topic, you will learn to: Illustrate the Accounts Payable work  & describe ...
What is Accounts Payable in GE? GE Medical Systems Office 10 machines @ $12,100 are ordered I, at GEMS  raise the  Purchas...
Goods are shipped to GEMS   GE Medical Systems Office  creates a GRN on receipt of goods Goods are purchased on credit fro...
Accounts Payable must process  the invoice , for payment on  the due date!!! XYZ Inc. raises invoice  payable after 45days
Accounts Payable Work! Payables department  receives invoices through courier, mails, scanned invoices, etc. Are goods and...
<ul><li>To pay a vendor, it is important that there are three documents in possession: </li></ul><ul><li>Purchase Order (r...
<ul><li>Purchase Order (PO)  - The request issued by a buyer to a vendor for goods  </li></ul><ul><li>or services. In most...
Goods Received Note (GRN)  - The purchaser of goods and services would issue a  notification that the ordered goods and se...
Invoice  - To pay, we need an invoice which describes who has to be paid, what has to  be paid for, and the amount due. In...
Appliances Inc. is a retailer of refrigerators and television sets.  He places orders from some manufacturers for the foll...
These goods are purchased on credit from the respective manufacturers at the  below costs: Cost of Model X-123 DBB of Onid...
<ul><ul><ul><li>Appliances Inc. raises a PO on P&G Inc.  </li></ul></ul></ul><ul><ul><ul><li>Appliances Inc. raises a PO o...
<ul><ul><ul><li>The invoice is raised on the name of the requisitionist, Appliances Inc. </li></ul></ul></ul><ul><li>On wh...
3 critical documents - In detail In this topic, you will learn to: Appraise the nature of the PO,GRN and Invoice  & Identi...
PO Creation Requirement for materials / services arises Reaches the requisitoner Analyze the vendor / supplier Create requ...
PO Types <ul><li>Mainly, there are four different types of Purchase Orders: </li></ul><ul><li>Standard Purchase Order </li...
Standard Purchase Orders are created for one-time purchase of various items.  These purchase orders are created when buyer...
Blanket Purchase Agreement Blanket purchase orders are created when buyer knows the details of the goods or services to be...
Contract Purchase Agreement Contract purchase agreements are created with supplier to agree on specific terms and conditio...
Planned Purchase Orders A planned purchase order is a long-term agreement committing to buy items or services from a singl...
Materials shipped by vendor Requisitoner receives the material Inspect   Goods Rejected Accepted Goods are returned to the...
Critical fields in an invoice with PO: Invoice - Key fields Invoice Date PO Number Part Number Total Invoice Amount Remit ...
Non-PO invoice  -  Invoices not against a purchase order is termed as a Non-PO  invoice. A purchase order does not exist f...
Critical fields in an invoice with No PO: Invoice - Key fields Invoice Date and Number Remit to address Account Code Amoun...
Vendor Set Up In this topic, you will learn to: Illustrate the method of setting up a new vendor
Vendor set up is the process of updating in a database, the vendor details like vendor name, site address, payment terms, ...
<ul><li>Vendor set up is the process of setting up vendors in the ‘Vendor Master File’. Here, new vendors are added and ch...
<ul><li>Check if the vendor is already set up </li></ul><ul><li>Check for approval </li></ul><ul><li>Check for Tax Id/SSN ...
Is the vendor already set up? <ul><li>Search in the Vendor Master Database if a similar or exact  </li></ul><ul><li>vendor...
Check for approval <ul><li>All new vendor set up requests should have the required approvals on it </li></ul><ul><li>There...
During vendor set up, check for the tax id/SSN …… Tax ID: A number provided by the IRS to an individual or a business whic...
Check for the nature of payment <ul><li>Taxability varies from sale of merchandise or services…this needs to be taken care...
<ul><li>Request a Form W-8 from any person to whom you are making payment that you presume or otherwise believe to be a fo...
<ul><li>Use Form W-9 to request the taxpayer identification number (TIN) of a U.S person (including a resident alien) and ...
1099 Form <ul><li>1099 is an Internal Revenue Service (IRS) tax document that is sent to businesses or individuals after c...
Time for set up <ul><li>Only after all preliminary checks are completed, the vendor has to be set up. </li></ul><ul><li>If...
Accounts Payable  -  Terms and Concepts In this topic, you will learn to: Describe the Accounts Payable terms and concepts
Buyer  - Refers to the company/individual placing the order for goods and services To buy goods and services, a requisitio...
Vendor  - A company or an individual that/who sells goods and services to another  business or individual. It/He is also r...
One Time Vendors  There are certain vendors with whom we do regular business and  their names are already set up in the sy...
Part Number  -  Number used to identify specific parts ordered or received. A model number of a particular product can be ...
Price  -  Refers to the amount paid towards purchase of goods and services. The price per item multiplied by the number of...
Ship date  - Date on which the goods and services are shipped by the vendor to the  buyer. Normally, it is also the date o...
Remit-to address  - Refers to the vendor’s address to which the payment for goods or services is to be sent. The remit-to ...
Terms  - The credit period within which the payment is to be made to the vendor.  It normally varies from 30 to 60 days. A...
Service charge  - A fee charged by a vendor for a service performed or for a particular  part ordered on an invoice. Vendo...
Tax  - A charge imposed by a federal, state or local body (Regulatory bodies) for the  sale of goods and services. It is u...
Approval  - Certain invoices require approval from an authorized person  Approvals are required to vouch for payment of in...
Code correctly - Financial Planning Analysts need to identify the  expenditure incurred by a particular cost centre!  Acco...
Three way match  -  A matching of the Invoice, Purchase Order and the Receiver. Moving to Appliances Inc. example, note th...
Voucher  - Each invoice is assigned a unique voucher number. For example, ABC Inc sends an invoice (Invoice # 123456) to I...
Utilities  -  The term refers to the basic amenities used for in-house consumption. For example, gas, water, electricity, ...
<ul><li>Repeat Payment -   </li></ul><ul><li>A repeat payment is a payment for lease. </li></ul><ul><li>It can be on build...
Discounts  -  Invoices earn discounts if the buyer chooses to pay early and/or with  cash.  The date by which, if payment ...
<ul><li>Cash discount is: </li></ul><ul><li>.  A credit or discount offered if the buyer chooses to pay early  </li></ul><...
<ul><li>Trade discount is: </li></ul><ul><li>.  Reduction in price offered or given for larger than average  </li></ul><ul...
Tolerance  - Any variation in ordered price/quantity vs. invoiced price/quantity would  result in matching discrepancy dur...
<ul><li>Duplicate  -  Invoices can be potential duplicates if: </li></ul><ul><li>Two or more invoices have the same invoic...
Line Item  -  Multiple goods or services may be ordered in a single  purchase order. For ordering each type of goods and s...
<ul><li>Invalid PO  - Every Purchase Order has a number. The Purchase Order number  </li></ul><ul><li>normally contains bo...
<ul><li>Closed PO  -  A Purchase Order may have multiple line items. Each of these lines get  </li></ul><ul><li>closed if ...
Blanket PO  -  A purchase order is sometimes raised on a roughly estimated amount. It is so created because the exact valu...
<ul><li>Adjustments  -  Invoice might be… </li></ul><ul><li>short paid </li></ul><ul><li>paid to wrong vendor </li></ul><u...
<ul><li>Dispute  - All invoices are in dispute, if they cannot be processed for payment for  </li></ul><ul><li>some reason...
Invoice types  In this topic, you will learn to: Explain the different invoice types
<ul><li>Broadly, there are two types of invoices: </li></ul><ul><li>Paper Invoices -  </li></ul><ul><li>We receive invoice...
Types of Paperless Invoices <ul><li>There are mainly two types of paperless invoices: </li></ul><ul><li>Web invoices </li>...
It is also known as Electronic invoicing. It works on a web based application. Suppliers use this application to view invo...
<ul><li>E-Invoicing helps reduce payment lead time by providing accurate and up-to-date payment information. </li></ul><ul...
EDI Provides a translation channel through which invoice date can be exchanged between the buyer and the suppliers.  EDI i...
<ul><li>Pros: </li></ul><ul><li>Accurate transactions. </li></ul><ul><li>Faster payment (Waiting time for invoice to be re...
Invoiceless payments <ul><li>Payments for the purchase of goods/services can also be made without an Invoice  </li></ul><u...
Evaluated Receipt Settlement (ERS) payment is triggered on receipt of a product/service. The pay amount is the negotiated ...
<ul><li>Pros: </li></ul><ul><li>Eliminates matching errors. </li></ul><ul><li>Faster payment (Waiting time for invoice to ...
P-Card <ul><li>P-Card refers to the Purchasing Card. It is a credit card which allows you to make small dollar purchases w...
Payment methods In this topic, you will learn to: Explain the different payment types
Modes of payment <ul><li>Different methods are used to disburse payments.  </li></ul><ul><li>Let’s look at the different p...
Cash Cash is paid when any purchases are made. These are done when the value of the purchases is very nominal.  These are ...
Check <ul><li>A negotiable instrument drawn against deposited funds, to pay a specified  </li></ul><ul><li>amount of money...
Wire is transfer of amount due directly to the supplier’s bank…an electronic transfer of funds to the vendor concerned. It...
<ul><li>Electronic Funds Transfer (EFT) ensures funds transfer from one bank account to another using electronic links.  <...
A check drawn by one bank against funds deposited into its account at  another bank, authorizing the second bank to make p...
<ul><li>The P-Card is a stable and effective solution to pay for purchases. It operates much like a consumer credit card. ...
Payment Run process In this topic, you will learn to: Explain the payment run process, discuss the remedies  available whe...
<ul><li>How does Payment Run normally happen? </li></ul><ul><li>Invoices that are due for payment are selected. </li></ul>...
<ul><li>Check Run refers to the process of cutting checks to make vendor payments. The time at which the checks are cut di...
<ul><li>Checks issued may be returned due to various reasons: </li></ul><ul><li>Transmitted to incorrect supplier </li></u...
Transmitted to incorrect supplier <ul><li>Remedies available if checks are transmitted to incorrect supplier: </li></ul><u...
Sent to incorrect remit <ul><li>Remedies available if checks are sent to incorrect remit: </li></ul><ul><li>Contact buyer ...
If new remit is not updated  <ul><li>Remedies available if new remit is not updated in the system: </li></ul><ul><li>Vendo...
<ul><li>Remedies available if repeat payment is undeliverable: </li></ul><ul><li>Send email to contact listed on repeat pa...
Hey! I won a lottery ticket for $50,000 Yo! I’m rich. I’ll deposit the  check right away in the bank! Oh!My, I cannot find...
WAIT! Don’t panic… No one can cash the check -  There’s a solution! MAKE A STOP PAYMENT!!! I lost the check you  gave me f...
The Lottery agency informed the  bank and made a stop pay! The check cannot be used by anyone now!!! Stop pay is a request...
When do you stop pay <ul><li>When check is misplaced  </li></ul><ul><li>If the check has not reached the vendor </li></ul>...
Third Party Payments In this topic, you will learn to: Describe the circumstances under which a third  party gets paid
<ul><li>Payments are made only to the actual vendors. However, in certain exceptional cases and with approvals from the au...
<ul><li>Factoring means buying receivables at reasonable rates. </li></ul><ul><li>It involves payments to finance companie...
<ul><li>When a leasing company sells their lease to a bank or finance company, it is called assignment. </li></ul><ul><li>...
<ul><li>Sometimes, vendors might have outstanding payments due to another GE company and might be unwilling to pay. </li><...
<ul><li>Levies can be imposed on vendors who have tax liabilities with a  </li></ul><ul><li>Federal or a State government ...
Due Diligence In this topic, you will learn to: Describe the Due Diligence process
This is a term used to define the efforts made by companies to reunite unclaimed property with the rightful owner.  The fi...
Once property items have been identified as unclaimed, research is performed to ensure that the property items are valid. ...
Timing of Due Diligence process GE has an internal policy of performing the due diligence process twice prior to the esche...
Accounting Entries In this topic, you will learn to: Write the journal entries involved in AP
Goods received GR/IR is the short form for Goods received/Inventory received. (a)  When Goods worth $100 are received  Dr....
Accounting for cost changes The change in the cost of goods is intimated by the AP Rep to the buyer <ul><li>Sometimes, the...
When receiving is made for $100 and invoice is processed for $105. Cost change of $5. Goods received (a)  When goods worth...
When receiving is made for $100 and invoice is processed for $95. Cost change of -$5. Goods received (a)  When goods worth...
When tax, freight or other expense is processed along with the product price. <ul><li>.  When invoice of $100.00, Freight ...
Accounting for Exchange rate variances <ul><li>Sometimes, books may be maintained in one currency (Eg: CAD). </li></ul><ul...
In the Canadian books, when receiving is made for USD$100.00 and invoices are processed for USD$100.00 (Assuming the Excha...
In the Canadian books, when receiving is made for USD$100.00 (Assuming the Exchange rate is 1.50) and invoices are process...
In the Canadian books, when receiving is made for USD$100.00 (Assuming the Exchange rate is 1.50) and invoices are process...
AP JEs At the time of Receivings Purchases A/c Dr To Receipt Control A/c At the time of Invoice – PO Matching Receipt Cont...
Material in Transit Material in Transit A/c Dr To Accrued Liability A/c Material Recd. but Invoice Not Recd. Receipt Contr...
Purchase Returns In this topic, you will learn to: Define purchase returns and explain how it is handled
Purchase returns - what and how to handle? <ul><li>Purchases made may be returned to the vendor due to certain reasons: </...
