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May 7-9, 2017
Disney’s Yacht & Beach Club Resorts®, Florida
Improve Your Payment Process, Step by Step
Introduction
• Anne Wheeler of CS Process Flows, LLC
• Certified Accounts Payable Manager
• 20+ years experience in Accounts Payable
• Managed various payment processes and methods
• Offering tips and tricks for more efficient and effective Payment Processing
Learning Objectives
• Discover steps for efficient and effective processing
• Explore benefits in making even small changes
• Identify the values of different payment methods
• Recognize options for initiating Wire Transfers
• Discover advantages of using Positive Pay
The Payment Process
• Are mistakes being made with current processes?
• Discover Checks and Balances to reduce risks of:
– Paying amounts to the wrong payee
– Paying amounts that have not been properly approved
– Paying an incorrect amount
– Paying an amount with the wrong reference number
– Paying amounts early
– Potential for Fraud
A Basic Process Flow
•
What is Your Process?
• Pulling all Open Payables?
– Payment decisions based on what?
– Is selection criteria consistent?
– Documented?
• Time involved in:
– Selecting what to pay
– Deselecting what is not to be paid
• Any audit work being performed?
Consider the Following
• Pull only Open Payables due for payment
– Reduces risk of paying early
• Leverage due dates applied by system
– Based on Payment Terms
• Audit opportunities
– Anomalies in invoice numbers?
– Unusually high invoice amounts?
Best Practice Note
• Due dates are based on Payment Terms entered into the Vendor record
– Don’t pay invoices early based on request from Vendor
– Accounts Payable processors should obtain approval from management
– Renegotiate terms?
Payment Methods
• Create Payment Proposals by Payment Method
– Check
– Automatic Clearing House (ACH)
– Credit Card
– Wire Transfer
– Direct Debit
– Supply Chain Financing
– Others
Reduce Financial Risk
• Invoices being paid too early or late
• Invoices intentionally not being paid when due
– To improve Cash Flow for period?
– Increase in helpdesk calls
– Impact to Vendor Relationships
• Weigh the pros and cons – Worth the risk?
Reduce Financial Risk
• Identify invoice processing errors
• Compare invoice numbers listed for each vendor
– Same invoice numbering conventions?
• Review invoice amounts
– Unusual invoice amounts?
Reduce Financial Risk
• Additional audit of Payment Proposal – Invoices > $x,xxx
– Set percentage of listed invoices
– Compare listed invoices to source documents
• Common errors
– Wrong Vendor
– Wrong amount
– Improper match to PO
– Insufficient approval
– Incorrect entry of invoice date
Reduce Financial Risk
• Submit Payment Proposal for peer review or managerial approval
– It’s not just about the amount
– Second set of eyes
– Present invoices, or a sub-set, with report
• Does the reviewer/approver have any questions?
Reduce Financial Risk
• Reviewer may request removal of invoices
• Cancel original then create new (clean) Proposal
– Potential flag for auditors
• Resubmit for review/approval
• Final report:
– Signed
– Dated by the reviewer/approver
– Retained as back-up
Payment Schedule
• Weekly payment runs?
– At what cost?
– Human Resources
– Check stock, envelopes, postage, etc.
– ACH or Wire Transfers transaction fees per payment
• Economies of scale – pay as many invoices on each payment record as you can
– Reduces payment costs per invoice
Payment Schedule
• Prompt Payment Discount Vendors; once a week
• Once every other week for other Payment Terms
• List Open Payables based on due dates
– Payment processing date + X number of days
– Reduces risk of paying invoices too early; Cash Flow
– Work with Treasury to define a balance
Payment Schedule
Revised Payment Process
Releasing Check Payments
• Confirm next available check number is correct
– Based on last payment run
– In system and with check stock
– No unauthorized payment runs
• Verify Payment Register total matches approved Proposal
– Research differences
• Do not release payments until all is in order
Releasing Check Payments
• Printing checks
– Look for any paper jams or miss feeds
– Confirm first and last check numbers match Payment Register
• Attach:
– Remittance over-run pages
– Vendor supplied remittance advice
• Send out promptly
Releasing ACH Payments
• Automatic Clearing House (ACH)
• Confirm total of ACH file matches Proposal
• Send file to the bank
• Bank confirmation
– Total dollars
– Count of payments
• Contact bank of any discrepancies
• Retain all acknowledgements with other payment documentation
Benefits of ACH Payments
• No delays in Vendor receiving payment due to weather disasters/lost checks
• Reduces number of checks that need to be printed
– Eliminates check handling time
– Check stock, envelops, postage, etc. – Go Green!
