Accounts Payable – A Guide to Running an Efficient Department 2e

<p>Preface xxi</p>
<p>Acknowledgments xxiii</p>
<p>Part One Processing 1</p>
<p>1 Invoice Handling 3</p>
<p>1.1 Introduction 3</p>
<p>1.2 The Invoice 4</p>
<p>1.3 Purchase Orders 5</p>
<p>1.4 Receiving Documents 6</p>
<p>1.5 Proper Invoice Handling 7</p>
<p>1.6 When Accounts Payable Receives Invoices Last 8</p>
<p>1.7 Entry by Month–End 9</p>
<p>1.8 Timely Approvals 10</p>
<p>1.9 Unidentified Invoices Sent to Accounts Payable 10</p>
<p>1.10 Use Best of Terms 11</p>
<p>1.11 Strategies to Use When Short–Paying Invoices 12</p>
<p>1.12 Goods Improperly Ordered Outside Purchasing 12</p>
<p>1.13 Nonpurchase Order Buying 13</p>
<p>1.14 Encouraging Others to Follow Accounts Payable s Guidelines 14</p>
<p>1.15 Invoices without Invoice Numbers 14</p>
<p>1.16 Invoice Amnesty Day 14</p>
<p>1.17 Keeping Difficult Invoices from Disappearing 15</p>
<p>1.18 Using Vendor Statements: Theory 16</p>
<p>1.19 Using Statements: Reality 17</p>
<p>1.20 Filing: Batch versus Alpha Filing 18</p>
<p>1.21 Reducing the Number of Invoices 18</p>
<p>1.22 Handling Bills with Remittance Advices 21</p>
<p>2 Alternatives to the Three–Way Match 23</p>
<p>2.1 Introduction 23</p>
<p>2.2 Assumed Receipt 23</p>
<p>2.3 Evaluated Receipt Settlement 25</p>
<p>3 Check Preparation Printing and Filing 33</p>
<p>3.1 Introduction 33</p>
<p>3.2 A More Common Approach 33</p>
<p>3.3 Manual Signatures 33</p>
<p>3.4 Authorized Signers 34</p>
<p>3.5 Proper Check–Signing Procedures and Control 35</p>
<p>3.6 Limiting Time Spent Getting Checks Signed 37</p>
<p>3.7 Mailing versus Picking Up Checks 39</p>
<p>3.8 Check Filing 40</p>
<p>3.9 Time–Saving Techniques in the Check Production Cycle 41</p>
<p>3.10 Canceled Checks and Irate Vendors 43</p>
<p>4 Automated Clearinghouse and Direct Deposit 47</p>
<p>4.1 Introduction 47</p>
<p>4.2 Direct Deposit 47</p>
<p>4.3 Other Common Examples 47</p>
<p>4.4 Combining Electronic Billing And Payments 48</p>
<p>4.5 Terminology 48</p>
<p>4.6 Check Truncation and Check Conversion 49</p>
<p>4.7 What Companies Are Doing Today 49</p>
<p>4.8 Case Study: How One Company Gets Suppliers to Accept ACH Payments 49</p>
<p>4.9 The Future 50</p>
<p>5 Making International Payments 52</p>
<p>5.1 Introduction 52</p>
<p>5.2 Foreign Exchange 53</p>
<p>5.3 Bank Account Issues 53</p>
<p>5.4 Payment Mechanisms 53</p>
<p>5.5 International Payment Service 54</p>
<p>5.6 Benefits of International Payment Services 54</p>
<p>5.7 Payments to NAFTA Partners 55</p>
<p>Part Two Controls 57</p>
<p>6 Exception and Rush Processing 59</p>
<p>6.1 Introduction 59</p>
<p>6.2 Dealing with the Issue 60</p>
<p>6.3 Hard–Line Approach 62</p>
<p>6.4 Identify Rush–Check Troublemakers 62</p>
<p>6.5 Modify Systems and Procedures to Reduce the Need for Rush Checks 63</p>
<p>6.6 Publish a Newsletter 64</p>
<p>7 Errors and Duplicate Payments 67</p>
