Table of Contents

Chapter 1 - Overview of Payables. 1

Transaction Cycles. 1

Organizational Structure of the Accounting Department 2

Payables Functions. 4

Payables Job Descriptions. 6

Chapter 2 - Invoice Processing. 9

The Need for Precise Invoice Processing. 9

The Supplier Invoice Processing Procedure (Manual System) 9

The Supplier Invoice Processing Procedure (Integrated System) 14

Accounts Payable Credits Processing Procedure. 16

The Evaluated Receipts Processing Procedure. 18

The Check Payment Issuance Procedure. 19

Payment Alternatives. 22

The Void Checks Procedure. 22

Enhancements to Invoice Processing. 23

Direct Invoice Delivery. 23

Centralize E-mailed Invoice Processing. 24

Return Incomplete Invoices. 24

Invoice Numbering Convention. 24

Request Aggregated Invoice. 24

Minimize Approvals. 25

Analyze Matching Discrepancies. 25

Monitor Invoice Disputes. 25

Recurring Payment Automation. 26

Manual Check Reduction. 26

Analyze Manual Checks. 26

Restrict Manual Delivery of Checks. 26

Restrict Cash Advances. 26

Schedule Frequent Check Runs. 27

Use a Signature Stamp or Plate. 27

Reduce the Need for Second Signatures. 27

Encourage use of ACH.. 27

Clean the Payables Aging Report 28

Search for Open Credits. 28

Reduce the Number of Suppliers. 28

Final Thoughts. 28

Chapter 3 - Types of Payments. 31

Cash Payments (Petty Cash) 31

Check Payments. 33

Foreign Check Clearing. 35

Float 36

Advantages of Checks. 37

Disadvantages of Checks. 37

Bank Drafts. 37

Automated Clearing House Payments. 37

Advantages of ACH.. 39

Impact on Float 40

Global ACH.. 40

Wire Transfers. 40

The Letter of Credit 41

The Standby Letter of Credit 42

Chapter 4 - Expense Reimbursement 45

The Need for Expense Reimbursement 45

The Expense Report Submission Procedure (Manual System) 45

The On-Line Expense Report Submission Procedure. 49

The Expense Report Review Procedure. 50

The Travel and Entertainment Policy. 51

Additional Expense Reimbursement Topics. 53

Form of Documentation. 53

Cash Advances. 53

Expense Report Auditing. 54

Expense Report Outsourcing. 54

Spend Management 54

Employee Reviews. 54

Chapter 5 - Procurement Cards. 57

When and How to Use Procurement Cards. 57

The Card Reconciliation Procedure. 59

The Lost Card Procedure. 62

Additional Procurement Card Topics. 65

Card Issuer Relations. 65

Card Rebates. 65

Cash Flow Management 65

Card User Relations. 65

Departure of Card Users. 66

Chapter 6 - Use Taxes. 68

Sales and Use Tax Overview.. 68

Use Tax Systems. 69

Additional Use Tax Issues. 70

Use Tax Audits. 70

Sales Tax Exemption Certificate. 70

Multiple Points of Use Certificate. 71

Chapter 7 - Finance Issues. 73

Early Payment Discounts. 73

Payment Timing. 74

Supply Chain Financing. 75

Chapter 8 - Accounting for Payables. 78

Routine Accounts Payable Entries. 78

Gross and Net Price Methods. 79

Period-end Accounts Payable Entries. 80

Applicable Accounts to Charge. 80

Chapter 9 - Closing Payables. 85

Accounts Payable Accruals. 85

Expense Reports. 86

Issues with the Credit Card Close. 86

Accounts Payable Suspense Items. 87

Discrepancy Invoices. 88

Uncashed Checks. 88

Reconciling Accounts Payable. 89

Additional Year-end Tasks. 89

Closing the Ledger. 90

Chapter 10 - Department Management 92

Payables Manager Responsibilities. 92

Schedule of Activities. 92

Error Tracking System.. 92

Process Reviews. 94

Queue Management 94

Department Layout 95

Skills Review and Training. 96

Measuring the Results of Training. 97

Consolidate Accounting. 97

Quality of the Work Environment 98

Flexible Work Hours. 98

Job Sharing. 99

Permanent Part-Time Work. 99

Chapter 11 - Payables Controls. 101

Accounts Payable Processing Controls. 101

