Understandably, most companies are focused on their incoming cash flow and the bottom line. As a result, accounts receivable departments, or incoming balances, tend to get all the attention. Consider what companies might discover if they took a closer look at accounts payable. The management of accounts payable should also be considered a priority. When ignored or overlooked, issues like duplicate payments and contract non-compliance can erode the bottom line.
As companies prepare for year-end and begin looking to 2014, think about implementing new practices and procedures to help get an even better handle on the business.
AP post audit services
Many companies use third party firms to provide post audit recovery services. A post audit service by a third party firm examines accounts payable transactions after the check has been processed. The auditor reviews transactions after software exposes errors through the data mining function. These errors are examined and validated with related documents. When a claim is presented to the client, the auditor has the responsibility to follow-up and answers any of the vendor’s questions. The auditor collects his contingency fee after the claim is settled.
Post audit software
Post-audit software also can be purchased and used internally by the accounts payable staff, eliminating the cost of external audits. This software can range in price depending on the scope and the industry. Most programs use benchmarks, controls and analytics to discover discrepancies. Many industries have specialized needs such as the retail and beverage distribution industry where duplicate payments are more prevalent.
Streamline accounts payable
Third party services and audit software can be cost prohibitive for most small business. For a less expensive, but viable solution, a small business can reorganize the accounts payable process with checks and balance to reduce the possibility of duplicate payments, fraudulent bills and employee embezzlement. One employee can process and print a check, but another employee should be required to review and sign it. This dual duty can be incorporated into most basic business accounting software so employees can only access and perform assigned functions. For checks that exceed a predetermined amount, requiring a second signature is another good practice. Separating the process of adding a new supplier to your system from the ability to issue payment is also advised.
Implementing checks and balances as a part of your company procedures will help catch errors and improve controls. Regardless of company size or revenues, a post audit or streamlining of the accounts payable system should be on the to do list. After all, recovering funds that were paid in error, preventing future errors, and a more confident AP management team will inevitably increase the bottom line..