Debit/Credit Memos <ul><li>There is all possibility that goods and services purchased might: </li></ul><ul><ul><ul><ul><li...
<ul><li>Credit Memo/Debit Memos  -  Occasionally, goods and services paid might: </li></ul><ul><li>not meet specification ...
What is a Debit Memo? Vendor Compaq Ltd. raises an invoice on GE Aircraft Engines for $5,230 and the amount was paid. $230...
What is a Credit Memo? A note/memo indicating the amount owed to a company or a person. A credit memo is used to reduce th...
Aged Debit memos Uncollected debit memos begin to age. Thus, they require intense  collection methods, including research,...
Hold In this topic, you will learn to: Define hold and explain the circumstances under  which hold is placed
<ul><li>Certain invoices are put on HOLD meaning, invoices do not get paid although  </li></ul><ul><li>processed! </li></u...
<ul><li>A HOLD indicates that the vendor’s payments are being held. It may be placed due to any of the following reasons: ...
<ul><li>Audit hold:  </li></ul><ul><li>This indicates that the vendor is on hold for any other reason. Vendors placed on a...
Vendor Reconciliations In this topic, you will learn to: Explain the High level Reconciliation process
Vendor Statements are received on a regular basis from the Vendors. These are then compared with the General Ledger balanc...
(1)  Description/purpose of the balance sheet account must be documented (2)  Total of items listed equals ending balance ...
Reconciliation Process Download Vendor account balance from G/L  and receive the Vendor Statement Identify if there are an...
Customer  Service In this topic, you will learn to: Express the importance of Customer Service
Accounts Payable process does not stop with just processing invoices. Vendors and buyers contact the AP Department with ma...
<ul><li>Invoices will not get paid when they are in dispute or is discrepant. </li></ul><ul><li>We have given a list of pr...
<ul><li>Invoice processed to wrong ADN number </li></ul><ul><li>Dispute on why a certain percentage of discount has been a...
Controllership in AP In this topic, you will learn to: Explain Controllership in AP and identify a few red flags
Hence, payment if made, will reach the wrong vendor!!! Accounts Payable is a liability to a company and such liability sho...
<ul><li>Probable Errors </li></ul><ul><li>Payment to a wrong vendor </li></ul><ul><li>Payment in wrong currency </li></ul>...
What can happen with little or no care? <ul><li>Vendor Over paid </li></ul><ul><li>Loss of discounts due to time limitatio...
<ul><li>Ensure accurate, timely and actionable financial information </li></ul><ul><li>Think Strategically About Business ...
Controllership – A value-added, unyielding commitment to: What Is Controllership? <ul><li>Compliance </li></ul><ul><li>Eff...
<ul><li>Financial position, results of operations and related disclosures are reported  </li></ul><ul><li>in a fair and ti...
<ul><li>How does this affect you: </li></ul><ul><li>Understand operational processes (supplier and internal) and internal ...
6 Duplicate Payments GL Coding Accruals Forex Accounting Biz Process 6   Process Segregation of Duties Vendor Verificatio...
Accounts Payable <ul><li>Segregation of Duties </li></ul><ul><li>Vendor Verification </li></ul><ul><li>Approval / Matching...
<ul><li>The  Purchase Order Creator  and the  Invoice Processor , are in all circumstances, </li></ul><ul><li>different pe...
Requirement  for materials / services  arises  Create  agreement or communicate  Purchase Order  to supplier Vendor  ships...
Sourcing <ul><li>Separation of duties </li></ul><ul><li>(materials request & order placement) </li></ul><ul><li>Secured & ...
Receiving <ul><li>Control over Receiving Area  </li></ul><ul><li>Short or Over Shipments Handling  </li></ul><ul><li>Quali...
Accounts Payable <ul><li>Receipt  of invoices </li></ul><ul><li>Approved invoices from buyers to A/P (Non PO only) </li></...
$ = $ Controls <ul><li>GL Balance Vs. Vendor Statement Balance </li></ul><ul><li>Scheduled Reconciliation </li></ul><ul><l...
GL Account Reconciliation $ = $ GL Accounts Reconciliation Controls <ul><li>AP Clearing / Control Accounts </li></ul><ul><...
Risks Vs. Controls Potential Risk Control Multiple Vendor Ids Vendor Purging Policy Blanket POs Tracking Process Evaluate ...
Potential Risk Control Duplicate Payments Duplicate Audit Process Price / Qty. / Currency Variance Limits Absolute $ and %...
Potential Risk Control Processing Accuracy Q C Process Knowledge Update SOPs Process Refresher Course Disputed Invoices Ro...
AP Tips <ul><li>Expense Invoices Having Big $ Value </li></ul><ul><ul><li>Water bill of $ 100 K with approval and coding <...
<ul><li>Vendor Reconciliation </li></ul><ul><ul><li>Items appearing in statement and non in GL </li></ul></ul><ul><ul><li>...
Identify the Red flags...
Red flag zones Understand the Red Flags (Warning Signs): Controllership issues have to be kept in mind while processing in...
<ul><li>.  Juan Park uses his approval authority to pay for childcare or private schooling of his children.  </li></ul><ul...
<ul><li>.  Gerri Teak’s company is the payee on the check request or invoice and he is also the approver. </li></ul><ul><l...
<ul><li>.  Craig Thomas does not have the authority to approve payments over a certain dollar amount. However, he knows th...
<ul><li>.  Steve Buckner books his improper expenses and payments to a higher volume, less detectable account. </li></ul><...
AP does not process... In this topic, you will learn to: Explain the cases which Accounts Payable does not process
AP does not process… A Statement of an Invoice is a  Proforma Invoice  which lets the purchaser know of his liability. It ...
<ul><li>Intra company billing is referred to as one GE company billing another GE business. </li></ul><ul><li>AP is not in...
Political Contributions <ul><li>Political contributions are strictly controlled by GE Government Relations </li></ul><ul><...
Embargo <ul><li>Payments to countries embargoed are prohibited.  </li></ul>Understand the complete process - pay the corre...
Sarbanes Oxley In this topic, you will learn to: Define SOX404
Sarbanes Oxley – Mandates Audit of Internal Controls “ Sarbanes Oxley Act was passed in response to the issues at companie...
<ul><li>Key controls could incorporate the following aspects: </li></ul><ul><ul><li>Controls over initiating, processing, ...
Best practice from GE Businesses In this topic, you will learn to: Identify some E-tools used by different GE Businesses
Some E-Tools in Sourcing
Some E-Tools in Sourcing
E-Bid Tools: Example, Sourcebid, Noosh, Procuri.Com. Reverse auctions get the best pricing, terms, etc. that the market wi...
<ul><li>Accounts Payable Department processes invoices on time and ensures to capture discounts. </li></ul><ul><li>In most...
TPS Is a Creative Alliance That Provides Significant Incremental Income And Working Capital Opportunities for GE Industria...
Program Benefits <ul><li>•  Financial Productivity </li></ul><ul><li>- Improved Cash Flow </li></ul><ul><li>- Improved Bal...
Accelerated Payment Program GE Trade Payables Is An Early Payment Program That Creates a Unique Alliance Between GE Capita...
GAP 31 <ul><li>General Accounting Procedures No. 31 – Trade Payables </li></ul><ul><li>Trade Payable Includes </li></ul><u...
Dictionary Double Click to view the AP Dictionary
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Ap[1](buy to pay)

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  • Invoices should not be paid till receivables are cleared from the particular vendor - Added to glossary MORE CLARITY
  • Our businesses have 100 processes. Lets take a simple example about paying Supplier for Products or Services. What can go wrong? Compliance is Easy to Understand … Very Hard to Operationalize
  • Ap[1](buy to pay)

    1. 1. GE Capital Accounts Payables Module
    2. 2. Learning Goals <ul><li>The endeavor is to help the New Hire induct to the Accounts Payable process </li></ul><ul><li>with ease and bring in uniform knowledge base to the Payables shopfloor. </li></ul><ul><li>The course contents: </li></ul><ul><li>Accounts Payable Overview </li></ul><ul><li>Sourcing – The Procurement process </li></ul><ul><li>High level Process Maps </li></ul><ul><li>Accounts Payable – Critical documents </li></ul><ul><li>3 critical documents – In detail </li></ul><ul><li>Vendor Set Up </li></ul><ul><li>Accounts Payable – Terms & Concepts </li></ul><ul><li>Invoice types </li></ul><ul><li>Payment Methods </li></ul><ul><li>Payment Run process </li></ul><ul><li>Third Party payments </li></ul><ul><li>Due Diligence </li></ul><ul><li>Accounting Entries </li></ul><ul><li>Purchase Returns </li></ul><ul><li>Hold </li></ul><ul><li>Vendor Reconciliation's </li></ul><ul><li>Customer Service </li></ul><ul><li>Controllership in AP </li></ul><ul><li>Identify Red Flags </li></ul><ul><li>AP does not process… </li></ul><ul><li>Sarbanes Oxley </li></ul><ul><li>Best practices from GE businesses </li></ul>
    3. 3. Accounts Payable Overview In this topic, you will learn to: Explain the Origin of Accounts Payable
    4. 4. Exchange began when mankind first engaged in transfer, that is, when two parties with surplus resorted to barter obtaining goods as an alternative. Barter then evolved into the fine art of selling. Early men produced everything they consumed. Gradually, they formed groups and created an opportunity for trade or exchange. Exchange therefore contributes to surplus and economic growth. Such exchange resulted in the production and marketing of goods and services. Origin of the Exchange process
    5. 5. Four stages in the provision of satisfaction Stage 1 Obtaining Resources Stage 2 Producing Goods & Services Stage 3 Making Intermediate Exchanges Stage 4 Consuming Goods & Services The relationship between intermediate exchanges and the consumption of the goods and services gave birth to payment for such goods and services. We slowly shifted from barter to paying money for the consumption of goods and services. This gave rise to ACCOUNTS PAYABLES!
    6. 6. Let’s understand the process of Payables!!! I want to buy a few things for home! Joan rushes to the market...
    7. 7. Let me pick up all these!!! The bill is made by the counter person for $136.25 Joan gives a credit card to pay the bill
    8. 8. <ul><li>The bill is immediately honored by the credit card issuer. </li></ul><ul><li>It would take more time for Joan to make this payment to the credit card company. </li></ul><ul><li>Joan owes $136.25 to the credit card company, which means, $136.25 is </li></ul><ul><li>payable by Joan. </li></ul><ul><li>Bill raised by the counter person is referred to as the Invoice ! </li></ul><ul><li>The time gap between goods purchased and the payment made is termed as the </li></ul><ul><li>credit period . </li></ul>Learn a few terms from the above narration… Goods and services are purchased on credit in an Accounts Payable transaction!
    9. 9. Sourcing - The process of purchasing In this topic, you will learn to: Discuss the Procurement process
    10. 10. Sourcing is the first phase in the Procurement process, where information is gathered and research is done in order to enable the best procurement decision. Let’s take a look at the purchasing process: Procurement Receiving
    11. 11. Steps in Purchasing <ul><li>The different steps in Purchasing are: </li></ul><ul><li>Requisition - This is a request for materials. </li></ul><ul><li>Request for Quotation - This is used for soliciting quotes from the supplier regarding prices, terms and conditions of the item. There are 3 sub types of ‘Request for Quotation’ (RFQ): </li></ul><ul><ul><ul><ul><li>Bid </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Catalog </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Standard </li></ul></ul></ul></ul><ul><li>Quotation - It is a sales offer from the supplier. </li></ul>
    12. 12. Bid - This refers to accepting quotes from potential suppliers over a predetermined period of time. Catalog - Product information is available with description and price, based on which order is placed. This option is used for short term or immediate supplies. Standard - Business identifies the vendor and negotiates the terms of payment. It also approves the vendor as the authorized supplier. This method is used for long term supplies. Types of RFQ
    13. 13. Sourcing Process
    14. 14. Highlevel Process Maps In this topic, you will learn to: Describe the Accounts Payable process flow
    15. 15. Process of purchasing Multiple options for the purchaser...requiring multiple processing. Buyer orders goods or services No Purchase Order (P.O) used Purchase Order (P.O) used Manual P.O used Mechanical P.O used
    16. 16. Products and Services AP processes invoices raised for products and services! Products: Goods like medical equipment, computer peripherals, industrial instruments, etc. are examples of products purchased Services: Invoices raised on services like repairing, cleaning, telephone service, etc. For example, installation carried out by technicians/engineers…PO is not raised for utility services like gas, fuel, electricity, etc Service Engineers from GE or third party vendors carry out services.
    17. 17. Requirement for materials / services arises Vendor ships materials Approve invoice for payment Payables department verifies invoice and makes payment Requisition sent to Sourcing Department Buy to Pay - With PO Vendor sends order and invoice to buyer Create agreement or communicate Purchase Order to supplier
    18. 18. Buy to Pay - Without PO Requirement for materials / services arises Vendor ships materials Requisition sent to Sourcing Department Vendor sends order and invoice to buyer Buyer approves invoice for payment, assigns account number Payables department verifies invoice and makes payment Create agreement or communicate Purchase Order to supplier
    19. 19. Accounts Payable - Critical Documents In this topic, you will learn to: Illustrate the Accounts Payable work & describe the importance of some documents
    20. 20. What is Accounts Payable in GE? GE Medical Systems Office 10 machines @ $12,100 are ordered I, at GEMS raise the Purchase Order
    21. 21. Goods are shipped to GEMS GE Medical Systems Office creates a GRN on receipt of goods Goods are purchased on credit from XYZ Inc., the vendor
    22. 22. Accounts Payable must process the invoice , for payment on the due date!!! XYZ Inc. raises invoice payable after 45days
    23. 23. Accounts Payable Work! Payables department receives invoices through courier, mails, scanned invoices, etc. Are goods and services received? VERIFY Goods Received Note! Check if the vendor set up in the system Verify if the invoice is a duplicate! Do a Preliminary check: Can the vendor be paid? Should he be placed on HOLD? Should payment be redirected? Process the invoice in the system (Enter details as required to make the payment on the due date) Vendor receives payment…. Invoice gets paid on the due date
    24. 24. <ul><li>To pay a vendor, it is important that there are three documents in possession: </li></ul><ul><li>Purchase Order (referred to as P.O.) </li></ul><ul><li>Acknowledgment for receipt of goods and services (Goods Received Note{GRN or </li></ul><ul><li>Receiver}) </li></ul><ul><li>Invoice </li></ul>Documents needed to pay Standard documents required to honor payment!
