Accounts Payable

Mary S. Schaeffer is the Editorial Director and Publisher of Accounts Payable Now & Tomorrow, a newsletter devoted to payment issues. She also pens, e-News from the AP Front, a complimentary e-zine for the payment community. She's the author of ten books and numerous magazine, newsletter and newspaper articles. Her books have been used in several certification programs. She is a member of the New York Financial Writers Association. She is currently working on two additional books for John Wiley & Sons.

• Preface xxiAcknowledgments xxiiiPart One Processing 11 Invoice Handling 31.1 Introduction 31.2 The Invoice 41.3 Purchase Orders 51.4 Receiving Documents 61.5 Proper Invoice Handling 71.6 When Accounts Payable Receives Invoices Last 81.7 Entry by Month-End 91.8 Timely Approvals 101.9 Unidentified Invoices Sent to Accounts Payable 101.10 Use Best of Terms 111.11 Strategies to Use When Short-Paying Invoices 121.12 Goods Improperly Ordered Outside Purchasing 121.13 Nonpurchase Order Buying 131.14 Encouraging Others to Follow Accounts Payable’s Guidelines 141.15 Invoices without Invoice Numbers 141.16 Invoice Amnesty Day 141.17 Keeping Difficult Invoices from Disappearing 151.18 Using Vendor Statements: Theory 161.19 Using Statements: Reality 171.20 Filing: Batch versus Alpha Filing 181.21 Reducing the Number of Invoices 181.22 Handling Bills with Remittance Advices 212 Alternatives to the Three-Way Match 232.1 Introduction 232.2 Assumed Receipt 232.3 Evaluated Receipt Settlement 253 Check Preparation Printing and Filing 333.1 Introduction 333.2 A More Common Approach 333.3 Manual Signatures 333.4 Authorized Signers 343.5 Proper Check-Signing Procedures and Control 353.6 Limiting Time Spent Getting Checks Signed 373.7 Mailing versus Picking Up Checks 393.8 Check Filing 403.9 Time-Saving Techniques in the Check Production Cycle 413.10 Canceled Checks and Irate Vendors 434 Automated Clearinghouse and Direct Deposit 474.1 Introduction 474.2 Direct Deposit 474.3 Other Common Examples 474.4 Combining Electronic Billing And Payments 484.5 Terminology 484.6 Check Truncation and Check Conversion 494.7 What Companies Are Doing Today 494.8 Case Study: How One Company Gets Suppliers to Accept ACH Payments 494.9 The Future 505 Making International Payments 525.1 Introduction 525.2 Foreign Exchange 535.3 Bank Account Issues 535.4 Payment Mechanisms 535.5 International Payment Service 545.6 Benefits of International Payment Services 545.7 Payments to NAFTA Partners 55Part Two Controls 576 Exception and Rush Processing 596.1 Introduction 596.2 Dealing with the Issue 606.3 Hard-Line Approach 626.4 Identify Rush-Check Troublemakers 626.5 Modify Systems and Procedures to Reduce the Need for Rush Checks 636.6 Publish a Newsletter 647 Errors and Duplicate Payments 677.1 Introduction 677.2 Statistics 677.3 Types of Erroneous Payments 687.4 Low-Tech Solutions 687.5 High-Tech Solutions 697.6 Employees: Your Most Important Resource 697.7 Tolerance Levels 707.8 Handling Discrepancies 707.9 Accuracy and Timeliness 717.10 Timing Issues 747.11 Eliminating Duplicate Payments without an Auditor 747.12 Duplicate Pay Audits: The Future of Accounts Payable and AP Audits 758 Paying When the Original Invoice Is Not Available 798.1 Introduction 798.2 Who Pays from Copies 798.3 Controls When Using Copies 808.4 Common Techniques to Ensure a Second Payment Will not Be Made 818.5 Controls When Paying from Copies 819 Master Vendor Files 849.1 Introduction 849.2 The Data 849.3 Cleanup Policies 859.4 When to Set Up a New File 859.5 Maintenance Policies 869.6 Good Master Vendor Policies 869.7 Establishing Vendor Naming Conventions 879.8 Tips on Setting Up the Master Vendor File 889.9 New Vendor Setup 899.10 Adjustments, Corrections, and Additions 919.11 Maintaining the Master Vendor File 91Part Three Cash Management 9310 Terms and Taking Discounts 9510.1 Introduction 9510.2 Should the Discount be Taken? 