<p>7.1 Introduction 67</p>
<p>7.2 Statistics 67</p>
<p>7.3 Types of Erroneous Payments 68</p>
<p>7.4 Low–Tech Solutions 68</p>
<p>7.5 High–Tech Solutions 69</p>
<p>7.6 Employees: Your Most Important Resource 69</p>
<p>7.7 Tolerance Levels 70</p>
<p>7.8 Handling Discrepancies 70</p>
<p>7.9 Accuracy and Timeliness 71</p>
<p>7.10 Timing Issues 74</p>
<p>7.11 Eliminating Duplicate Payments without an Auditor 74</p>
<p>7.12 Duplicate Pay Audits: The Future of Accounts Payable and AP Audits 75</p>
<p>8 Paying When the Original Invoice Is Not Available 79</p>
<p>8.1 Introduction 79</p>
<p>8.2 Who Pays from Copies 79</p>
<p>8.3 Controls When Using Copies 80</p>
<p>8.4 Common Techniques to Ensure a Second Payment Will not Be Made 81</p>
<p>8.5 Controls When Paying from Copies 81</p>
<p>9 Master Vendor Files 84</p>
<p>9.1 Introduction 84</p>
<p>9.2 The Data 84</p>
<p>9.3 Cleanup Policies 85</p>
<p>9.4 When to Set Up a New File 85</p>
<p>9.5 Maintenance Policies 86</p>
<p>9.6 Good Master Vendor Policies 86</p>
<p>9.7 Establishing Vendor Naming Conventions 87</p>
<p>9.8 Tips on Setting Up the Master Vendor File 88</p>
<p>9.9 New Vendor Setup 89</p>
<p>9.10 Adjustments, Corrections, and Additions 91</p>
<p>9.11 Maintaining the Master Vendor File 91</p>
<p>Part Three Cash Management 93</p>
<p>10 Terms and Taking Discounts 95</p>
<p>10.1 Introduction 95</p>
<p>10.2 Should the Discount be Taken? 95</p>
<p>10.3 An Ongoing Process 98</p>
<p>10.4 Possible Problems When Paying Late 99</p>
<p>10.5 Are All Possible Discounts Being Taken? 100</p>
<p>10.6 Should You? 101</p>
<p>11 Cash Management 104</p>
<p>11.1 Introduction 104</p>
<p>11.2 Why Discuss Cash Management in Accounts Payable? 104</p>
<p>11.3 Payment Timing 105</p>
<p>11.4 Maximize Float 106</p>
<p>11.5 Purchasing Cards 107</p>
<p>11.6 Bank Fees 107</p>
<p>11.7 ACH Background 107</p>
<p>11.8 ACH: Types of Corporate Payments 108</p>
<p>11.9 Clean–Desk Syndrome 109</p>
<p>11.10 Games Companies Play 110</p>
<p>12 Petty Cash 111</p>
<p>12.1 Introduction 111</p>
<p>12.2 Petty Cash No–Nos 111</p>
<p>12.3 Recommended Procedures 112</p>
<p>12.4 Other Recommended Procedures 113</p>
<p>13 Payment Timing 114</p>
<p>13.1 Introduction 114</p>
<p>13.2 Can Another Day be Squeezed out of Payables? 114</p>
<p>13.3 Timing Payments in Difficult Times 114</p>
<p>13.4 Stretching Vendor Payments 115</p>
<p>13.5 Place Smaller Orders 115</p>
<p>13.6 Talk to Vendors 115</p>
<p>13.7 A Formalized Approach 116</p>
<p>14 Audits and the Outside Accountant s Management Letter 119</p>
<p>14.1 Introduction 119</p>
<p>14.2 Most Notable Payables Issues 119</p>
<p>14.3 Using This Information 122</p>
<p><br />14.4 Sarbanes–Oxley Effect 123</p>
<p>Part Four Travel and Entertainment 125<br /><br />15 Handling Travel and Entertainment Reports 127</p>
<p>15.1 Introduction 127</p>
<p>15.2 The Problem 127</p>
