Can Your Bottom Line Stand Another Hit?
Best practice tips revealed.January 7, 2010
by Mary Schaeffer
Ignoring your accounts payable (AP) function comes at a cost. That’s right — not paying proper attention to your payment function can hurt your organization financially — and in this economy that’s something no company can afford. Some executives think, “What’s the big deal about accounts payable? You get an invoice and you pay it. Why allocate resources to such a simple, low-level function?” The answer is quite simple: There’s a lot more to accounts payable than just paying bills; this is unless you don’t mind:
There’s more, but I think you probably get the picture.
The Best-Practice Hitch
Complicating the issue is the simple fact that AP best practices are changing. Policies that worked a year or two years ago, no longer protects your organization. Here are two simple examples.
The first revolves around the old issue of never paying from copies to guard against duplicate payments. By demanding original invoices for payment purposes, organizations were pretty certain to guard against duplicate payments. This old reliable practice no longer offers any protection. Why? With today’s technology, it is simple to produce many original invoices. With electronic and e-mailed invoices everyone looks like an original. Hence, a number of organizations have removed this restriction from their processes.
The second involves a check-fraud deterrent called Void Pantographs. When it was first developed, it was a brilliant way to stop crooks from copying and/or altering checks. By including a void pantograph in your check design, any time a copy was made of the check, the word Void or Copy would appear. This prevented thieves from scanning your checks and making multiple copies. Unfortunately, as scanning technology improved a side effect was that in some cases the void pantograph no longer worked. So, organizations depending on it had checks without protection.
What You Can Do
There’s plenty of information out there. Make it your New Year’s resolution that both you and your staff will keep up with it. No organization can afford to take this issue lightly. As reported in last month’s column, new types of payment fraud are emerging. You need current, accurate information to protect your firm. Reading this publication each month is a good way to start.
Invest in your AP function. This means hiring well-educated and experienced folks to handle your payment process. It also means making sure your existing staff gets the ongoing continuing education they need to stay current. This can come from reading, webinars (both free and fee-based) attending seminars and conferences and joining professional associations.
For years organizations were able to skate by investing minimally in their accounts payable staff and hiring employees who may not have had a lot of education but were willing to work hard. Today, the price for following this approach is too high. Every organization needs to be serious about their payment function.
Additional Resource: Visit AICPA’s Forensic and Valuation Center.
Rate this article 5 (excellent) to 1 (poor). Send your responses here.
Mary S. Schaeffer is the author of over a dozen business books including The Controller & CFO’s Guide to Accounts Payable and Fraud in Accounts Payable: How to Prevent It. She is the publisher of the CFO & Controllers Accounts Payable Management Journal, a quarterly electronic journal for senior executives concerned about internal controls and cost control in their payment function, writes a monthly newsletter, a free weekly ezine e-AP News, speaks at accounts payable webinars, seminars and conferences and directs the organization’s consulting practice.