    25. 25. <ul><li>Purchase Order (PO) - The request issued by a buyer to a vendor for goods </li></ul><ul><li>or services. In most cases, purchases will be made utilizing a PO. It is also referred </li></ul><ul><li>to as a Customer Order. Each PO is assigned a PO number </li></ul><ul><li>A PO is an information sharing vehicle provided to vendors which specifies: </li></ul><ul><li>Who is making the purchase </li></ul><ul><li>Who the vendor is </li></ul><ul><li>Where the goods/services are to be delivered </li></ul><ul><li>Whom to bill </li></ul><ul><li>Payment terms </li></ul><ul><li>Shipping terms and instructions </li></ul><ul><li>Due date </li></ul><ul><li>Account # to which the purchase will be charged </li></ul><ul><li>Authorizing Signature (if necessary) </li></ul><ul><li>Specifications regarding the purchase (including Product Code): </li></ul><ul><ul><ul><ul><li>Quantity,Color </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cost </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Size,weight and unit of measure </li></ul></ul></ul></ul>
    26. 26. Goods Received Note (GRN) - The purchaser of goods and services would issue a notification that the ordered goods and services were indeed received. This is an acknowledgement of receipt of goods and services. It is called as a “Goods Received Note”(GRN). It indicates who received the purchase, when it was received, and whether all or a part of the order was received. In the United States of America, Goods Received Note is also known as a ‘Receiver’!
    27. 27. Invoice - To pay, we need an invoice which describes who has to be paid, what has to be paid for, and the amount due. Invoices generally contain payment terms, which represents the timeframe that can be taken for which payment can be made to the vendor. It is provided by the vendor. It is in mutual interest to make prompt payment. For example, it may be a common practice to offer an x% discount on the purchase price of the goods or services, if the invoice is paid in full within X days. Invoices with Purchase Orders are referred to as a PO Invoice.
    28. 28. Appliances Inc. is a retailer of refrigerators and television sets. He places orders from some manufacturers for the following: 10 television sets - Model X-123 DBB of Onida Inc. (21inches)[Part # 316-52] 3 television sets - Model Big Screen34 of LG International (29inches) [Part # 26-1] 6 refrigerators - Double Door Super Cooling of LG International [Part # 689-00] 3 refrigerators - Single Door Model 56B of P&G Inc. [Part # 238-7] What does Appliances Inc. do?
    29. 29. These goods are purchased on credit from the respective manufacturers at the below costs: Cost of Model X-123 DBB of Onida Inc. television: $2480 each piece Cost of Model Big Screen34 of LG International television: $3436 each piece Cost of Double Door Super Cooling of LG International refrigerator: $1510 each piece Cost of Single Door Model 56B of P&G Inc. refrigerator: $850 each piece
    30. 30. <ul><ul><ul><li>Appliances Inc. raises a PO on P&G Inc. </li></ul></ul></ul><ul><ul><ul><li>Appliances Inc. raises a PO on Onida Inc. </li></ul></ul></ul><ul><ul><ul><li>Appliances Inc. raises a PO on LG International </li></ul></ul></ul><ul><li>Who raises the PO and whose name? </li></ul><ul><ul><ul><li>Each of the different manufacturers raise separate invoices. </li></ul></ul></ul><ul><li>Onida Inc., LG International and P&G Inc. raise the invoice. </li></ul><ul><li>Who has to raise the invoice? </li></ul>
    31. 31. <ul><ul><ul><li>The invoice is raised on the name of the requisitionist, Appliances Inc. </li></ul></ul></ul><ul><li>On whom will the invoice be raised? </li></ul><ul><ul><ul><li>Model Big Screen34 of LG International television = $10,308 </li></ul></ul></ul><ul><ul><ul><li>Double Door Super Cooling of LG International refrigerator = $9,060 </li></ul></ul></ul><ul><ul><ul><li>Total amount of the invoice = $19,368 </li></ul></ul></ul><ul><li>What will be the total invoice amount in the invoice raised by LG International? </li></ul>
    32. 32. 3 critical documents - In detail In this topic, you will learn to: Appraise the nature of the PO,GRN and Invoice & Identify the different types of invoices
    33. 33. PO Creation Requirement for materials / services arises Reaches the requisitoner Analyze the vendor / supplier Create request for quotations Quotations received from supplier Analyze the Quotations Create agreement or communicate Purchase Order to supplier Requistioner gets in touch with Sourcing Contacts requisitoner for details e.g. Timelines, Price, Qty Designated Buyer identified Designated authority approves
    34. 34. PO Types <ul><li>Mainly, there are four different types of Purchase Orders: </li></ul><ul><li>Standard Purchase Order </li></ul><ul><li>Blanket Purchase Agreement </li></ul><ul><li>Contract Purchase Agreement </li></ul><ul><li>Planned Purchase Orders </li></ul>
    35. 35. Standard Purchase Orders are created for one-time purchase of various items. These purchase orders are created when buyer knows the details of the goods or services, estimated costs, quantities, delivery schedules and accounting distributions. Standard Purchase Orders
    36. 36. Blanket Purchase Agreement Blanket purchase orders are created when buyer knows the details of the goods or services to be purchased from specific supplier in a period, but buyer do not yet know the detail of delivery schedules. Blanket purchase orders are used to specify negotiated prices for items before actually purchasing them. Blanket purchase orders can also be raised when the actual amount involved in the transaction is not known, when extra business is expected, etc.
    37. 37. Contract Purchase Agreement Contract purchase agreements are created with supplier to agree on specific terms and conditions without indicating the goods and services that will be purchased. Buyer can later issue standard purchase orders referencing contract agreement.
    38. 38. Planned Purchase Orders A planned purchase order is a long-term agreement committing to buy items or services from a single source. Buyer must specify tentative delivery schedules and all details for goods or services that are to be purchased, including charge account, quantities and estimated cost.
    39. 39. Materials shipped by vendor Requisitoner receives the material Inspect Goods Rejected Accepted Goods are returned to the vendor/supplier Good Received Note is raised by Requisitioner/Stores Dept. Receiving Is done by buyer Receiver creation Once the receiver is received, it has to updated in the system. An entry is passed and the Payables Representatives will be able to view this entry. Such entry is termed as ‘Receiving’
    40. 40. Critical fields in an invoice with PO: Invoice - Key fields Invoice Date PO Number Part Number Total Invoice Amount Remit To Address
    41. 41. Non-PO invoice - Invoices not against a purchase order is termed as a Non-PO invoice. A purchase order does not exist for certain invoices because the value of the service cannot be ascertained. In such cases, there exists a difficulty in ascertaining the amount for which a PO has to be created for. Mostly, all utility bills, check requests and A/R refunds are Non-PO. For example, rental bills, gas and fuel payments, electricity bills, freight payments, requisition from Accounts Receivable to return payments to vendors etc are Non-PO invoices. Invoices without Purchase Orders are referred to as a Non-PO Invoice.
    42. 42. Critical fields in an invoice with No PO: Invoice - Key fields Invoice Date and Number Remit to address Account Code Amount due Approval
    43. 43. Vendor Set Up In this topic, you will learn to: Illustrate the method of setting up a new vendor
    44. 44. Vendor set up is the process of updating in a database, the vendor details like vendor name, site address, payment terms, etc. The details of new vendors are to be included in this database which will assign a unique vendor code with which you can process the invoice. Even changes to existing vendors are to be made as and when required. Before setting up a new vendor, check if the vendor has already been set up. Sometimes, approvals are required from the buyer to set up vendors. In such cases, required approvals are also a mandate for vendor set up. Invoice cannot be processed or paid if vendors are not set up!!!
    45. 45. <ul><li>Vendor set up is the process of setting up vendors in the ‘Vendor Master File’. Here, new vendors are added and changes are made to the existing vendors. </li></ul><ul><li>Every vendor added is assigned a Vendor Code/Vendor Number. This process ensures that a master database is created for vendors. </li></ul><ul><li>The request for payment should be checked for it’s validity and completeness: </li></ul><ul><li>Is the document legible ? </li></ul><ul><li>Is there a Vendor Name on the document? </li></ul><ul><li>Is there a Vendor Remit to address on the document? </li></ul><ul><li>What is the title of the document? </li></ul>Validity checks are essential to be completed before a new vendor set up
    46. 46. <ul><li>Check if the vendor is already set up </li></ul><ul><li>Check for approval </li></ul><ul><li>Check for Tax Id/SSN </li></ul><ul><li>Check for the nature of payment </li></ul>Things to do before a new vendor set up
    47. 47. Is the vendor already set up? <ul><li>Search in the Vendor Master Database if a similar or exact </li></ul><ul><li>vendor exists </li></ul><ul><li>If it is a totally new vendor, begin with the pre-work of setting up a new vendor </li></ul><ul><li>In case the vendor exists, check if the site address is the same……If both the vendor and the site address are the same, Do not set up the vendor. </li></ul><ul><li>If it is the same vendor with a different site address, continue with the rest of the procedures for setting up the vendor. </li></ul>
    48. 48. Check for approval <ul><li>All new vendor set up requests should have the required approvals on it </li></ul><ul><li>There is no given rule on the number of approvals - It differs </li></ul><ul><li>from business to business. </li></ul><ul><li>Recent amendments to the IRS Guidelines states that all new </li></ul><ul><li>vendor request forms should be accompanied with a W8 or W9 Form. </li></ul>Rules change…Keep track of the amendments to the IRS Guidelines.
    49. 49. During vendor set up, check for the tax id/SSN …… Tax ID: A number provided by the IRS to an individual or a business which identifies them for tax reporting purposes. This is also called as Federal Id. Social Security Number: Social Security Numbers were introduced by the Social Security Act of 1935. They were originally intended to be used only by the social security program. In 1943, Roosevelt signed Executive Order 9397 which required federal agencies to use the number when creating new record-keeping systems. In 1961, the IRS began to use it as a Taxpayer Id. SSN is also termed as ‘EIN’ (Employee Identification Number). Check for Tax id/SSN
    50. 50. Check for the nature of payment <ul><li>Taxability varies from sale of merchandise or services…this needs to be taken care while setting up a vendor. </li></ul><ul><li>Certain criteria are enforceable if payment is towards services or towards merchandise. </li></ul><ul><li>1099, W8 or W9 forms filled by the vendors are submitted accordingly for the purpose of vendor set up. </li></ul>The forms are for the purpose of ensuring that the vendor is a valid individual or company.
    51. 51. <ul><li>Request a Form W-8 from any person to whom you are making payment that you presume or otherwise believe to be a foreign person. </li></ul><ul><li>The request for the form should be made before making the payment so that you hold it when making the payment. A completed Form W-8 must be reviewed for completeness and accuracy. </li></ul><ul><li>Request Form W-8ECI from any foreign person or organization to which you are making a payment if it the beneficial owner of the income and it claims that the income is effectively connected with the conduct of a trade or business within the United States. </li></ul>W8 form is a ‘declaration issued by the IRS that the vendor has rendered services on the US Soil’.
    52. 52. <ul><li>Use Form W-9 to request the taxpayer identification number (TIN) of a U.S person (including a resident alien) and to request certain certifications and claims for exemption. </li></ul><ul><li>Form W-9 (or an acceptable substitute) is used by persons required to file information returns with the IRS to get the payee’s (or other person’s) correct TIN. For individuals, the TIN is generally the Social Security Number (SSN). </li></ul>W9 Form - a ‘request for taxpayer identification number & certification’.
    53. 53. 1099 Form <ul><li>1099 is an Internal Revenue Service (IRS) tax document that is sent to businesses or individuals after calendar year-end. It is used by them for reporting taxable income to the IRS. </li></ul><ul><li>It is not issued to corporations, non-profit or tax exempt organizations. </li></ul><ul><li>Every vendor is assigned a 1099 code based on the nature of services rendered, rental payments, medical payments, non employee payments, royalties, awards and honorariums. </li></ul><ul><li>IRS issues a 1099 form to taxable vendors stating the details of tax </li></ul>1099 code is the basis for issuance of IRS forms.
    54. 54. Time for set up <ul><li>Only after all preliminary checks are completed, the vendor has to be set up. </li></ul><ul><li>If the vendor is already set up, the process should not be repeated. </li></ul><ul><li>To add a new site, only a new site has to be set up. </li></ul><ul><li>Follow all rules required to set up a vendor. </li></ul>Practice Controllership: Keep an eye....compliance is important!
    55. 55. Accounts Payable - Terms and Concepts In this topic, you will learn to: Describe the Accounts Payable terms and concepts
    56. 56. Buyer - Refers to the company/individual placing the order for goods and services To buy goods and services, a requisition is made by the buyer.