<p>15.3 Solutions 128</p>
<p>15.4 How Much Checking Is Enough? 131</p>
<p>15.5 T&amp;E Manual 134</p>
<p>15.6 Policy and Procedures Changes 135</p>
<p>15.7 What About Electronic Receipts? 136</p>
<p>15.8 Faster Employee Reimbursements 137</p>
<p>15.9 E–Tickets 138</p>
<p>16 Handling Electronic T&amp;E Reports 139</p>
<p>16.1 Introduction 139</p>
<p>16.2 Advantages 139</p>
<p>16.3 Homegrown Systems 140</p>
<p>16.4 Third–Party Electronic Software 142</p>
<p>16.5 E–Tickets 142</p>
<p>17 Automating the T&amp;E Report Process 146</p>
<p>17.1 Introduction 146</p>
<p>17.2 Making the Most of Direct Deposit 146</p>
<p>17.3 Spreadsheet Approach 147</p>
<p>17.4 One–Card Intranet–Based Solution 148</p>
<p>17.5 In–House versus Third Party 148</p>
<p>18 Value–Added Tax Refunds 150</p>
<p>18.1 Introduction 150</p>
<p>18.2 What is Vat? 150</p>
<p>18.3 Assistance Available 151</p>
<p>18.4 Vat Reclaim Companies 151</p>
<p>18.5 Time Limitations: Deadlines 151</p>
<p>18.6 Focus on Vat–Friendly Countries 152</p>
<p>18.7 Focus on Vat–Valuable Expenses 152</p>
<p>Part Five Technology 155</p>
<p>19 Electronic Data Interchange 157</p>
<p>19.1 Introduction 157</p>
<p>19.2 What Is EDI? 157</p>
<p>19.3 TECHNICAL Basics: introduction 157</p>
<p>19.4 Why EDI? 158</p>
<p>19.5 Getting Started 160</p>
<p>19.6 Business Infrastructure Requirements 161</p>
<p>19.7 Managing Accounts Payable EDI 162</p>
<p>19.8 Accounts Payable EDI Opportunities 162</p>
<p>19.9 Accounts Payable EDI Success Factors 163</p>
<p>19.10 Systems Requirements 163</p>
<p>19.11 Trading Partner Directory 166</p>
<p>19.12 EDI Standards 166</p>
<p>19.13 Effect on Supplier Partnerships 167</p>
<p>19.14 Convincing Management 167</p>
<p>19.15 FEDI Applications 168</p>
<p>19.16 Cost–Justifying FEDI 168</p>
<p>19.17 Getting Up the EDI Learning Curve 168</p>
<p>19.18 Internet EDI 170</p>
<p>19.19 Web EDI: An Idea Whose Time Has Come 171</p>
<p>19.20 Security and Standards Issues 171</p>
<p>19.21 Why the Internet? 171</p>
<p>19.22 Special Application: ACH Debits for Tax Payments 172</p>
<p>20 Imaging 175</p>
<p>20.1 Introduction 175</p>
<p>20.2 Poor Man s Imaging 175</p>
<p>20.3 Planning for Full–Scale Imaging 176</p>
<p>20.4 Using Full–Scale Imaging with E–Mail 176</p>
<p>20.5 Imaging on a Smaller Scale 176</p>
<p>20.6 Overview 177</p>
<p>20.7 Imaging in Practice: Growing Pains 179</p>
<p>20.8 Legal Acceptance 180</p>
<p>20.9 Disaster Recovery 180</p>
<p>20.10 Frequently Asked Questions about Imaging 181</p>
<p>20.11 Preparing Documents for Imaging 182</p>
<p>21 The Internet, E–Mail, and E–Invoicing 184</p>
<p>21.1 Introduction 184</p>
<p>21.2 E–Mail 184</p>
<p>21.3 The Internet 185</p>
<p>21.4 Case Study: An Accounts Payable Department Web Site 187</p>
<p>21.5 What to Include on an Accounts Payable Web Page 191</p>
<p>21.6 Electronic Invoicing 191</p>
<p>21.7 Everyday AP uses for the Internet 194</p>