• Reduces risk of check fraud
Wire Transfers
• Wire Transfers
– Why? – Consider cost
– Only for Foreign Currency payments?
• If not automated through ERP
– Create request template for each vendor
– Reduces risk of paying wrong vendor
Paying With Credit Cards
• Corporate Card Programs
– Purchasing Cards
– Point of Sale
– Single billing statement
– Reduction in small dollar transactions
– Posting of expenses
– Direct Debit?
Wire Transfers
• Template File Name: Template_ABC_Company
Vendor Name: ABC Company Payment Currency: British Pounds
Address: 123 Lambeth Request Date:
London, UK Settlement Date:
SE1 7PB
Amt to be Paid in GBP:
Bank Name: United Overseas Bank LTD.
Bank Address: 50 Cannon St, London EC4N 6JJ, UK
Name on Account: ABC Company USD Equivalent:
Swift Code: UOCBSGSG
Account Number: 123456789
Invoice Number Invoice Amt in For. Curr.
Wire Transfers
• If ERP system supports multiple currencies, confirm total of requests match Wire Transfer Payment Proposal(s)
• Second set of eyes
• Obtain and retain bank acknowledgement
• Process invoices
• Settle Open Payables
Direct Debits
• Payee is authorized to pull funds directly from Company’s bank account
• Delivery of supporting documentation
• Company posts an accounting transaction
– Timing
– Audit
Supply Chain Financing
• A bank product
• Processed invoice data file sent to bank for registered vendors
• Vendor can choose to accept a reduced settlement amount
• Company pays bank for the original amount when invoices are due
• Cash flow benefit for both parties
Other Forms of Payment
• Petty Cash
• Contra Sale
• PayPal
• Money Orders
• Certified Checks
• Letters of Credit
Payment Release Process
•
Positive Pay
• An automated fraud detection tool
• Offered by most banks
• Used to compare data on checks against data from Company’s ERP
• Data points may vary
• No match?
– Suspect Item reported to Company
– Company has option to release payment or not
Positive Pay
• Bank account number, check number and check amount
• May include confirmation of vendor name and address
• Hand-written details on a check should result in “Suspect Item” status
• Both Reviewer and Approver can release payment
Security
• Check Stock - Lock it up!
• Limit access
• Control Numbers
• Check stock usage log
• ERP Payment Role - Assign to only a few people
– No access to Vendor Master and/or Invoice Processing
• Facsimile of authorized signature
– Store in ERP
– For check use only
Voids and Stop Pays
• Stamp “VOID” on any printed checks not to be issued/cashed
– Printer miss feeds
– Returned checks to be voided
• Do not destroy them – store in a secured area
– Audit artifact
• Check to be voided but “not in hand”?
– Contact bank to confirm it has not been paid
– Place a “Stop Pay” with bank
Limit Pay Out Time Frame
• Aged and unpaid checks cause reconciliation issues
• Consider limiting validity of checks
• Debated issue – contact your bank to learn more
– Have clause printed on check stock
• Systemically void in ERP system
Lost Check
• Vendor hasn’t received check? Why not?
• Invoice paid to correct vendor?
• Verify correct Pay Site selected
• Confirm Vendor Master details
– Payee name
– Remit to address
Voiding Check in ERP
• ERP options may differ
– Void and Reissue
– Void and Cancel
• Your ERP may require two unrelated steps
– Void check within ERP
– Debit or cancel each invoice not due
• New check may have additional invoices listed
Conclusion
• Accounts Payable is not just about writing a check
• Review your payment process
• Confirm your Checks and Balances to reduce the risks
– Paying amounts to the wrong payee
– Paying amounts that have not been properly approved
– Paying an incorrect amount
– Paying an amount with the wrong reference number
– Paying amounts early
– Potential for Fraud
Conclusion
• Consistency is key – document the process
• Audit regularly
• Don’t let complacency settle in
• If it does, take action