    57. 57. Vendor - A company or an individual that/who sells goods and services to another business or individual. It/He is also referred to as the Supplier . The unique number assigned to identify a vendor is termed as a vendor code Vendors who do not belong to the United States are Foreign Vendors
    58. 58. One Time Vendors There are certain vendors with whom we do regular business and their names are already set up in the system with a vendor code. However, very often we do a number of adhoc purchases from new vendors. We may never buy from that vendor again. Such vendors are One time Vendors. For Example: Gallopine Inc. employs temporary engineers to do some repair work at XYZ Inc. The repair work amounted to $125 which included purchase of a spare part from Indsys Co., a vendor from whom we normally don’t buy. Indsys Co. is thus set in the system as a One Time Vendor. Be careful while paying - There will be only one invoice and discrepancies cannot be deducted from another invoice
    59. 59. Part Number - Number used to identify specific parts ordered or received. A model number of a particular product can be referred to as a part number. Refer Appliances example, 316-52 : Part Number of Model X-123 DBB of Onida Inc. (21inches) 26-1: Part Number of Model Big Screen34 of LG International (29inches) 689-00: Part Number of Double Door Super Cooling of LG International 238-7: Part Number of Single Door Model 56B of P&G Inc.
    60. 60. Price - Refers to the amount paid towards purchase of goods and services. The price per item multiplied by the number of items ordered or received is referred to as ‘extended price’. The price per item is termed as ‘price per unit’.
    61. 61. Ship date - Date on which the goods and services are shipped by the vendor to the buyer. Normally, it is also the date on which the title (ownership) of goods and services is passed to the purchaser
    62. 62. Remit-to address - Refers to the vendor’s address to which the payment for goods or services is to be sent. The remit-to address might be the vendor’s address or any other address to which payments are to be made. Shipment address refers to the address to which goods and services purchased are shipped. The shipment address will never be the same as the remit to address. Shipment address is for Buyers and Remit-to address is for suppliers! Drop shipment refers to shipping goods and services directly to the end customer’s site!
    63. 63. Terms - The credit period within which the payment is to be made to the vendor. It normally varies from 30 to 60 days. An invoice stands due on the last date of the term date. Discount due date: Date by which if payment is made, earns a discount Net due date: Date on which is invoice is due for payment Example, ABC Co buys goods on credit from DEF Inc. on 01-01-2002 to be paid after a period of 30days. If ABC Co pays on 01-15-2002, it will earn a discount of 10% and the due date for payment is 01-31-2002. Discount due date: 01-15-2002 Net due date: 01-31-2002 Discounts can be earned on an invoice depending on how early the payment is made before the due date!!!
    64. 64. Service charge - A fee charged by a vendor for a service performed or for a particular part ordered on an invoice. Vendors may employ temporary engineers to service a particular product.
    65. 65. Tax - A charge imposed by a federal, state or local body (Regulatory bodies) for the sale of goods and services. It is usually stated as a percentage. The tax element is given on the face of the invoice. The type of tax claimed would depend on the province/state to which the goods and services are shipped. Tax is paid on an invoice based on agreed contract terms and conditions!
    66. 66. Approval - Certain invoices require approval from an authorized person Approvals are required to vouch for payment of invoices. Specific approvals are needed for high dollar invoices or for invoices which are not PO based. Approvals given on the face of the invoice are termed as ‘Face Approved Invoice’ . It is generally written ‘OK to Pay’ on the face of the invoice signed by the authorized signatory. Business rules decided the number of approvals required
    67. 67. Code correctly - Financial Planning Analysts need to identify the expenditure incurred by a particular cost centre! Account Distribution Number - Refers to the complete general ledger account number to which a transaction is coded to. Each account number can be broken into several Components, like the GL code, Product Code, Cost Centre, etc. GL Code: A code which represents each GL account. Cost Centre: Refers to a unit within a concern/ firm to which the transaction has to be coded to. For example: Freight paid to GEMS on purchase on MRI Scan will be charged to the below account 01.111.1336.2521.000.001.12 GEMS Ultrasound. MRI Scans. Model Number. Freight. Default . Zone . Area .
    68. 68. Three way match - A matching of the Invoice, Purchase Order and the Receiver. Moving to Appliances Inc. example, note that there was an order for 3 refrigerators [Single Door Model 56B] from P&G Inc. each costing $850. 2 refrigerators of the same part and price were received by them and goods were invoiced for the total amount of $1700 for 2 quantities. Order Quantity: 3 Unit Price: $850 Extended Price: $2550 Part Number: 238- 7 Here, the amount/quantity/part ordered, received and invoiced match. Although 1 quantity is received less, 2 were ordered, received and invoiced. Thus, the vendor can be paid. Received and Invoiced Quantity: 2 Unit Price: $850 Extended Price: $1700 Part Number: 238- 7
    69. 69. Voucher - Each invoice is assigned a unique voucher number. For example, ABC Inc sends an invoice (Invoice # 123456) to Indsys Co. Indsys Co. also receives another invoice from XYZ Inc (Invoice # 123456). There is a possibility that Indsys Co might end up paying only one invoice, since both carry the same number. Thus, one invoice number can be used by several vendors. In such cases, the invoice number is not a unique one. Hence, every invoice number is assigned a unique voucher number. A voucher number may not exist if the invoice number is unique across different vendors!
    70. 70. Utilities - The term refers to the basic amenities used for in-house consumption. For example, gas, water, electricity, telephone, etc. All these invoices are only service related invoices and are Non-PO. Prompt payment of a utility bill will not earn discounts. Non payment of an utility bill will lead to disconnection of services!!!
    71. 71. <ul><li>Repeat Payment - </li></ul><ul><li>A repeat payment is a payment for lease. </li></ul><ul><li>It can be on building, equipment, rent(apartment or car), etc. </li></ul><ul><li>It can also be for payment of services which the buyer has agreed to make at </li></ul><ul><li>regular intervals </li></ul><ul><li>Payments should be fixed and are to be made over a definite period of time </li></ul>Repeat Payment is a contract payment to the same vendor for the same amount at regular intervals.
    72. 72. Discounts - Invoices earn discounts if the buyer chooses to pay early and/or with cash. The date by which, if payment is made will earn discounts is termed as the “ discount due date”. There are two types of discount, cash discount and trade discount.
    73. 73. <ul><li>Cash discount is: </li></ul><ul><li>. A credit or discount offered if the buyer chooses to pay early </li></ul><ul><li>and/or with cash </li></ul><ul><li>. Discount earned on the payment of all or a part of a debt prior </li></ul><ul><li>to its due date </li></ul><ul><li>. Anything selling below it’s normal price </li></ul><ul><li>. A and B </li></ul><ul><li>. None of the above </li></ul>Help me!!! Answer these questions ...
    74. 74. <ul><li>Trade discount is: </li></ul><ul><li>. Reduction in price offered or given for larger than average </li></ul><ul><li>purchases </li></ul><ul><li>. Bank charge made for a payment of a note prior to maturity </li></ul><ul><li>. Anything selling below it’s normal price </li></ul><ul><li>. None of the above. </li></ul>Trade discount is also termed as ‘Volume Discount’
    75. 75. Tolerance - Any variation in ordered price/quantity vs. invoiced price/quantity would result in matching discrepancy during three way match. Businesses to reduce rework fix tolerance limits. It refers to a standing approval to bypass certain set rules and pay invoices with matching discrepancy upto a specified dollar value or percentage. Let’s assume that Appliances Inc. fixes the tolerance limit as 5%. The actual invoice amount is $19,368, however, it was raised for $20,300 and paid. Was the AP Rep right by paying the invoice? Yes, The AP Reps can process the invoice up to $20,336.40 (5% tolerance - $968.40) Tolerance limits differ from business to business
    76. 76. <ul><li>Duplicate - Invoices can be potential duplicates if: </li></ul><ul><li>Two or more invoices have the same invoice number </li></ul><ul><li>They belong to different vendors with the same invoice number, date and amount </li></ul><ul><li>Sometimes the date is used as an invoice number </li></ul><ul><li>Invoice numbers that differ by only one number, which could have been misread, </li></ul><ul><li>mis-keyed or transposed </li></ul><ul><li>Invoice with same numbers or with an additional number or letter at the beginning </li></ul><ul><li>or the end. For example, 3456 has been keyed as 3456A </li></ul>Duplicate Invoices should be identified and NOT paid.
    77. 77. Line Item - Multiple goods or services may be ordered in a single purchase order. For ordering each type of goods and services, a separate PO line would be created containing information like part description, quantity ordered, ordered price, ADN (Account Distribution Number) to be debited etc. Each of such separate line is referred to as a PO line or line item.
    78. 78. <ul><li>Invalid PO - Every Purchase Order has a number. The Purchase Order number </li></ul><ul><li>normally contains both numeric and alpha numeric characters. </li></ul><ul><li>Every company has a PO structure of its own. Any deviation from the normal PO </li></ul><ul><li>structure is considered as invalid. </li></ul><ul><li>For example…An invalid PO </li></ul><ul><li>might have some special/ extra numeric or alpha numeric characters. </li></ul><ul><li>might contain less number of digits. </li></ul><ul><li>might be linked to the wrong vendor. </li></ul>
    79. 79. <ul><li>Closed PO - A Purchase Order may have multiple line items. Each of these lines get </li></ul><ul><li>closed if </li></ul><ul><li>Entire quantity ordered has been received and applied already. In this case, the </li></ul><ul><li>system will automatically close the PO line. </li></ul><ul><li>Quantity ordered originally is not required anymore. In this case or for any other </li></ul><ul><li>reasons, buyers would cancel the PO line. </li></ul><ul><li>Each of the lines closed as such is a Closed PO line. When all lines </li></ul><ul><li>of a PO are closed, it is a Closed PO. </li></ul>PO’s can be opened/modified by the person who created it.
    80. 80. Blanket PO - A purchase order is sometimes raised on a roughly estimated amount. It is so created because the exact value of the purchase or the service might not be known at the time of creation of the PO. In such cases, an estimated amount is created as a PO amount. For example, A PO may be created for $12,500 and then several invoices of a vendor are linked to this particular PO.
    81. 81. <ul><li>Adjustments - Invoice might be… </li></ul><ul><li>short paid </li></ul><ul><li>paid to wrong vendor </li></ul><ul><li>charged to a wrong account </li></ul><ul><li>In such cases, an adjustment is to be made. </li></ul><ul><li>Adjustment refers to the passing of rectification entries to correct wrong entries </li></ul><ul><li>passed. </li></ul>To make adjustment, there could be other reasons too.
    82. 82. <ul><li>Dispute - All invoices are in dispute, if they cannot be processed for payment for </li></ul><ul><li>some reason. </li></ul><ul><li>The Accounts Payable team might refrain from processing invoices if: </li></ul><ul><li>resolutions are awaited for clarifications </li></ul><ul><li>certain conditions are not satisfied </li></ul><ul><li>customer is put on HOLD </li></ul><ul><li>Disputed invoices are processed on receiving the resolution. </li></ul>A log is usually maintained to track pending disputes.