9510.3 An Ongoing Process 9810.4 Possible Problems When Paying Late 9910.5 Are All Possible Discounts Being Taken? 10010.6 Should You? 10111 Cash Management 10411.1 Introduction 10411.2 Why Discuss Cash Management in Accounts Payable? 10411.3 Payment Timing 10511.4 Maximize Float 10611.5 Purchasing Cards 10711.6 Bank Fees 10711.7 ACH Background 10711.8 ACH: Types of Corporate Payments 10811.9 Clean-Desk Syndrome 10911.10 Games Companies Play 11012 Petty Cash 11112.1 Introduction 11112.2 Petty Cash No-Nos 11112.3 Recommended Procedures 11212.4 Other Recommended Procedures 11313 Payment Timing 11413.1 Introduction 11413.2 Can Another Day be Squeezed out of Payables? 11413.3 Timing Payments in Difficult Times 11413.4 Stretching Vendor Payments 11513.5 Place Smaller Orders 11513.6 Talk to Vendors 11513.7 A Formalized Approach 11614 Audits and the Outside Accountant’s Management Letter 11914.1 Introduction 11914.2 Most Notable Payables Issues 11914.3 Using This Information 122 14.4 Sarbanes-Oxley Effect 123Part Four Travel and Entertainment 12515 Handling Travel and Entertainment Reports 12715.1 Introduction 12715.2 The Problem 12715.3 Solutions 12815.4 How Much Checking Is Enough? 13115.5 T&E Manual 13415.6 Policy and Procedures Changes 13515.7 What About Electronic Receipts? 13615.8 Faster Employee Reimbursements 13715.9 E-Tickets 13816 Handling Electronic T&E Reports 13916.1 Introduction 13916.2 Advantages 13916.3 Homegrown Systems 14016.4 Third-Party Electronic Software 14216.5 E-Tickets 14217 Automating the T&E Report Process 14617.1 Introduction 14617.2 Making the Most of Direct Deposit 14617.3 Spreadsheet Approach 14717.4 One-Card Intranet-Based Solution 14817.5 In-House versus Third Party 14818 Value-Added Tax Refunds 15018.1 Introduction 15018.2 What is Vat? 15018.3 Assistance Available 15118.4 Vat Reclaim Companies 15118.5 Time Limitations: Deadlines 15118.6 Focus on Vat-Friendly Countries 15218.7 Focus on Vat-Valuable Expenses 152Part Five Technology 15519 Electronic Data Interchange 15719.1 Introduction 15719.2 What Is EDI? 15719.3 TECHNICAL Basics: introduction 15719.4 Why EDI? 15819.5 Getting Started 16019.6 Business Infrastructure Requirements 16119.7 Managing Accounts Payable EDI 16219.8 Accounts Payable EDI Opportunities 16219.9 Accounts Payable EDI Success Factors 16319.10 Systems Requirements 16319.11 Trading Partner Directory 16619.12 EDI Standards 16619.13 Effect on Supplier Partnerships 16719.14 Convincing Management 16719.15 FEDI Applications 16819.16 Cost-Justifying FEDI 16819.17 Getting Up the EDI Learning Curve 16819.18 Internet EDI 17019.19 Web EDI: An Idea Whose Time Has Come 17119.20 Security and Standards Issues 17119.21 Why the Internet? 