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The accounts payable function is the absolute most labor-intensive of all the accounting functions and is therefore a fantastic supply of labor savings if the right best practices can be implemented. The essential process in most companies is to receive three kinds of information from three sources—an invoice from the supplier, a purchase order from the purchasing department, and a proof of receipt from the receiving department. The accounts payable staff then matches all three documents to ensure that a prospective payment is authorized and that the underlying goods have been received, and then pays the bill. The process is labor-intensive partially while there is this kind of wide range of matching to complete, but in addition since the three documents rarely match. Either the purchase order quantities or prices do not match what the supplier is charging, or else the amount received does not match the quantities on one other two documents.

Because of those inaccuracies, the quantity of labor needed to issue a payment may be extraordinarily high. The very best practices in this chapter belong to a few main categories, many of them designed to lessen the matching work. One category attempts to consolidate the number of invoices arriving from suppliers, thereby shrinking the paperwork from this source—typical best practices in this area are employing procurement cards and shrinking the amount of suppliers. Another category tries to lessen or eliminate how many receiving documents. Typical best practices of this type are substituting occasional audits for ongoing matching of receiving documents, in addition to directly entering receipts in to the computer system. Finally, another category reduces the number of purchase orders that must definitely be matched. Typical best practices of this type include using blanket purchase orders and automating threeway matching. Other solutions to the matching problem involve going from the traditional matching process entirely, by utilizing payments based solely on proof of receipt. It is difficult to make use of many of these best practices together, since some are mutually exclusive—one must certanly be careful in choosing the correct best practices. Lastly, a number of best practices concentrate on the entire accounts payable process, trying to either shrink or automate the number of steps required before a company issues payment to a supplier. Samples of best practices in this region include utilizing a signature stamp and switching to wire transfers. How many best practices in the accounts payable area indicates that this function is ripe for improvements. However, some best practices require a large investment of money or time, as noted in the chart within the next section, so the person doing the improving should verify that resources are available before embarking on an implementation.

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