    83. 83. Invoice types In this topic, you will learn to: Explain the different invoice types
    84. 84. <ul><li>Broadly, there are two types of invoices: </li></ul><ul><li>Paper Invoices - </li></ul><ul><li>We receive invoices by fax, courier or ordinary mail. These invoices are later </li></ul><ul><li>scanned, mailed or faxed to the Accounts Payable Processing team. </li></ul><ul><li>Paperless invoices - </li></ul><ul><li>In many cases, vendors do not send the invoices by mail, fax or </li></ul><ul><li>courier. Instead, they are electronically transmitted. </li></ul>If vendors have opted for paperless invoices, paper invoices are not accepted!!! Invoice types
    85. 85. Types of Paperless Invoices <ul><li>There are mainly two types of paperless invoices: </li></ul><ul><li>Web invoices </li></ul><ul><li>EDI </li></ul><ul><li>Benefits are: </li></ul><ul><li>Increased discount capture rate. </li></ul><ul><li>Reduced rework. </li></ul><ul><li>Less transaction cost. </li></ul><ul><li>More efficient payment performance to suppliers. </li></ul>
    86. 86. It is also known as Electronic invoicing. It works on a web based application. Suppliers use this application to view invoice information and payment status online. Invoices need not wait for the mailing time to Accounts Payables, because it also allows the suppliers to create invoices and submit them electronically by keying all necessary details. Web invoices Continued
    87. 87. <ul><li>E-Invoicing helps reduce payment lead time by providing accurate and up-to-date payment information. </li></ul><ul><li>Pros: </li></ul><ul><li>Eliminates matching errors </li></ul><ul><li>Faster payment (Waiting time for invoice to be received does not exist) </li></ul><ul><li>Reduced error rate (No mistakes due to manual keying of invoices) </li></ul><ul><li>Reduces supplier queries to sourcing </li></ul><ul><li>Cons: </li></ul><ul><li>Requires manual input by suppliers </li></ul><ul><li>Gives room for duplicate work by suppliers </li></ul>
    88. 88. EDI Provides a translation channel through which invoice date can be exchanged between the buyer and the suppliers. EDI is defined as the exchange of computer to computer, standard business documents in electronic format. It streamlines the paper process into an efficient and less time consuming electronic process. Continued
    89. 89. <ul><li>Pros: </li></ul><ul><li>Accurate transactions. </li></ul><ul><li>Faster payment (Waiting time for invoice to be received does not exist). </li></ul><ul><li>Able to handle a large number of transactions automatically. </li></ul><ul><li>Cons: </li></ul><ul><li>Occasional data errors. </li></ul><ul><li>There are fixed and variable costs associated with EDI. </li></ul><ul><li>Does not reduce matching problems due to pricing, line reference, etc. </li></ul>
    90. 90. Invoiceless payments <ul><li>Payments for the purchase of goods/services can also be made without an Invoice </li></ul><ul><li>Below are few such cases: </li></ul><ul><li>ERS </li></ul><ul><li>P-Card </li></ul>
    91. 91. Evaluated Receipt Settlement (ERS) payment is triggered on receipt of a product/service. The pay amount is the negotiated price as reflected on the Purchase Order. Suppliers need not send paper or electronic invoices for received materials. It is a simple process which establishes a match between the receipt information and the purchase order information. When a supplier delivers materials, the action of verifying receipt through an automated system will generate a receiver file which will be fed into the AP system on a daily basis. Further, the AP system will create a payment schedule based on the terms of settlement. It is also known as File Feeds. ERS is used only for Purchase Order backed supplies. ERS Continued
    92. 92. <ul><li>Pros: </li></ul><ul><li>Eliminates matching errors. </li></ul><ul><li>Faster payment (Waiting time for invoice to be received does not exist). </li></ul><ul><li>Reduced error rate (No mistakes due to manual keying of invoices). </li></ul><ul><li>No invoice. </li></ul><ul><li>Cons: </li></ul><ul><li>Requires a robust receiving process. </li></ul><ul><li>Suppliers may have trouble reconciling payments without invoice numbers on remittances. </li></ul><ul><li>Can be used only if a Purchase Order is raised. </li></ul>
    93. 93. P-Card <ul><li>P-Card refers to the Purchasing Card. It is a credit card which allows you to make small dollar purchases without going through the traditional process of requisition, PO, etc…with enhanced features: </li></ul><ul><ul><ul><li>Controls tailored for cardholder and company specific policies </li></ul></ul></ul><ul><ul><ul><li>Cardholders receive monthly statements to reconcile charges </li></ul></ul></ul><ul><ul><ul><li>Monthly spending limits defined </li></ul></ul></ul><ul><li>Pros: </li></ul><ul><li>Allows procurement of low value, small dollar purchases by end user </li></ul><ul><li>Eliminated creation of purchase orders for low value purchases </li></ul><ul><li>Substantiates all purchases with appropriate accounting instructions </li></ul><ul><li>Suppliers get paid within a specific time frame (usually 72 hours) </li></ul><ul><li>Enables requester/buyer accountability </li></ul><ul><li>Cons: </li></ul><ul><li>Might restrict the purchase of some goods/services </li></ul><ul><li>High value purchases cannot be made </li></ul>
    94. 94. Payment methods In this topic, you will learn to: Explain the different payment types
    95. 95. Modes of payment <ul><li>Different methods are used to disburse payments. </li></ul><ul><li>Let’s look at the different payment modes in detail: </li></ul><ul><li>Cash </li></ul><ul><li>Check </li></ul><ul><li>Wires </li></ul><ul><li>EFT </li></ul><ul><li>P - Card </li></ul><ul><li>Draft </li></ul>
    96. 96. Cash Cash is paid when any purchases are made. These are done when the value of the purchases is very nominal. These are usually associated with the day to day office expenses like stationery, recreation expenses, conveyance and other miscellaneous expenditure.
    97. 97. Check <ul><li>A negotiable instrument drawn against deposited funds, to pay a specified </li></ul><ul><li>amount of money, to a specific person upon demand. This is the most preferred mode of payment and is made to the supplier on the due date. The check can be encashed by the vendor on presenting it to the bank. </li></ul><ul><li>Pros: </li></ul><ul><li>Stop pay can be placed in case of any discrepancy. </li></ul><ul><li>Cons: </li></ul><ul><li>Delay in payment reaching the supplier. </li></ul><ul><li>Possibility of check being misplaced during transit. </li></ul><ul><li>Takes a day or two to cash the check. </li></ul>Be aware of postal rules…Restrictions/ban on mailing checks might be present.
    98. 98. Wire is transfer of amount due directly to the supplier’s bank…an electronic transfer of funds to the vendor concerned. It is a faster mode of payment. Instructions are sent to the bank to wire a particular amount to a vendor. This mode of payment is typically used for international suppliers and can be paid in Foreign Currency or USD. Wire payments are ‘same day’ payments that are costly to both GE and their suppliers. These are reserved for International banking transactions. Wires
    99. 99. <ul><li>Electronic Funds Transfer (EFT) ensures funds transfer from one bank account to another using electronic links. </li></ul><ul><li>EFT payments are faster than check payments. It can be used to make payments into domestic banks (within US) in USD only. </li></ul><ul><li>Benefits: </li></ul><ul><li>Direct deposit eliminates mailing time. </li></ul><ul><li>Lost, torn or mislaid checks are eliminated. </li></ul><ul><li>Waiting time to encash checks does not exist. </li></ul><ul><li>Reduces a few supplier’s interest payments by increasing working fund availability. </li></ul>EFT
    100. 100. A check drawn by one bank against funds deposited into its account at another bank, authorizing the second bank to make payment to the individual named in the draft. This mode of payment helps to provide prompt payments in foreign currencies. These can be issued either is USD or in Foreign Currency. This allows payments to be made to foreign countries with the convenience of drawing funds from a foreign bank. A draft can clear much more quickly than a check drawn. Draft Statutory requirements with respect to drafts should be adhered to.
    101. 101. <ul><li>The P-Card is a stable and effective solution to pay for purchases. It operates much like a consumer credit card. When a purchase is made, GE presents the card for payment. </li></ul><ul><li>Once the transaction is approved, the information is stored and reported back to GE on a monthly statement. This supplier will be paid between 48 to 72 hours. The acquiring bank will deposit the money electronically and directly in to the suppliers account. </li></ul><ul><li>Pros: </li></ul><ul><li>No invoice and payment in 2 to 3 days. </li></ul><ul><li>Improved cash flow </li></ul><ul><li>Reduced administrative costs associated with billing and collections </li></ul><ul><li>Cons: </li></ul><ul><li>Cost associated with implementation </li></ul>P-Card
    102. 102. Payment Run process In this topic, you will learn to: Explain the payment run process, discuss the remedies available when a check returns & identify when a stop payment can be made
    103. 103. <ul><li>How does Payment Run normally happen? </li></ul><ul><li>Invoices that are due for payment are selected. </li></ul><ul><li>Selected invoices create a payment file that includes all payment methods. </li></ul><ul><li>In most cases, an outsource supplier is involved in processing and mailing the checks & drafts. </li></ul><ul><li>Wire and EFT payments that are due are sent to the bank directly. </li></ul>Payment Files
    104. 104. <ul><li>Check Run refers to the process of cutting checks to make vendor payments. The time at which the checks are cut differ from business to business. </li></ul><ul><li>Checks are in transit, if: </li></ul><ul><li>A check is cut </li></ul><ul><li>It has been dispatched to the vendor’s address and </li></ul><ul><li>It has not yet reached the vendor </li></ul>Check Run Checks, in most cases, are printed and mailed by an outsourcing agent.
    105. 105. <ul><li>Checks issued may be returned due to various reasons: </li></ul><ul><li>Transmitted to incorrect supplier </li></ul><ul><li>Sent to incorrect remit </li></ul><ul><li>If new remit to is not updated in the system </li></ul><ul><li>Repeat payment undeliverable </li></ul><ul><li>Other reasons </li></ul>Why checks are returned?
    106. 106. Transmitted to incorrect supplier <ul><li>Remedies available if checks are transmitted to incorrect supplier: </li></ul><ul><li>Contact buyer listed on the PO </li></ul><ul><li>Buyer to contact supplier to retransmit the correct Supplier number </li></ul><ul><li>Buyer to correct the Supplier number on the PO </li></ul><ul><li>Void check </li></ul>Business rules decide the remedies available for returned checks
    107. 107. Sent to incorrect remit <ul><li>Remedies available if checks are sent to incorrect remit: </li></ul><ul><li>Contact buyer listed on the PO </li></ul><ul><li>Buyer to contact supplier to retransmit the correct Supplier number </li></ul><ul><li>Void and reissue check to new Supplier number </li></ul><ul><li>Buyer to correct the Supplier number on the PO </li></ul>
    108. 108. If new remit is not updated <ul><li>Remedies available if new remit is not updated in the system: </li></ul><ul><li>Vendor set up rep to add the new site address/remit to </li></ul><ul><li>After set up, Vendor set up rep to intimate the Check Run rep </li></ul><ul><li>Void and reissue check to new site/remit to </li></ul><ul><li>Business to modify all PO’s to reflect new site code listing, if applicable. </li></ul>
    109. 109. <ul><li>Remedies available if repeat payment is undeliverable: </li></ul><ul><li>Send email to contact listed on repeat payment form requesting new remit </li></ul><ul><li>Request contact to identify new remit </li></ul><ul><li>Forward a request to repeat payment rep to change supplier number or site code </li></ul><ul><li>Void and reissue the returned check to the new supplier number </li></ul>Repeat payment undeliverable
    110. 110. Hey! I won a lottery ticket for $50,000 Yo! I’m rich. I’ll deposit the check right away in the bank! Oh!My, I cannot find the check
    111. 111. WAIT! Don’t panic… No one can cash the check - There’s a solution! MAKE A STOP PAYMENT!!! I lost the check you gave me for winning the lottery
    112. 112. The Lottery agency informed the bank and made a stop pay! The check cannot be used by anyone now!!! Stop pay is a request to the bank not to honor a particular check! Oh!oh! I’ll make a stop payment right away. Please confirm the check number Since the check has been lost and stop paid, we’ll reissue another check in your favor!!!
    113. 113. When do you stop pay <ul><li>When check is misplaced </li></ul><ul><li>If the check has not reached the vendor </li></ul><ul><li>If an invoice has been released to a wrong vendor </li></ul><ul><li>If the wrong dollar amount has been released for payment </li></ul><ul><li>If a duplicate invoice has been released for payment </li></ul><ul><li>For any other reason </li></ul>A check is considered cancelled if it is stop paid!
    114. 114. Third Party Payments In this topic, you will learn to: Describe the circumstances under which a third party gets paid
    115. 115. <ul><li>Payments are made only to the actual vendors. However, in certain exceptional cases and with approvals from the authority concerned, payments may be made to third parties. </li></ul><ul><li>Below are certain circumstances under which payments can be made to third parties: </li></ul><ul><li>Factoring </li></ul><ul><li>Pay Warrants </li></ul><ul><li>Tax levies </li></ul><ul><li>Leases </li></ul>Third party Normally, the original vendor is put on hold and funds are re-routed to the third party!
    116. 116. <ul><li>Factoring means buying receivables at reasonable rates. </li></ul><ul><li>It involves payments to finance companies for vendors who have sold their account receivable invoices. </li></ul><ul><li>If specified in an invoice, the check must be payable to the vendor or the factoring company. </li></ul><ul><li>Vendor’s agreement is essential for selling the receivables </li></ul>Factoring Ensure legal documentation, if receivables are sold to a factoring agent
    117. 117. <ul><li>When a leasing company sells their lease to a bank or finance company, it is called assignment. </li></ul><ul><li>Legal documentation should be obtained outlining the agreement between the vendor and the bank </li></ul><ul><li>The vendor should be set up payable to the bank or the finance company only </li></ul><ul><li>On setup, it is not necessary to include the original vendor’s name. </li></ul>Assignment of leases
    118. 118. <ul><li>Sometimes, vendors might have outstanding payments due to another GE company and might be unwilling to pay. </li></ul><ul><li>In such cases, a pay warrant is issued by the account receivables diverting funds. </li></ul><ul><li>A new vendor has to be set up payable to the original vendor and to GE Accounts Receivable. </li></ul><ul><li>The actual vendor should be put on hold until notification to </li></ul><ul><li>remove warrant is received. </li></ul>Pay Warrants Paywarrants are placed only with the instructions from GE Counsel authorization.
    119. 119. <ul><li>Levies can be imposed on vendors who have tax liabilities with a </li></ul><ul><li>Federal or a State government </li></ul><ul><li>Sometimes, buyers receive levy notices stating that outstanding payments are sent to the IRS or state in order to satisfy the vendor’s tax burden. </li></ul><ul><li>The vendor should be placed on hold thus placing a lien on all future payments. </li></ul><ul><li>If there are are no outstanding invoices, such communication should be sent to IRS. </li></ul>The vendor will be put on HOLD till taxes are paid to IRS. Tax levies
    120. 120. Due Diligence In this topic, you will learn to: Describe the Due Diligence process
    121. 121. This is a term used to define the efforts made by companies to reunite unclaimed property with the rightful owner. The first step in due diligence is to identify what property is considered legally unclaimed. Accounts Payable generally considers a vendor payment to be legally unclaimed when a check has remained outstanding for more than six months beyond the issuance date. Due Diligence
    122. 122. Once property items have been identified as unclaimed, research is performed to ensure that the property items are valid. Examples of invalid items could include duplicate payments made to vendors or customer payments incorrectly accounted for. Validation of unclaimed property Escheatment - The process of turning over unclaimed or abandoned property to a state authority.
    123. 123. Timing of Due Diligence process GE has an internal policy of performing the due diligence process twice prior to the escheatment of funds to state governments. The AP initial due diligence process should be completed when a vendor payment has been outstanding for more than six months beyond the issuance date. The final due diligence process should be completed pursuant to state regulations. Each state generally requires the final due diligence process to be performed within 30 to 120 days prior to the escheatment of funds. This allows the owner sufficient time to claim the funds prior to escheatment.