17119.22 Special Application: ACH Debits for Tax Payments 17220 Imaging 17520.1 Introduction 17520.2 Poor Man’s Imaging 17520.3 Planning for Full-Scale Imaging 17620.4 Using Full-Scale Imaging with E-Mail 17620.5 Imaging on a Smaller Scale 17620.6 Overview 17720.7 Imaging in Practice: Growing Pains 17920.8 Legal Acceptance 18020.9 Disaster Recovery 18020.10 Frequently Asked Questions about Imaging 18120.11 Preparing Documents for Imaging 18221 The Internet, E-Mail, and E-Invoicing 18421.1 Introduction 18421.2 E-Mail 18421.3 The Internet 18521.4 Case Study: An Accounts Payable Department Web Site 18721.5 What to Include on an Accounts Payable Web Page 19121.6 Electronic Invoicing 19121.7 Everyday AP uses for the Internet 19421.8 Case Study: Putting the Web to Work for Accounts Payable 19622 Encryption and Digital Signatures 20022.1 Introduction 20022.2 Basics 20022.3 Case Study 20323 E-Marketplaces and XML 20623.1 Introduction 20623.2 E-Marketplaces 20623.3 XML 20823.4 How Accounts Payable Professionals Can Prepare Themselves 20823.5 How to Participate in the E-Commerce Revolution 209Part Six Specialty Topics 21124 Purchasing Cards 21324.1 Introduction 21324.2 What Is a Purchasing Card? 21424.3 How a Purchasing Card Differs from a Consumer or Corporate Card 21424.4 Why Use a Purchasing Card? 21524.5 How Does the Purchasing Card Work within the Company? 21524.6 Plan Administrator 21524.7 User Feedback 21524.8 Vendor Feedback 21624.9 Control Features 21724.10 Maximizing Cost Savings 21924.11 Considering a Program 22125 Post Audit Firms 22325.1 Introduction 22325.2 Why Are Accounts Payable Audit Firms Necessary? 22425.3 How Post Audit Firms Work 22425.4 Accounts Payable Benefits 22525.5 Costs 22525.6 Getting Money Back 22625.7 Selecting the Best Profit Recovery Firm 22625.8 Other Considerations 22825.9 Reaction to Profit Recovery Firms 22825.10 Self-Auditing 22825.11 Self-Auditing for Duplicate Payments 22925.12 Current State of Duplicate Payment Audit Industry 22926 Benchmarking 23026.1 Introduction 23026.2 What is Benchmarking? 23026.3 Sources of Benchmarking Data 23226.4 Benchmarking Applications 23226.5 Case Study: How to Start or Improve a Benchmarking Program 234Part Seven Regulatory Issues 23927 Form 1099 and Form 1042-S 24127.1 Introduction 24127.2 Background 24127.3 Best 1099 Practice 24227.4 What if the 1099 Is Not Filed? 24227.5 Who Should Receive a 1099? 24327.6 Letters Instead of W-9s 24427.7 B-Notices 24427.8 Types of Payments Reflected on 1099S 24627.9 More Help from the IRS 24627.10 It’s 1099 Time: Changes Implemented in 2002 24627.11 1042-S 24928 Sales and Use Tax 25028.1 Introduction 25028.2 Defining Sales and Use Tax 25028.3 Education 25128.4 Policies and Procedures 25228.5 Sales and Use Tax Audits 25228.6 Sales and Use Tax Terminology 25428.7 Types of Sales and Use Tax 25428.8 Keeping Up To Date 25428.9 Use Tax and Nexus 25528.10 Specialized Software 25528.11 Additional Learning Opportunities 25628.12 Help Others Help Accounts Payable 25628.13 Industry-Specific Sales and Use Tax Advice 25928.14 Avoiding a Sales and Use Tax Disaster 26228.15 Conclusion 26329 Escheatment 26429.1 Introduction 26429.2 What Is Escheatment? 26429.3 What If You Do Not Escheat? 26529.4 Dilemma 26529.5 What Can Be Done? 26629.6 Necessary Documentation 26629.7 Software Solutions 26629.8 What Can Accounts Payable Professionals Do? 26729.9 What If You Have Not Been Escheating? 26829.10 Professional Organizations for Unclaimed Property Owners 26829.11 Typical Unclaimed Property Experience 26829.12 An Unclaimed Property Game Plan 270Part Eight Management Issues 27330 Ethics 27530.1 Introduction 27530.2 Sections of Sarbanes-Oxley Act Pertinent to Accounts Payable 27530.3 Cascading Certifications 27630.4 Sarbanes-Oxley Act: A Case Study 27630.5 Foreign Payments 27830.6 Office of Foreign Assets Control 27930.7 What This Means to Accounts Payable 27931 Disaster Recovery 28131.1 Introduction 28131.2 Personnel Travel Policies 28131.3 Telephone Trees 28231.4 Computer Backups 28331.5 Protecting Paper 28332 Outsourcing 28432.1 Introduction 28432.2 Why Companies Do Not Outsource Accounts Payable 28432.3 When Outsourcing Makes Sense 28432.4 Hiring an Outsourcer 28532.5 Outsourcing: A Case Study 28633 Management Techniques 28933.1 Introduction 28933.2 Six Sigma 28933.3 Balanced Scorecard 290Part Nine Department Management 29134 Making Your Accounts Payable Department First-Rate 29334.1 Introduction 29334.2 Typical Accounts Payable Department 29334.3 Who Runs the Department? 