<p>21.8 Case Study: Putting the Web to Work for Accounts Payable 196</p>
<p>22 Encryption and Digital Signatures 200</p>
<p>22.1 Introduction 200</p>
<p>22.2 Basics 200</p>
<p>22.3 Case Study 203</p>
<p>23 E–Marketplaces and XML 206</p>
<p>23.1 Introduction 206</p>
<p>23.2 E–Marketplaces 206</p>
<p>23.3 XML 208</p>
<p>23.4 How Accounts Payable Professionals Can Prepare Themselves 208</p>
<p>23.5 How to Participate in the E–Commerce Revolution 209</p>
<p>Part Six Specialty Topics 211</p>
<p>24 Purchasing Cards 213</p>
<p>24.1 Introduction 213</p>
<p>24.2 What Is a Purchasing Card? 214</p>
<p>24.3 How a Purchasing Card Differs from a Consumer or Corporate Card 214</p>
<p>24.4 Why Use a Purchasing Card? 215</p>
<p>24.5 How Does the Purchasing Card Work within the Company? 215</p>
<p>24.6 Plan Administrator 215</p>
<p>24.7 User Feedback 215</p>
<p>24.8 Vendor Feedback 216</p>
<p>24.9 Control Features 217</p>
<p>24.10 Maximizing Cost Savings 219</p>
<p>24.11 Considering a Program 221</p>
<p>25 Post Audit Firms 223</p>
<p>25.1 Introduction 223</p>
<p>25.2 Why Are Accounts Payable Audit Firms Necessary? 224</p>
<p>25.3 How Post Audit Firms Work 224</p>
<p>25.4 Accounts Payable Benefits 225</p>
<p>25.5 Costs 225</p>
<p>25.6 Getting Money Back 226</p>
<p>25.7 Selecting the Best Profit Recovery Firm 226</p>
<p>25.8 Other Considerations 228</p>
<p>25.9 Reaction to Profit Recovery Firms 228</p>
<p>25.10 Self–Auditing 228</p>
<p>25.11 Self–Auditing for Duplicate Payments 229</p>
<p>25.12 Current State of Duplicate Payment Audit Industry 229</p>
<p>26 Benchmarking 230</p>
<p>26.1 Introduction 230</p>
<p>26.2 What is Benchmarking? 230</p>
<p>26.3 Sources of Benchmarking Data 232</p>
<p>26.4 Benchmarking Applications 232</p>
<p>26.5 Case Study: How to Start or Improve a Benchmarking Program 234</p>
<p>Part Seven Regulatory Issues 239</p>
<p>27 Form 1099 and Form 1042–S 241</p>
<p>27.1 Introduction 241</p>
<p>27.2 Background 241</p>
<p>27.3 Best 1099 Practice 242</p>
<p>27.4 What if the 1099 Is Not Filed? 242</p>
<p>27.5 Who Should Receive a 1099? 243</p>
<p>27.6 Letters Instead of W–9s 244</p>
<p>27.7 B–Notices 244</p>
<p>27.8 Types of Payments Reflected on 1099S 246</p>
<p>27.9 More Help from the IRS 246</p>
<p>27.10 It s 1099 Time: Changes Implemented in 2002 246</p>
<p>27.11 1042–S 249</p>
<p>28 Sales and Use Tax 250</p>
<p>28.1 Introduction 250</p>
<p>28.2 Defining Sales and Use Tax 250</p>
<p>28.3 Education 251</p>
<p>28.4 Policies and Procedures 252</p>
<p>28.5 Sales and Use Tax Audits 252</p>
<p>28.6 Sales and Use Tax Terminology 254</p>
<p>28.7 Types of Sales and Use Tax 254</p>
<p>28.8 Keeping Up To Date 254</p>
<p>28.9 Use Tax and Nexus 255</p>
<p>28.10 Specialized Software 255</p>
<p>28.11 Additional Learning Opportunities 256</p>
<p>28.12 Help Others Help Accounts Payable 256</p>
<p>28.13 Industry–Specific Sales and Use Tax Advice 259</p>
