Account management controls are used to mitigate the risk of losses in the payables function. Payables controls are aggregated into three general categories, which are verifying the obligation of the business to pay, entering the payables data into the computer system, and paying suppliers.
The controls are as follows:
Account management software provides users with powerful automation as an ongoing process, to streamline AP processing requirements, while simplifying transactions between your company and its suppliers. Account Payable automation increases the efficiency of Accounting departments, where invoices and other important business documents are frequently received. Is your organization ready to implement an Account Payable solution? Let’s explore the top four benefits of Account Management automation.
System Control: A computerized payables system conducts an automatic search for duplicate invoice numbers. This is a much more difficult endeavour in an entirely manual accounting system. In this case, the payables clerk can search through the vendor file and unpaid invoices file to see if an invoice just received from a supplier has already been paid. In many situations, the volume of incoming supplier invoices makes this so difficult that the payable staff abandons any attempt to identify duplicate invoices, and simply accepts that it will occasionally pay for such items.
Invoice Approval: An Account Management department is responsible for managing and processing invoices to ensure they are approved, recorded and paid. This process is time-consuming and costly when working with paper, as invoices must go through the company’s respective manual business process in order to be paid properly. Why not take processes digital? After an invoice, e-Form has been filled out online and submitted, it will automatically route by email to the designated approving manager. The manager can then immediately review the requisition and approve for further routing, without waiting for a physical copy of that invoice. With the manager’s approval of the requisition, a workflow process will then automatically generate a purchase order for vendor distribution via email. Document management systems handle the routing, matching, approval and distribution of both purchase orders and invoices, streamlining AP tasks while providing real-time visibility into the course of processing.
Purchase Order Approval: The purchasing department issues a purchase order for every purchase made. By doing so, the purchasing staff is, in essence, approving all expenditures before they have been made, which may prevent some expenditures from ever occurring. Since this control entails a considerable amount of work by the purchasing staff, they will likely ask employees to request items on a formal purchase requisition form.
Electronic invoicing allows records to be submitted digitally, automatically indexing, routing and processing for the three-way match. During the indexing process, users automating AP processes with a document management system in place have the option to apply cost centres and General Ledger codes to the invoice line items for accurate bookkeeping. The system will then match your incoming invoices to their respective purchase orders and packing slips. After the three-way match is performed and confirmed, the document management system will route the invoice for final approval and payment. This allows your Account Management department to work on tasks of higher importance, while letting workflow software finish processes automatically, in the background.
The bulk of the controls noted below pertain to payment by check since that is still the predominant form of payment. The controls are:
Split check printing and signing. One person should prepare checks, and a different person should sign them. By doing so, there is a cross-check on the issuance of cash
Store all checks in a locked location. Unused check stock should always be stored in a locked location. Otherwise, checks can be stolen and fraudulently filled out and cashed. This means that any signature plates or stamps should also be stored in a locked location
Track the sequence of check numbers used. Maintain a log in which are listed the range of check numbers used during a check run. This is useful for determining if any checks in storage might be missing. This log should not be kept with the stored checks since someone could steal the log at the same time they steal checks
Require manual check signing. A company can require that all checks be signed. This is actually a relatively weak control since few check signers delve into why checks are being issued, and rarely question the amounts paid. If a company chooses to use a signature plate or stamp instead, then it is much more important to have a strong purchase order system; the purchasing staff becomes the de facto approvers of invoices by issuing purchase orders earlier in the payables process flow
Require an additional check signer. If the amount of a check exceeds a certain amount, require a second check signer. This control supposedly gives multiple senior-level people the chance to stop making a payment. In reality, it is more likely to only introduce another step into the payment process without really strengthening the control environment.