    124. 124. Accounting Entries In this topic, you will learn to: Write the journal entries involved in AP
    125. 125. Goods received GR/IR is the short form for Goods received/Inventory received. (a) When Goods worth $100 are received Dr. Inventory (Asset clearing) a/c 100.00 Cr. GR/IR (Payables Clearing) a/c 100.00 (b) When Invoice is processed for the receiving of $100 Dr. GR/IR (Payables clearing) a/c 100.00 Cr. A/P Vendors (vendors) a/c 100.00 (c) When Payment is done Dr. A/P Vendors (vendors) a/c 100.00 Cr. Bank a/c 100.00 Receiving applied Invoice paid When goods worth $100 is received and invoice processed for the same. (a) $100.00 Inventory a/c Dr. Cr. (b) $100.00 (a) $100.00 GR/ IR a/c Dr. Cr. (c) $100.00 (b) $100.00 A/P vendors a/c Dr. Cr. (c) $100.00 Bank a/c Dr. Cr.
    126. 126. Accounting for cost changes The change in the cost of goods is intimated by the AP Rep to the buyer <ul><li>Sometimes, the cost of goods increase or decrease at the time of invoicing. </li></ul><ul><li>Thus, AP Representatives should account for the cost change. </li></ul><ul><li>Normally, a x% or X dollar value tolerance is acceptable and is processed by the AP Reps. </li></ul><ul><li>However, the buyer’s approval is required if the cost change is more than the tolerance percentage agreed. </li></ul><ul><li>The excess/less price should be coded to Purchase Price Variance Account </li></ul>
    127. 127. When receiving is made for $100 and invoice is processed for $105. Cost change of $5. Goods received (a) When goods worth $100 are received Dr. Inventory (Asset clearing) a/c 100.00 Cr. GR/IR (Payables Clearing) a/c 100.00 (b) When Invoice is processed for the receiving of $105 taking into account the cost change Dr. GR/IR (Payables clearing) a/c 105.00 Cr. A/P Vendors (vendors) a/c 105.00 (c) When Payment is done Dr. A/P Vendors (vendors) a/c 105.00 Cr. Bank a/c 105.00 Receiving applied Invoice paid (d) When an entry for cost change is passed Dr. Inventory (Asset clearing) a/c 5.00 Cr. GR/IR (Payables Clearing) a/c 5.00 Adjustment made (a) $100.00 (d) $5.00 Inventory a/c Dr. Cr. (b) $105.00 (a) $100.00 (d) $5.00 GR/ IR a/c Dr. Cr. (c) $105.00 (b) $105.00 A/P USD$ vendors a/c Dr. Cr. (c) $105.00 Bank a/c Dr. Cr.
    128. 128. When receiving is made for $100 and invoice is processed for $95. Cost change of -$5. Goods received (a) When goods worth $100 are received Dr. Inventory (Asset clearing) a/c 100.00 Cr. GR/IR (Payables Clearing) a/c 100.00 (b) When Invoice is processed for the receiving of $95 taking into account the cost change Dr. GR/IR (Payables clearing) a/c 95.00 Cr. A/P Vendors (vendors) a/c 95.00 (c) When Payment is done Dr. A/P Vendors (vendors) a/c 95.00 Cr. Bank a/c 95.00 Receiving applied Invoice paid (d) When an entry for cost change is passed Dr. GR/IR (Payables Clearing) a/c 5.00 Cr. Inventory (Asset clearing) a/c 5.00 Adjustment made (a) $100.00 (d) $5.00 Inventory a/c Dr. Cr. (b) $95.00 (d) $5.00 (a) $100.00 GR/ IR a/c Dr. Cr. (c) $95.00 (b) $95.00 A/P USD$ vendors a/c Dr. Cr. (c) $95.00 Bank a/c Dr. Cr.
    129. 129. When tax, freight or other expense is processed along with the product price. <ul><li>. When invoice of $100.00, Freight $5.00 and Tax $5.00 is processed </li></ul><ul><li>Dr. GR/IR a/c 100.00 </li></ul><ul><li>Dr. Tax a/c 5.00 </li></ul><ul><li>Dr. Freight a/c 5.00 </li></ul><ul><li>Cr. Accounts Payables Vendor a/c 110.00 </li></ul>Tax, Freight or other expense
    130. 130. Accounting for Exchange rate variances <ul><li>Sometimes, books may be maintained in one currency (Eg: CAD). </li></ul><ul><li>Payment for invoices may be made in a different currency (Eg: USD) </li></ul><ul><li>Thus, the exchange rate variances should also be accurately accounted for. </li></ul><ul><li>The gain or loss should be charged to the Foreign Exchange Gain/Loss account. </li></ul>
    131. 131. In the Canadian books, when receiving is made for USD$100.00 and invoices are processed for USD$100.00 (Assuming the Exchange rate is 1.50) (a) When Goods are received Dr. Inventory a/c ---150.00 (CAD) Cr. GR/IR a/c 100.00 (CAD) Cr. Fx gain/Loss a/c 50.00(CAD) (b) When Invoice is processed for the above receiving . Dr. GR/IR a/c 150.00 (CAD) Cr. A/P CAN $ vendors a/c 150.00 (CAD) (c) When Payment is done Dr. A/P CAN $ vendors a/c 150.00 Cr. Bank a/c 150.00 (d) System passes an Entry for the Foreign exchange variance Dr. Fx gain/Loss a/c 50.00 Cr. GR/IR a/c 50.00 (a) $150.00 Inventory a/c Dr. Cr. (b) $150.00 (a) $100.00 (d) $50.00 GR/ IR a/c Dr. Cr. (c) $150.00 (b) $150.00 A/P CAD$ vendors a/c Dr. Cr. (c) $150.00 Bank a/c Dr. Cr. (d) $50.00 (a) $50.00 Forex Gain/Loss a/c Dr. Cr.
    132. 132. In the Canadian books, when receiving is made for USD$100.00 (Assuming the Exchange rate is 1.50) and invoices are processed for USD$100.00 (Assuming the Exchange rate is 1.52) (a) When Goods are received Dr. Inventory a/c ---150.00 (CAD) Cr. GR/IR a/c 100.00 (CAD) Cr. Fx gain/loss a/c 50.00 (CAD) (b) When Invoice is processed for the above receiving . Dr. GR/IR a/c 152.00 (CAD) Cr. A/P CAN $ vendors a/c 152.00 (CAD) (c) When Payment is done Dr.A/P CAN $ vendors a/c152.00 (CAD) Cr. Bank a/c 152.00 (CAD) (d) System passes an Entry for the Foreign exchange variance Dr Fx gain/Loss a/c 52.00 Cr. GR/IR a/c 52.00 (a) $150.00 Inventory a/c Dr. Cr. (b) $152.00 (a) $100.00 (d) $52.00 GR/ IR a/c Dr. Cr. (c) $152.00 (b) $152.00 A/P CAD$ vendors a/c Dr. Cr. (c) $150.00 Bank a/c Dr. Cr. (d) $52.00 (a) $50.00 Forex Gain/Loss a/c Dr. Cr.
    133. 133. In the Canadian books, when receiving is made for USD$100.00 (Assuming the Exchange rate is 1.50) and invoices are processed for USD$100.00 (Assuming the Exchange rate is 1.48) (a) When Goods are received Dr. Inventory a/c ---150.00 (CAD) Cr. GR/IR a/c 100.00 (CAD) Cr. Fx gain/Loss a/c 50.00 (CAD) (b) When Invoice is processed for the above receiving . Dr. GR/IR a/c 148.00 (CAD) Cr. A/P CAN $ vendors a/c 148.00 (CAD) (c) When Payment is done Dr. A/P CAN $ vendors a/c 148.00(CAD) Cr. Bank a/c 148.00 (CAD) (d) System passes an Entry for the Foreign exchange variance Dr. Fx gain/Loss a/c 48.00 Cr. GR/IR a/c 48.00 (a) $150.00 Inventory a/c Dr. Cr. (b) $148.00 (a) $100.00 (d) $48.00 GR/ IR a/c Dr. Cr. (c) $148.00 (b) $148.00 A/P CAD$ vendors a/c Dr. Cr. (c) $148.00 Bank a/c Dr. Cr. (d) 48.00 (a) 50.00 Forex Gain/Loss a/c Dr. Cr.
    134. 134. AP JEs At the time of Receivings Purchases A/c Dr To Receipt Control A/c At the time of Invoice – PO Matching Receipt Control A/c Dr To AP Liability A/c At the time of Payment AP Liability A/c Dr To Cash/Bank A/c Opposite Process For Material Returns* ( * Depends on Case To Case Basis )
    135. 135. Material in Transit Material in Transit A/c Dr To Accrued Liability A/c Material Recd. but Invoice Not Recd. Receipt Control A/c Dr To Accrued Liability A/c Accrual for Expenses and Charges Like Rent etc.. (sometimes estimates) Expense A/c Dr To Provision for Expenses A/c AP Accrual JEs Entries To Be Passed At Month End To Be Reversed At Beginning of Next Month
    136. 136. Purchase Returns In this topic, you will learn to: Define purchase returns and explain how it is handled
    137. 137. Purchase returns - what and how to handle? <ul><li>Purchases made may be returned to the vendor due to certain reasons: </li></ul><ul><ul><ul><li>If goods do not meet a specified criteria </li></ul></ul></ul><ul><ul><ul><li>If goods are defective </li></ul></ul></ul><ul><li>When goods and services are returned, a credit note is </li></ul><ul><li>raised to reverse the purchase </li></ul><ul><li>Accounts Payable team will collect the payments already made to the vendors </li></ul>Pass Journal entries accordingly - Debit Vendor(Creditor) account Credit Purchase Returns account Purchase returns
    138. 138. Debit/Credit Memos <ul><li>There is all possibility that goods and services purchased might: </li></ul><ul><ul><ul><ul><li>not meet specification </li></ul></ul></ul></ul><ul><ul><ul><ul><li>not have been ordered </li></ul></ul></ul></ul><ul><ul><ul><ul><li>be short of the amount ordered or billed </li></ul></ul></ul></ul><ul><li>In such cases, adjustments between the buyer and seller are to be made using debit or credit memos. </li></ul>
    139. 139. <ul><li>Credit Memo/Debit Memos - Occasionally, goods and services paid might: </li></ul><ul><li>not meet specification </li></ul><ul><li>not have been ordered </li></ul><ul><li>have an invoice error </li></ul><ul><li>be short of the amount ordered or billed </li></ul><ul><li>any other reason </li></ul><ul><li>In such cases, adjustments are made between the buyer and the seller using debit or </li></ul><ul><li>credit memos. All credit and debit notes state the corresponding invoice number as a </li></ul><ul><li>reference </li></ul>Debit and Credit memos are documents which inform the other party in a transaction that an adjustment has been made!
    140. 140. What is a Debit Memo? Vendor Compaq Ltd. raises an invoice on GE Aircraft Engines for $5,230 and the amount was paid. $230 is not to be paid as they amount to freight expenses. Who raises a Debit Memo? On whose name? A debit memo is raised by GE Aircraft Engines (GEAE) on the vendor’s name, Compaq Ltd. Origin of debit memos are duplicate payments, payment to wrong vendor, extra payment, services cancelled etc.. Debit Memo is a note/memo indicating the amount owed by a company or a person. These actually originate from uncollected credits.
    141. 141. What is a Credit Memo? A note/memo indicating the amount owed to a company or a person. A credit memo is used to reduce the accounts receivable on the books of the vendor. Origin of credit memos are underpayments, payment to a wrong vendor, etc.. Dell Inc raises an invoice on GE Information Technology Solutions (ITS) for $10,519 which includes freight of $219. Due to an invoice error, only $9,519 was paid. Who raises a Credit Memo? On whose name? A credit memo is raised by GE Information Technology Solutions (ITS) on the vendor’s name, Dell Inc
    142. 142. Aged Debit memos Uncollected debit memos begin to age. Thus, they require intense collection methods, including research, calls to the vendor, etc.. When items begin to age, the responsibility of collections is turned to collection agencies. The collection agencies assist Accounts Payable with collections for a fee. The longer a debit ages, the less likelihood of it being collected, either by the Accounts Payable department or by the collection agency. In the event of all measures failing, the amounts due are written off after obtaining the necessary approvals from the buyer. Vigorously follow up to collect - Do not allow items to age!
    143. 143. Hold In this topic, you will learn to: Define hold and explain the circumstances under which hold is placed
    144. 144. <ul><li>Certain invoices are put on HOLD meaning, invoices do not get paid although </li></ul><ul><li>processed! </li></ul><ul><li>Reasons for an invoice to be on HOLD: </li></ul><ul><li>Invoices await clarification </li></ul><ul><li>Customer puts the vendor on HOLD </li></ul><ul><li>Invoices should not be paid till receivables are cleared </li></ul><ul><li>from the particular vendor </li></ul><ul><li>For any other reason </li></ul><ul><li>If an invoice is put on hold manually by a representative, it is a Manual Hold. </li></ul><ul><li>When it is automatically put on hold in the system (based on certain in-built </li></ul><ul><li>parameters), it is a Electronic Hold. </li></ul>An invoice put on hold gets processed but not paid!