<p>28.14 Avoiding a Sales and Use Tax Disaster 262</p>
<p>28.15 Conclusion 263</p>
<p>29 Escheatment 264</p>
<p>29.1 Introduction 264</p>
<p>29.2 What Is Escheatment? 264</p>
<p>29.3 What If You Do Not Escheat? 265</p>
<p>29.4 Dilemma 265</p>
<p>29.5 What Can Be Done? 266</p>
<p>29.6 Necessary Documentation 266</p>
<p>29.7 Software Solutions 266</p>
<p>29.8 What Can Accounts Payable Professionals Do? 267</p>
<p>29.9 What If You Have Not Been Escheating? 268</p>
<p>29.10 Professional Organizations for Unclaimed Property Owners 268</p>
<p>29.11 Typical Unclaimed Property Experience 268</p>
<p>29.12 An Unclaimed Property Game Plan 270</p>
<p>Part Eight Management Issues 273</p>
<p>30 Ethics 275</p>
<p>30.1 Introduction 275</p>
<p>30.2 Sections of Sarbanes–Oxley Act Pertinent to Accounts Payable 275</p>
<p>30.3 Cascading Certifications 276</p>
<p>30.4 Sarbanes–Oxley Act: A Case Study 276</p>
<p>30.5 Foreign Payments 278</p>
<p>30.6 Office of Foreign Assets Control 279</p>
<p>30.7 What This Means to Accounts Payable 279</p>
<p>31 Disaster Recovery 281</p>
<p>31.1 Introduction 281</p>
<p>31.2 Personnel Travel Policies 281</p>
<p>31.3 Telephone Trees 282</p>
<p>31.4 Computer Backups 283</p>
<p>31.5 Protecting Paper 283</p>
<p>32 Outsourcing 284</p>
<p>32.1 Introduction 284</p>
<p>32.2 Why Companies Do Not Outsource Accounts Payable 284</p>
<p>32.3 When Outsourcing Makes Sense 284</p>
<p>32.4 Hiring an Outsourcer 285</p>
<p>32.5 Outsourcing: A Case Study 286</p>
<p>33 Management Techniques 289</p>
<p>33.1 Introduction 289</p>
<p>33.2 Six Sigma 289</p>
<p>33.3 Balanced Scorecard 290</p>
<p>Part Nine Department Management 291</p>
<p>34 Making Your Accounts Payable Department First–Rate 293</p>
<p>34.1 Introduction 293</p>
<p>34.2 Typical Accounts Payable Department 293</p>
<p>34.3 Who Runs the Department? 294</p>
<p>34.4 Hiring Practices 294</p>
<p>34.5 How to Assemble an Accounts Payable Dream Team 296</p>
<p>34.6 Procedures Manual 299</p>
<p>34.7 The Impact of Technology on Accounts Payable Departments 301</p>
<p>34.8 Outsourcing 303</p>
<p>35 Managing the Staff 307</p>
<p>35.1 Introduction 307</p>
<p>35.2 Training 307</p>
<p>35.3 Finding Challenging Work for the Staff 310</p>
<p>35.4 Listening Skills 310</p>
<p>35.5 Hiring Staff 312</p>
<p>35.6 Overtime: A Serious Issue 313</p>
<p>35.7 Managing a Unionized Staff 314</p>
<p>36 Staff Motivation and Morale 319</p>
<p>36.1 Introduction 319</p>
<p>36.2 Motivation Techniques 319</p>
<p>36.3 Evaluating Your Motivation Skills 321</p>
<p>36.4 Motivating the Seemingly Unmotivatable 324</p>
<p>36.5 Using the Staff Knowledge as Company Resource 325</p>
<p>36.6 Dealing with Poor–Attitude Problems 325</p>
<p>36.7 Getting the Accounts Payable Staff to Take on More Work 327</p>
<p>36.8 A Realistic Approach to Motivating Accounts Payable Staff 327</p>
<p>36.9 Improving the Image of Accounts Payable 330</p>
