Best Ten Practices for Accounts Payable

Healthy capital flow is of vital importance to any or all companies. This is also true for smaller companies. Accounts payable, when correctly managed, is definitely an effective technique to release and safeguard capital. Listed here are best ten practices for accounts payable management:

Create a written accounts payable policy and operations document. An itemized policy: (a) facilitates worker training, (b) helps you to set up a consistent reaction to routine situations and, (c) may produce a framework for appropriate delegation of responsibilities.

Identify incompatible responsibilities and implement appropriate segregation of those responsibilities. For instance, employees who authorize invoices for payment shouldn’t be capable of edit vendor master files, also, employees who are able to edit vendor master files shouldn’t be permitted to process vendor invoices. Where possible appoint someone, not otherwise active in the accounts payable process, to watch changes to vendor master files.

Where possible buy things from pre-approved vendors only. This might help negotiate better terms.

When new vendors are added somewhere, make sure to send a brand new vendor welcome letter. The letter should detail where invoices should be sent and then any information essential to process vendor invoices like the completed w-9 forms, that are required for the annual preparation of form 1099. You will find hefty fines for non-compliance with 1099 reporting.

Have vendor invoices delivered to the accounts payable department, where they must be logged, prior to being sent for approvals. This process cuts down on the incidence of lost and missing invoices.

Don’t enter vendor invoices like a batch. Rather, enter each invoice individually because this facilitates the resolution of variances and supply a much better audit trail.

Set up a specific procedures for processing vendor invoices, such as the assignment of invoice figures, (where vendor invoices are unnumbered or perhaps in the situation of internal documents for example worker expense reimbursements) and entering invoice figures.

The invoice amount ought to be joined as billed. Debit memos and adjustments ought to be published separate transactions because this facilitates account reconciliation and backbone of variances.

Define the default general distribution codes, where possible, as part of new vendor setup procedures. Code all vendor invoices with relevant general ledger codes before posting. These two procedures reduce the potential of errors.

Pay vendor invoices timely and make the most of any discounts available. Discounts can equal to significant cash savings, and consistently having to pay invoices timely might help steer clear of the outlay of money for late charges and interest and, set the foundation for the settlement of higher vendor terms.