    145. 145. <ul><li>A HOLD indicates that the vendor’s payments are being held. It may be placed due to any of the following reasons: </li></ul><ul><li>Pay warrant: </li></ul><ul><li>The actual vendor should be put on hold until notification to remove warrant is received. </li></ul><ul><li>Tax levy: </li></ul><ul><li>When levies are imposed on vendors, they should be placed on hold thereby placing a lien on all future payments. </li></ul>Hold
    146. 146. <ul><li>Audit hold: </li></ul><ul><li>This indicates that the vendor is on hold for any other reason. Vendors placed on audit holds include those that were discovered to be fraudulent or scam artists. </li></ul><ul><li>Other reasons: </li></ul><ul><li>(!) Accumulated credit balance in vendor accounts. </li></ul><ul><li>(2) Have a legal litigation </li></ul><ul><li>(3) If GE has something to be received from the vendor </li></ul>Hold Vendors are put and removed from hold only after receipt of approvals from authorized persons.
    147. 147. Vendor Reconciliations In this topic, you will learn to: Explain the High level Reconciliation process
    148. 148. Vendor Statements are received on a regular basis from the Vendors. These are then compared with the General Ledger balance of that particular vendor. The process of identifying and classifying the entries of differences between the Vendor statements and the G/L is referred to as a Vendor Reconciliations. The purpose of the reconciliation is to rectify or resolve the open items for accurate tallying of balances. Vendor Reconciliations
    149. 149. (1) Description/purpose of the balance sheet account must be documented (2) Total of items listed equals ending balance in the general ledger account (3) Items supported by sources independent of the general ledger being reconciled (4) Account reconciliation and supporting documentation are accessible (5) Open items resolved in the quarter identified (6) Account Reconciliation is reviewed by Peer/Manager and indicated by signature and date (7) Account Reconciliation is completed timely. Corporate Criteria
    150. 150. Reconciliation Process Download Vendor account balance from G/L and receive the Vendor Statement Identify if there are any variances between the G/L and the Vendor statement No Variance Variance Compile Reconciliation Templates Reconciliation sheet Identify the reason for the Variances Identify action plan, timing & Responsibility
    151. 151. Customer Service In this topic, you will learn to: Express the importance of Customer Service
    152. 152. Accounts Payable process does not stop with just processing invoices. Vendors and buyers contact the AP Department with many queries. And it is part of the team’s work to ensure that the queries and concerns are addressed. Respond promptly & accurately to queries - Become a Quality Customer Service Personnel! Customer Service - Part of the game
    153. 153. <ul><li>Invoices will not get paid when they are in dispute or is discrepant. </li></ul><ul><li>We have given a list of probable reasons why an invoice can have a discrepancy or be disputed: </li></ul><ul><li>Invoice is a potential duplicate </li></ul><ul><li>If the vendor is on Paper Shut Off and paper invoices are received. </li></ul><ul><li>Inadequate and improper approvals </li></ul><ul><li>Invoice lines not matching with PO lines </li></ul><ul><li>PO paid in full </li></ul><ul><li>Invoice is processed to wrong PO line </li></ul>Accuracy of response is vital
    154. 154. <ul><li>Invoice processed to wrong ADN number </li></ul><ul><li>Dispute on why a certain percentage of discount has been availed </li></ul><ul><li>If a non taxable vendor is taxed </li></ul><ul><li>Insufficient funds in PO </li></ul><ul><li>When a stop payment is made </li></ul><ul><li>Other reasons </li></ul><ul><li>There are various other reasons for an invoice to be in dispute. </li></ul>Do not neglect disputed invoices - resolve them.
    155. 155. Controllership in AP In this topic, you will learn to: Explain Controllership in AP and identify a few red flags
    156. 156. Hence, payment if made, will reach the wrong vendor!!! Accounts Payable is a liability to a company and such liability should be rightly accounted for. Even small errors are big blunders in Accounts Payable. For Example: Coding of a credit purchase of goods of $5,000 from XYZ Inc. to ABC Inc. Correct Journal Entry: Purchases A/c Dr. $5,000 XYZ Inc. A/c Cr. $5,000 Thus, liability is wrongly accounted! Wrong Journal Entry: Purchases A/c Dr.$5,000 ABC Inc. A/c Cr. $5,000
    157. 157. <ul><li>Probable Errors </li></ul><ul><li>Payment to a wrong vendor </li></ul><ul><li>Payment in wrong currency </li></ul><ul><li>Duplicate payments </li></ul><ul><li>Wrong coding </li></ul><ul><li>Wrong Invoice Date </li></ul><ul><li>Implications </li></ul><ul><li>Bad debts, Rework, Discounts lost. </li></ul><ul><li>Burden of collections, Rework, </li></ul><ul><li>Discount non-availability. </li></ul><ul><li>Bad and doubtful debts, Burden </li></ul><ul><li>of collections, Rework. </li></ul><ul><li>Rework, Discount non-availability. </li></ul><ul><li>Late payments, Lose discounts, </li></ul><ul><li>Lose business, Loss of reputation. </li></ul>Eye for detail prevents errors!!!
    158. 158. What can happen with little or no care? <ul><li>Vendor Over paid </li></ul><ul><li>Loss of discounts due to time limitation </li></ul><ul><li>Burden of collections </li></ul><ul><li>Loss of Goodwill </li></ul><ul><li>Serious Customer Dissatisfaction due to non timely action </li></ul>Understand the red flags!
    159. 159. <ul><li>Ensure accurate, timely and actionable financial information </li></ul><ul><li>Think Strategically About Business Needs </li></ul><ul><li>Identify and raise Controllership issues in business </li></ul><ul><li>Identify factors which increase risk in your business </li></ul><ul><li>Suggest controls which are effective, efficient and justifiable </li></ul>Lessons we learn: Fix the root cause!!!
    160. 160. Controllership – A value-added, unyielding commitment to: What Is Controllership? <ul><li>Compliance </li></ul><ul><li>Effectiveness of Business Processes </li></ul><ul><li>Integrity of Communications </li></ul>Poor Controllership is a leaky faucet... Compliance <ul><li>GE Policies </li></ul><ul><li>Applicable Laws </li></ul><ul><li>Relevant Regulations </li></ul>An environment to be proud of Effectiveness Of Business Processes <ul><li>Economic, risk-based decisions </li></ul><ul><li>6 sigma processes </li></ul><ul><li>Assets safeguarded </li></ul>Creation of Share Owner Value Integrity Of Communications <ul><li>External Reporting </li></ul><ul><li>Forecasting </li></ul><ul><li>Metrics </li></ul>The Foundation of our Credibility
    161. 161. <ul><li>Financial position, results of operations and related disclosures are reported </li></ul><ul><li>in a fair and timely manner in accordance with generally accepted </li></ul><ul><li>accounting principles. </li></ul><ul><li>Assets are safeguarded </li></ul><ul><li>Extent of controls are in consistent with exposure </li></ul><ul><li>Compliance with company policies, appropriate laws and regulations is </li></ul><ul><li>monitored and enforced. </li></ul><ul><li>Transaction economics and risks are evaluated, approved and documented </li></ul>Meaning Apply Controllership in everything that you do Controllership means … maintaining a sound , dynamic and cost effective system of internal controls that provides assurance to management and the Board of Directors that:
    162. 162. <ul><li>How does this affect you: </li></ul><ul><li>Understand operational processes (supplier and internal) and internal controls </li></ul><ul><li>It includes documentation of key processes (internal and outsourced), knowledge of the process (including controls) and your role in it </li></ul><ul><li>Support account reconciliation requirements as needed </li></ul><ul><li>Understand and monitor measurements related to Controllership </li></ul>Impact Internal controls decrease business risk.
    163. 163. 6 Duplicate Payments GL Coding Accruals Forex Accounting Biz Process 6  Process Segregation of Duties Vendor Verification Approval / Matching Economic, Risk Based Decisions Discount / Finance Charges Paid on Time Expedited Transactions Assets Safeguard Disputes Resolution Vendor Recon Control Acct. Recon
    164. 164. Accounts Payable <ul><li>Segregation of Duties </li></ul><ul><li>Vendor Verification </li></ul><ul><li>Approval / Matching </li></ul><ul><li>Expedited Transactions </li></ul><ul><li>Forex Accounting </li></ul><ul><li>G L Coding </li></ul><ul><li>Duplicate Payments </li></ul><ul><li>Discounts / Finance Charges </li></ul><ul><li>Disputes Resolution </li></ul><ul><li>Paid on Time </li></ul><ul><li>Accruals </li></ul><ul><li>Control Account Reconciliations </li></ul><ul><li>Vendor Reconciliations </li></ul><ul><li>MIS </li></ul><ul><li>Review calls </li></ul><ul><li>Minutes </li></ul><ul><li>Pricing </li></ul><ul><li>Quality Audit </li></ul><ul><li>Communication Matrix </li></ul><ul><li>GAP 31 </li></ul><ul><li>SOPs </li></ul><ul><li>SLA / SOW </li></ul><ul><li>1099 Process </li></ul>Do We Understand Controllership In Our Process ? Effectiveness of Business Processes Integrity of Communications Compliance
    165. 165. <ul><li>The Purchase Order Creator and the Invoice Processor , are in all circumstances, </li></ul><ul><li>different people. A person/ department which creates the Purchase Order cannot process the invoice </li></ul><ul><li>Which department raises the PO? </li></ul><ul><li>The Purchasing department/team </li></ul><ul><li>Which department pays the Invoice? </li></ul><ul><li>The Accounts Payable department/team </li></ul>Both activities are not done by the same person, because there is a scope for manipulation and tampering! Why the difference
    166. 166. Requirement for materials / services arises Create agreement or communicate Purchase Order to supplier Vendor ships materials Approve invoice for payment Payables department verifies invoice and makes payment Requisition sent to Sourcing Department The process – Put controls Vendor sends order and invoice PO Non PO Reconcile Vendor Accounts & GL Accounts $ = $
    167. 167. Sourcing <ul><li>Separation of duties </li></ul><ul><li>(materials request & order placement) </li></ul><ul><li>Secured & Approved Vendors </li></ul><ul><li>Alternative Vendors </li></ul><ul><li>Competitive Bids </li></ul><ul><li>Documentation of Vendor Selection </li></ul><ul><li>Appropriate management approval matrix </li></ul><ul><li>Standard PO Format (Name/Delivery Terms/Qty/Price/Credit Terms) </li></ul>PO Authorized Requirement Vendor Scoring System Controls
    168. 168. Receiving <ul><li>Control over Receiving Area </li></ul><ul><li>Short or Over Shipments Handling </li></ul><ul><li>Quality Inspection </li></ul><ul><li>Authorized Receiver's Specimen Signatures in place </li></ul><ul><li>Verify Delivery note with PO </li></ul><ul><li>Raise Goods Receipt Note (GRN) / Material Rejection </li></ul><ul><li>Receiving Report Generation & Submission </li></ul>PO Goods Shipped by Vendor Goods Received Controls
    169. 169. Accounts Payable <ul><li>Receipt of invoices </li></ul><ul><li>Approved invoices from buyers to A/P (Non PO only) </li></ul><ul><li>Three-way match performed by A/P (PO, Receiver, Invoice) </li></ul><ul><li>Safeguards against duplicate payments in place </li></ul><ul><li>Separation of duties </li></ul><ul><li>(A/P and cash disbursements) </li></ul><ul><li>Payments made on time </li></ul><ul><li>Proper Accounting (Revenue Vs. Capital) </li></ul><ul><li>Accrual Entries </li></ul>Goods Received Vendor Paid Controls
    170. 170. $ = $ Controls <ul><li>GL Balance Vs. Vendor Statement Balance </li></ul><ul><li>Scheduled Reconciliation </li></ul><ul><li>Standardize Open Items </li></ul><ul><li>Separation of duties </li></ul><ul><li>(Payment processing and Account reconciliation) </li></ul><ul><li>Timely clearing of open items </li></ul>Vendor Paid Vendor Account Reconciled Vendor Reconciliation
    171. 171. GL Account Reconciliation $ = $ GL Accounts Reconciliation Controls <ul><li>AP Clearing / Control Accounts </li></ul><ul><li>Accounting Flow </li></ul><ul><li>Color of Account </li></ul><ul><li>Range of Balance </li></ul><ul><li>Scheduled Reconciliations </li></ul><ul><li>Separation of duties </li></ul><ul><li>(AP and GL Teams) </li></ul><ul><li>Aged Items </li></ul><ul><li>Account Reconciliation Criteria </li></ul>Vendor Account Reconciled
    172. 172. Risks Vs. Controls Potential Risk Control Multiple Vendor Ids Vendor Purging Policy Blanket POs Tracking Process Evaluate Possibility of Standard PO Non PO Invoices Approval Matrix and Validity Name of the Approver with specimen Money Limits Pay Current Charges Material Returns Return To Vendor (RTV) Process Claim / Tracking # Vendor Account Dr. Balance Recover / Adjust Payments Contd …..