<p>37 Working with and for Purchasing and Other Departments 332</p>
<p>37.1 Introduction 332</p>
<p>37.2 Why Interdepartmental Cooperation Is Important 333</p>
<p>37.3 Basic Approaches 333</p>
<p>37.4 Handling the Big Issues 336</p>
<p>37.5 Getting a Customer Service Mentality in Accounts Payable 338</p>
<p>37.6 Quick Answers to Common Problems 341</p>
<p>Part Ten Fraud 345</p>
<p>38 Check Fraud 347</p>
<p>38.1 Introduction 347</p>
<p>38.2 Check Fraud as Growth Industry 347</p>
<p>38.3 Legal Issue of Reasonable Care 348</p>
<p>38.4 Corporate Responsibility 348</p>
<p>38.5 Controls 348</p>
<p>38.6 If Preprinted Check Stock Is Used 349</p>
<p>38.7 Check Security Features 349</p>
<p>38.8 Short–Circuiting the Forger 350</p>
<p>38.9 Taking Reasonable Care 351</p>
<p>38.10 Positive Pay 353</p>
<p>38.11 Reverse Positive Pay 353</p>
<p>38.12 Ongoing Fraud Problems 353</p>
<p>38.13 A Total Fraud Protection Program 354</p>
<p>38.14 Identifying Fraudulent Checks Quickly 354</p>
<p>38.15 Segregation of Duties 355</p>
<p>38.16 Account Reconciliation 355</p>
<p>38.17 Accounts Payable Controls 356</p>
<p>38.18 Payment Pitfalls: What Your Banks May Not Tell You 356</p>
<p>38.19 Laws Covering Check Fraud 358</p>
<p>38.20 Positive Pay: The Next Generation 359</p>
<p>39 Employee Fraud 360</p>
<p>39.1 Introduction 360</p>
<p>39.2 Be Aware of Typical Candidates 360</p>
<p>39.3 What Can Go Wrong 360</p>
<p>39.4 Steps to Prevent Cash Fraud 361</p>
<p>39.5 Exercise Patience 362</p>
<p>39.6 Call in the Professionals 362</p>
<p>39.7 When Fraud has been Identified 363</p>
<p>39.8 Dealing with the Aftermath 364</p>
<p>39.9 Preventing Fraud in the Future 364</p>
<p>40 Vendor Fraud 366</p>
<p>40.1 Introduction 366</p>
<p>40.2 Master Vendor File 366</p>
<p>40.3 Con Artist Vendors 369</p>
<p>40.4 Scam Solutions 371</p>
<p>40.5 Vendor Profile Forms 372</p>
<p>Part Eleven Accounts Payable Today and in the Future 375</p>
<p>41 Professionalism in the Field 377</p>
<p>41.1 Introduction 377</p>
<p>41.2 Evaluating the Big Picture 377</p>
<p>41.3 Leadership and Preparation 378</p>
<p>41.4 Technology 378</p>
<p>41.5 Communication 379</p>
<p>41.6 Relevant Trends 380</p>
<p>41.7 Gaining the Attention of Management 380</p>
<p>41.8 How to Win Approvals on Accounts Payable Proposals 381</p>
<p>41.9 Taking Control of Your Own Destiny 383</p>
<p>41.10 Certification 383</p>
<p>41.11 Conferences 383</p>
<p>41.12 Accounts Payable in the Twenty–First Century 384</p>
<p>42 Salaries and Titles in Accounts Payable Today 386</p>
<p>42.1 Introduction 386</p>
<p>42.2 Basic Data 386</p>
<p>42.3 Bonuses 388</p>
<p>42.4 Education 390</p>
<p>42.5 Effects of Industry and Company Size 390</p>
<p>42.6 Trends 392</p>
<p>42.7 Reevaluating AP Positions for Grade–Level Changes 392</p>
<p>42.8 Titles 393</p>
<p>Appendix Accounts Payable Resources 397</p>
<p>Index 399</p>