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IOMA’s REPORT ON
Accounts
P
Managing
ayable
THE LEADING SOURCE OF INFORMATION ON CONTROLLING DISBURSEMENTS & MANAGING THE PAYABLES DEPARTMENT
ISSUE 03-08 http://www.ioma.com/ AUGUST 2003
Editor: Mary S. Schaeffer Managing Editor: Janice Prescott Editorial Coordinators: Gale Shangold David Solomon Desktop/Design Editor: Alison J. Brathwaite Group Publisher: Perry Patterson Executive Director: David L. Foster Published monthly by the Institute of Management & Administration, Inc.
In This Issue:
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E-Check Applications From ACH ....... page 9
(Source: ACH)
A/P Cash Management Best Practices to Increase Corporate Profitability..................... 1 5 Ways to Say Good-bye to the Traditional 3-Way Match... and All Its Inherent Inefficiencies .................................................. Savvy Pro Reveals How Companies Can Use the Sarbanes-Oxley Act to Tighten A/P Controls .......................................................... Expert Advice on Becoming a Player in the e-Invoicing Game ........................................... 3 Real-Life Solutions to Delicate Cell Phone & Personal Call Issues ....................................... 6 Accounts Payable Miscellany ............................ Accounts Payable Calendar .............................. Accounts Payable Managers’ Forum ...............
A/P Cash Management
Best Practices to Increase
Corporate Profitability
Over the last few weeks MAP has talked exten- sively with several accounts payable managers who now have responsibilities for areas not typi- cally associated with the traditional bill-paying function. These A/P pros are discussing the in- creased financial “span of control” now residing in accounts payable. One financial area that is seep- ing into accounts payable is cash management as it is affected by various department initiatives,
5 Ways to Say Good-bye
to the Traditional 3-Way
Match... and All Its
Inherent Inefficiencies
Anything that can be done to streamline the invoice-handling process without increasing the risks of fraud and duplicate payment is a big plus for most accounts payable departments. If the restructure also reduces the amount of paper in the department, that’s even better. The traditional three- way match is probably the biggest cause of both
Internet-Initiated Entries (WEB) Telephone-Initiated Entries (TEL) Point-of-Purchase Entries (POP) Accounts Receivable Entries (ARC)
A/P Cash Management Best Practices to Increase Corporate Profitability
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ment policy. This is an acceptable and preferred approach.
Unfortunately, this is not always what a clean desk in accounts payable means. Some diligent accounts payable associates process for payment every invoice they receive the day they receive it. Then they pay the invoice at the same time, not taking advantage of the terms offered by the sup- plier. This is a bad accounts payable cash-manage- ment practice. Why? Because it causes a company to disburse funds before the due date, funds that could be invested earning some return for the company in the interim. This is when a clean desk is a bad accounts payable practice. If the company’s systems do not have the ability to schedule pay- ments, it is a better idea to have invoices in files, perhaps even on desks, in order to preserve the company’s cash for as long as is feasible.
As accounts payable professionals continue to increase their span of financial control, cash man- agement theories and practices will become a greater part of their everyday responsibilities—a definite way to improve the department’s standing within the company. ❏
5 Ways to Say Good-bye to the Traditional 3-Way Match... and All Its Inherent Inefficiencies
continued from page 1 inefficient processing and the paper mountains that are common in some accounts payable depart- ments. To help readers who are interested in re- engineering their workflow with an eye toward developing a paperless office, MAP has identified five practices that will do just that. Online Matching By converting all paper (specifically POs, in- voices, and receivers) to electronic documents, accounts payable can still do the three-way match while simultaneously eliminating paper. Docu- ments that are not created electronically can be converted using imaging technology. If the com- pany uses this workflow it can achieve a reengineered process that will greatly reduce er- rors and save processing time. While this is probably the ideal solution to a streamlined paperless accounts payable depart- ment, it is not one that will be used by all. Even those with the latest technology will only be able to convert a portion of their work. Evaluated Receipt Settlement Recognizing that most of the problems that arise during the three-way match are due to errors on the invoice, some savvy professionals decide to eliminate what they see as an unnecessary step. If the PO is filled out completely and the receiver is checked closely when goods arrive on the receiv- ing dock, what purpose does the invoice serve other than to cause problems? Companies that use evaluated receipt settlement (ERS) eliminate the invoice and do a two-way match. When the re- ceiver arrives in accounts payable, it is matched against the PO and a payment is scheduled accord- ing to the prearranged terms shown on the invoice. If approvals are needed, the information is for- warded to the appropriate parties via e-mail. How- ever, if the PO was approved before it was issued
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IOMA’s 2003 A/P Conference & Expo
Save the Date! ACCOUNTS P AYABLE B EST P RACTICES FOR 2004
3 Keynote Presentations; 12 Sessions on what best practices you can implement in A/P to automate, cut costs, improve productivity and succeed in 2004; 2 In-Depth Workshops; The Opportunity to speak with the top A/P vendors; Fundamentals of A/P: a half-day workshop on Oct. 19.
Accounts Payable
Calendar
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5 Ways to Say Good-bye to the Traditional 3-Way Match... and All Its Inherent Inefficiencies
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ing and mailing of invoices to customers who have already paid using the p-card. Any time an invoice shows up from such a vendor treat it with extreme caution. Has it already been paid for using a p- card? Duplicate payment auditors report an in- crease in such payments.
ACH Debits
A few hardy souls, including those that are captive customers of certain 800-pound gorillas, make use of ACH debits. This is not an approach for the faint-hearted or those that have a need to control everything. Here’s how it works. When a vendor ships, based on prearranged terms, it then directly debits the customer’s bank account for the funds owed. The customer (that’s you) is notified of the purchase and the debit so it can update its records. Most suppliers would be happy to oblige customers who were in favor of direct debits; few customers are.
Conclusion
The techniques discussed all rely on a few common requirements. For starters, most necessi- tate good up-front controls. Good technology and communication between departments also helps. Without these control points, use of these tools can result in an increase in duplicate payments and an opening of the window that permits fraud.
As accounts payable becomes more analytical and companies look for ways to become more efficient and rely less on paper-intensive manual techniques for processing work, the traditional three-way match will become endangered. Study the approaches discussed above to see which will help you streamline your accounts payable pro- cesses and then adapt them to your organization’s own requirements. They are the wave of the future. ❏
CONCEPTS 2003, Sept. 15-17, Mount Pleasant, MI. Contact: www.thepaymentsauthority.org/con- cepts2003. PAYMENTS SYMPOSIUM 2003, Sept. 28-30, San Francisco. Contact: www.wespay.org. PAYMENT INSIGHTS, Sept. 28-30, Wakefield, MA. Contact: www.paymentinsights.com. 2003 GACHA CONFERENCE: THE EVOLUTION OF PAYMENTS—THE NEW WORLD OF ACH, October 15-16, Atlanta. Contact: www.gacha.org. 18TH ANNUAL ELECTRONIC PAYMENTS CONFERENCE “FINISH FIRST WITH ACH,” Oc- tober 22 -23, Bloomington, MN. Contact: www.umacha.org. MID-AMERICA PAYMENTS CONFERENCE 2003: ELECTRONIC PAYMENTS—THE FUTURE IS NOW!, October 26-28, St. Louis, MO. Contact: www.mpx.org. THE AFP 24TH ANNUAL CONFERENCE, No- vember 2-5, Orlando, FL. Contact: 301-907-2862; www.afponline.org. ALACHA’S 13TH ANNUAL CORPORATE ACH SEMINAR, Dec. 11, Birmingham, AL. Contact: www.alacha.org.