    173. 173. Potential Risk Control Duplicate Payments Duplicate Audit Process Price / Qty. / Currency Variance Limits Absolute $ and %age Limit Track Variance Account value All Invoices & Credit Notes Timely Vendor Reconciliation Accounted for Balance Confirmation Reconciliation Open Items I Identify owners & timelines (Vendor / AP / Sourcing / GL Team) Escalation Matrix Advance Payments Vendor Reconciliation Force Pay etc.. Approval Matrix Contd ….. Risks Vs. Controls
    174. 174. Potential Risk Control Processing Accuracy Q C Process Knowledge Update SOPs Process Refresher Course Disputed Invoices Root Cause Analysis Initiate Process Improvements Risks Vs. Controls Not An Exhaustive List …….. Need Continuous Watch
    175. 175. AP Tips <ul><li>Expense Invoices Having Big $ Value </li></ul><ul><ul><li>Water bill of $ 100 K with approval and coding </li></ul></ul><ul><li>Old Invoices </li></ul><ul><ul><li>Invoices which are more than 1 year old </li></ul></ul><ul><li>Sudden active vendors </li></ul><ul><ul><li>Inactive vendors becoming active </li></ul></ul><ul><li>Transactions with Embargo countries </li></ul><ul><ul><li>Invoices from Libya, Iran & Cuba… </li></ul></ul><ul><li>PO Invoice processed as Non Pos </li></ul><ul><ul><li>Invoices process to GL Code </li></ul></ul><ul><li>Price Variance </li></ul><ul><ul><li>Regular variance within limits of any vendor </li></ul></ul><ul><ul><ul><ul><ul><li>Contd… </li></ul></ul></ul></ul></ul>
    176. 176. <ul><li>Vendor Reconciliation </li></ul><ul><ul><li>Items appearing in statement and non in GL </li></ul></ul><ul><ul><li>Items in GL not appearing in vendor statement </li></ul></ul><ul><li>GL Account Reconciliation </li></ul><ul><ul><li>AP & GL Control accounts balance should be zero </li></ul></ul><ul><li>Multiple vendor Ids </li></ul><ul><ul><li>Payment to Vendors while Money to be received in other account </li></ul></ul><ul><li>Vendors sending escalation / faxes / payment queries </li></ul><ul><ul><li>Invoice not being received / sent properly on time </li></ul></ul><ul><ul><li>Payment terms not matching </li></ul></ul>AP Tips Think creative……When in doubt, ASK!
    177. 177. Identify the Red flags...
    178. 178. Red flag zones Understand the Red Flags (Warning Signs): Controllership issues have to be kept in mind while processing invoices. Risks are involved during Vendor set up, Duplicate checking, Interaction with vendors and suppliers, Debit Memo/Credit Memo process, etc. Let’s take a look at the potential red flags (warning signs)...... <ul><li>Process Issues: </li></ul><ul><li>Lack of controls </li></ul><ul><li>Manual and Complex </li></ul><ul><li>Undocumented </li></ul><ul><li>Lack of understanding related </li></ul><ul><li>to “upstream” or “downstream” </li></ul>Untrained personnel, lack of back up <ul><li>Long, complicated closing processes: </li></ul><ul><li>Manual databases </li></ul><ul><li>Manual journal entries </li></ul><ul><li>Too many hand-offs </li></ul>Unresolved Pre-Closing or Audit Issues
    179. 179. <ul><li>. Juan Park uses his approval authority to pay for childcare or private schooling of his children. </li></ul><ul><li>Is he justified by doing so? </li></ul>These are not normal business expenses and should be investigated. Audit to determine if the goods or services paid for were for a business purpose. Do purchases fulfil the business requirement and are they compliant with the business policy? Juan Park’s approval case
    180. 180. <ul><li>. Gerri Teak’s company is the payee on the check request or invoice and he is also the approver. </li></ul><ul><li>What should you as an Accounts Payable Representative do? </li></ul>Investigation should be conducted to determine if this is a fraudulent payment. Check if this is a legitimate business operating as a going concern or does the approver have an ownership interest in the business. Is the supplier a legitimate business or does the invoice approver have an ownership interest in the business Payee Teak’s case
    181. 181. <ul><li>. Craig Thomas does not have the authority to approve payments over a certain dollar amount. However, he knows that he can occasionally send payment requests for more amount. </li></ul><ul><li>Do you identify a risk? </li></ul>Are the approvals obtained in conformance with the business policy? Abuse of this control may lead to improper non-business payments. Check for adequate number of approvals and verify signatures. Approval Bug
    182. 182. <ul><li>. Steve Buckner books his improper expenses and payments to a higher volume, less detectable account. </li></ul><ul><li>Is this acceptable? </li></ul>Maintain proper record of accounts. Audit the account distribution to determine if the invoice was booked to the correct account. It is clear by pass of financial controls. Was the payment recorded in the proper G/L account. Misuse of financial controls
    183. 183. AP does not process... In this topic, you will learn to: Explain the cases which Accounts Payable does not process
    184. 184. AP does not process… A Statement of an Invoice is a Proforma Invoice which lets the purchaser know of his liability. It is an unofficial document that serves as a notice to the buyer. It states the amounts outstanding, amounts paid and other charges, if any incurred as on a particular date. Accounts Payable is not supposed to pay against the statement of an invoice Keep your eye - Do not pay or process statements of invoices!
    185. 185. <ul><li>Intra company billing is referred to as one GE company billing another GE business. </li></ul><ul><li>AP is not involved in payments between components </li></ul><ul><li>Internal accounting procedures have been established for Intra company billing </li></ul><ul><li>The procedure mandates use of the Intra company billing system (IBS) </li></ul>Intra Company billing
    186. 186. Political Contributions <ul><li>Political contributions are strictly controlled by GE Government Relations </li></ul><ul><li>No vendor is set up for the purposes of making a political contribution unless approved by the Manager of Financial Analysis and Regulatory Operations of Government Relations </li></ul><ul><li>He can approve up to a certain amount. </li></ul>Subscription invoices also should not be paid.
    187. 187. Embargo <ul><li>Payments to countries embargoed are prohibited. </li></ul>Understand the complete process - pay the correct vendor!!!
    188. 188. Sarbanes Oxley In this topic, you will learn to: Define SOX404
    189. 189. Sarbanes Oxley – Mandates Audit of Internal Controls “ Sarbanes Oxley Act was passed in response to the issues at companies like Enron, Worldcom, Tyco to enable the public to be assured that what the financials represent is the real picture. Management now has to certify (document and test) that the systems and processes that we work with everyday will provide GE with the ability to provide accurate and timely financial reporting to our shareholders. Failure to comply with the Act attracts severe consequences including jail ti me.” <ul><li>An Internal Control Is a Process , Implemented and Executed by an Entity's Board of Directors, Management,and Other Personnel; Designed to Provide Assurance Regarding Prevention, Detection and Correction of Risks In: </li></ul><ul><ul><li>The Reliability of Financial Reporting, </li></ul></ul><ul><ul><li>The Effectiveness and Efficiency of on-Going Operations </li></ul></ul><ul><ul><li>Complying With Applicable Laws, External & Internal Regulations </li></ul></ul>Source: Interpretation From SAS NO. 55/78/94 Audit and Accounting Guides / Consideration of Internal Controls in a Financial Statement Audit Internal Controls Definition . . .
    190. 190. <ul><li>Key controls could incorporate the following aspects: </li></ul><ul><ul><li>Controls over initiating, processing, recording and reporting significant account balances, classes of transactions, and disclosures and related assertions embodied in financial statements. </li></ul></ul><ul><ul><li>Antifraud programs and controls. </li></ul></ul><ul><ul><li>Controls including general controls (e.g. information technology) on which other significant controls are dependent. </li></ul></ul><ul><ul><li>Each significant control in a group of controls that functions together to achieve a control objective. </li></ul></ul><ul><ul><li>Controls over significant non-routine and non-systematic transactions (such as accounts involving judgments and estimates). </li></ul></ul><ul><ul><li>Controls over the period end financial closing process, including controls over procedures used to enter transaction totals into the general ledger; to initiate, process and record journal entries in the general ledger; and to record recurring and non-recurring adjustments to the financial statements (for example, consolidating adjustments, report combinations, and reclassifications). </li></ul></ul><ul><li>Other items to consider when making this decision: </li></ul><ul><ul><li>The likelihood that the failure of a control could result in a material financial misstatement. </li></ul></ul><ul><ul><li>The degree, to which other controls, if effective, achieve the same control objective. </li></ul></ul>Guidelines on what makes a Key Control SOX 404 is an On-going requirement
    191. 191. Best practice from GE Businesses In this topic, you will learn to: Identify some E-tools used by different GE Businesses
    192. 192. Some E-Tools in Sourcing
    193. 193. Some E-Tools in Sourcing
    194. 194. E-Bid Tools: Example, Sourcebid, Noosh, Procuri.Com. Reverse auctions get the best pricing, terms, etc. that the market will bear. E-Buy Tools: E-Source Paperless purchasing via web-requisitioning system. Internal ordering via electronic catalogs and requisitions. Continual enhancements to Oracle system. E-Pay Tools: Purchasing Card (P-Card), Electronic Funds transfer (EFT) End users purchase low-value goods directly, eradicating non value added work connected with PO’s for Sourcing and Accounts Payable. GEIH Sourcing - Digitization Initiatives
    195. 195. <ul><li>Accounts Payable Department processes invoices on time and ensures to capture discounts. </li></ul><ul><li>In most businesses, business directly pays to the vendor on the discount or the net due date. </li></ul><ul><li>GE Industrial Systems uses the Trade Payables Services (TPS) Program to make payments to vendors. </li></ul><ul><li>The advantages of this system are: </li></ul><ul><li>Capturing discounts. </li></ul><ul><li>Business can still afford to pay on the net due date and continue to capture discounts. </li></ul><ul><li>Let’s take a look at the TPS Program Overview. </li></ul>GE Industrial Systems Contd…
    196. 196. TPS Is a Creative Alliance That Provides Significant Incremental Income And Working Capital Opportunities for GE Industrial Systems ... • Business Pays TPS On It’s Ordinary Net Date (i.e. Day 60) • Business & TPS Share Discount Income Step #3 ABC Inc. • Business Purchases Goods/Services • Business Receives Supplier Invoice • Business Approves the Invoice Step #1 <ul><li>TPS Funds Supplier Early Payment (i.e. 1.5% on Day 20) Net Of Discount... </li></ul>Step #2 Step #4 Example <ul><li>TPS negotiates/standardizes </li></ul><ul><li>payment term with Supplier </li></ul>$100.00 Invoice Approved For Payment By GEIS $98.50 Paid By GEIS to Supplier (98.5% of $100.00) is funded by GECS GECS Subtracts Money Cost And Expenses From $1.50 Discount With Remainder Split With GEIS Original $100.00 Invoice Paid To GECS By GEIS Working Capital Preserved + Incremental Income TPS Program Overview Contd…
    197. 197. Program Benefits <ul><li>• Financial Productivity </li></ul><ul><li>- Improved Cash Flow </li></ul><ul><li>- Improved Balance Sheet … Less $$$ Investment in AR </li></ul><ul><li>- Predictability of payments </li></ul><ul><li>Productivity </li></ul><ul><li> - Lower collection costs, fewer invoice </li></ul><ul><li>discrepancies </li></ul><ul><li>No Unauthorized discount Taken </li></ul><ul><li>Electronic Payment of invoices </li></ul>Suppliers Want Faster Payment . . . Money Received Today is More Valuable Than Money Received Next Month ! Supplier <ul><li>• Incremental Income ... No Investment </li></ul><ul><li>Improved Supplier Relationship … Alternate to long payment cycle </li></ul><ul><li>Catalyst/Support for extending AP & improving GEIS’ Working </li></ul><ul><li>Capital </li></ul><ul><li>No out of pocket costs </li></ul><ul><li>Dedicated negotiation & operational improvement support teams </li></ul>GEIS Contd…
    198. 198. Accelerated Payment Program GE Trade Payables Is An Early Payment Program That Creates a Unique Alliance Between GE Capital & GE Company Businesses ... Suppliers Desire Faster Payment... Product & Services <ul><li>GE Business Pays TPS On Supplier's Net Date </li></ul>...Yet, GE Prefers To Preserve Working Capital <ul><li>TPS Negotiates discount and Pays Supplier Early (i.e. Day15) Net Of Discount... </li></ul><ul><li>Income Split Between TPS & GE Businesses </li></ul>Program Benefits Benefits To GE Benefits To Suppliers <ul><li>Incremental Income … With no Investment </li></ul><ul><li>Catalyst/support for extending payment terms …and improving Business’s working capital </li></ul><ul><li>Improved supplier relationship … with pymt option </li></ul><ul><li>No out-of-pocket costs </li></ul><ul><li>Dedicated negotiation & operational improvement support teams </li></ul><ul><li>Improved cash flow … </li></ul><ul><li>- Less investment in AR </li></ul><ul><li>- Predictability of fast payments </li></ul><ul><li>- Balance sheet improvement </li></ul><ul><li>Productivity … reduction in suppliers’ collection </li></ul><ul><li>and admin costs </li></ul><ul><li>No risk guarantee … no unauthorized discounts taken… </li></ul>
    199. 199. GAP 31 <ul><li>General Accounting Procedures No. 31 – Trade Payables </li></ul><ul><li>Trade Payable Includes </li></ul><ul><li>Unpaid Vouchers </li></ul><ul><li>Notes or Drafts outstanding with Vendors and Suppliers </li></ul><ul><li>Material in Transit </li></ul><ul><li>General Procedures </li></ul><ul><li>Approvals From Authorized Individuals </li></ul><ul><li>Receivings Verification </li></ul><ul><li>3 Way Matching </li></ul><ul><li>Verification of Prior Payments </li></ul><ul><li>Utility / Service Expenses to Correct Accounts </li></ul><ul><li>Sub Account Classification (Payroll, Trade etc..) </li></ul><ul><li>Accruals </li></ul><ul><li>Balance Sheet Classification </li></ul><ul><li>Trade Payable Excludes </li></ul><ul><li>Vendor for Capital Equipment </li></ul><ul><li>Vendor for deferred payments > 1 Yr </li></ul><ul><li>Borrowings </li></ul>For Details Read GAP 31
    200. 200. Dictionary Double Click to view the AP Dictionary

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