29434.4 Hiring Practices 29434.5 How to Assemble an Accounts Payable Dream Team 29634.6 Procedures Manual 29934.7 The Impact of Technology on Accounts Payable Departments 30134.8 Outsourcing 30335 Managing the Staff 30735.1 Introduction 30735.2 Training 30735.3 Finding Challenging Work for the Staff 31035.4 Listening Skills 31035.5 Hiring Staff 31235.6 Overtime: A Serious Issue 31335.7 Managing a Unionized Staff 31436 Staff Motivation and Morale 31936.1 Introduction 31936.2 Motivation Techniques 31936.3 Evaluating Your Motivation Skills 32136.4 Motivating the Seemingly Unmotivatable 32436.5 Using the Staff Knowledge as Company Resource 32536.6 Dealing with Poor-Attitude Problems 32536.7 Getting the Accounts Payable Staff to Take on More Work 32736.8 A Realistic Approach to Motivating Accounts Payable Staff 32736.9 Improving the Image of Accounts Payable 33037 Working with and for Purchasing and Other Departments 33237.1 Introduction 33237.2 Why Interdepartmental Cooperation Is Important 33337.3 Basic Approaches 33337.4 Handling the Big Issues 33637.5 Getting a Customer Service Mentality in Accounts Payable 33837.6 Quick Answers to Common Problems 341Part Ten Fraud 34538 Check Fraud 34738.1 Introduction 34738.2 Check Fraud as Growth Industry 34738.3 Legal Issue of Reasonable Care 34838.4 Corporate Responsibility 34838.5 Controls 34838.6 If Preprinted Check Stock Is Used 34938.7 Check Security Features 34938.8 Short-Circuiting the Forger 35038.9 Taking Reasonable Care 35138.10 Positive Pay 35338.11 Reverse Positive Pay 35338.12 Ongoing Fraud Problems 35338.13 A Total Fraud Protection Program 35438.14 Identifying Fraudulent Checks Quickly 35438.15 Segregation of Duties 35538.16 Account Reconciliation 35538.17 Accounts Payable Controls 35638.18 Payment Pitfalls: What Your Banks May Not Tell You 35638.19 Laws Covering Check Fraud 35838.20 Positive Pay: The Next Generation 35939 Employee Fraud 36039.1 Introduction 36039.2 Be Aware of Typical Candidates 36039.3 What Can Go Wrong 36039.4 Steps to Prevent Cash Fraud 36139.5 Exercise Patience 36239.6 Call in the Professionals 36239.7 When Fraud has been Identified 36339.8 Dealing with the Aftermath 36439.9 Preventing Fraud in the Future 36440 Vendor Fraud 36640.1 Introduction 36640.2 Master Vendor File 36640.3 Con Artist Vendors 36940.4 Scam Solutions 37140.5 Vendor Profile Forms 372Part Eleven Accounts Payable Today and in the Future 37541 Professionalism in the Field 37741.1 Introduction 37741.2 Evaluating the Big Picture 37741.3 Leadership and Preparation 37841.4 Technology 37841.5 Communication 37941.6 Relevant Trends 38041.7 Gaining the Attention of Management 38041.8 How to Win Approvals on Accounts Payable Proposals 38141.9 Taking Control of Your Own Destiny 38341.10 Certification 38341.11 Conferences 38341.12 Accounts Payable in the Twenty-First Century 38442 Salaries and Titles in Accounts Payable Today 38642.1 Introduction 38642.2 Basic Data 38642.3 Bonuses 38842.4 Education 39042.5 Effects of Industry and Company Size 39042.6 Trends 39242.7 Reevaluating AP Positions for Grade-Level Changes 39242.8 Titles 393Appendix Accounts Payable Resources 397Index 399