Alternative Accounts Payable Control Systems. 105

Control System for Manual Accounts Payable. 105

Control System for Computerized Accounts Payable. 105

Additional Payables Controls – Trend Analysis. 106

Additional Payables Controls – Fraud Related. 106

Additional Payables Controls – Periodic Actions. 107

Expense Report Processing Controls. 108

Alternative Expense Report Control Systems. 109

Control System for Manual Expense Reporting. 109

Control System for Computerized Expense Reporting. 109

Additional Expense Report Controls – Fraud Related. 110

Additional Expense Report Controls – Periodic Actions. 111

In-Process Procurement Card Controls. 111

Alternative Procurement Card Control Systems. 113

Procurement Card Control System without a Transaction Log. 113

Procurement Card Control System with a Transaction Log. 113

Additional Payables Controls – Fraud Related. 113

Additional Payables Controls – Periodic Actions. 114

Petty Cash Controls. 115

Additional Payables Controls – Fraud Related. 116

Payables Policies. 116

Payables Policies. 117

Expense Report Policies. 117

Procurement Card Policies. 118

Petty Cash Policies. 118

Chapter 12 - Payables Fraud. 121

Personal Purchases. 121

Refunds of Personal Purchases. 121

Fake Suppliers. 121

Supplier Overbillings. 122

Unauthorized Shipments. 122

Supplier-Staff Collusion. 122

Authorization Limit Avoidance. 122

Petty Cash Theft 122

Redirected Payments. 123

Check Fraud. 123

Check Theft 123

ACH Debits. 123

Keystroke Logging. 124

The Need for Controls Reviews. 124

Chapter 13 - Payables Technology. 126

The Payment Factory. 126

Automated Expense Report Submissions. 127

Automated Payables Matching. 127

The Reverse Lockbox. 128

Supplier Portals. 128

Automated W-9 Forms. 128

Chapter 14 - Payables Record Keeping. 131

The Vendor Master File. 131

Vendor Master File Usage. 132

Supplier Naming Conventions. 132

Vendor Master File Errors. 133

Duplicate Record Detection and Prevention. 134

TIN Matching. 135

The Payables Filing System.. 135

Off-site Storage. 136

Document Imaging. 136

Document Destruction. 137

Chapter 15 - Government Reporting. 139

The Form 1099-MISC.. 139

Treatment of Incorrect Filings. 141

The Form W-9. 142

Backup Withholdings. 144

Form 1099 Administrative Issues. 144

Form W-9 Administrative Issues. 144

Chapter 16 - Unclaimed Property. 148

The Unclaimed Property Liability. 148

Uncashed Checks. 149

Treatment of Credits. 149

Due Diligence Letters. 150

The Dormancy Period. 150

The Unclaimed Property Audit 150

Document Retention Policy. 151

Filing Unclaimed Property Reports. 152

Claiming Unclaimed Property. 153

Chapter 17 - Cost Recovery. 155

Internal Cost Recovery Targets. 155

Advertising Expenditures. 155

Allowances. 155

Contracts. 155

Duplicate Payments. 156

Freight Billings. 156

Health Plan Enrollment 156

Legal Billings. 156

Spend Compliance. 156

Supplier Credits. 157

Telecommunications Billings. 157

Unclaimed Property. 157

Unreturned Deposits. 157

Internal Cost Recovery Staff 157

Recovery Auditors. 158

Cost-Benefit of Cost Recovery Activities. 159

Cost Recovery Timing. 161

Fertile Ground for Cost Recovery Efforts. 161

Chapter 18 - Payables Measurements. 163

Days Payables Outstanding. 163

Supplier Billed Price Variance. 164

Transaction Error Rate. 165

Full-Time Equivalent Measurements. 165

FTEs per $1 Million of Revenue. 166

Staff Cost per FTE.. 166

Line Items per FTE.. 167

Paperless Measurements. 167

Percent of Paperless Invoices. 167

Percent of Paperless Payments. 167

Additional Payables Measurements. 167

Answers to Chapter Questions. 170

Glossary. 191

Index. 193

 

Final Examination……………………………………………………………………………………………….…198