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Controller and CFO's Guide to Accounts Payable

Controller and CFO's Guide to Accounts Payable

Mary S. Schaeffer

ISBN: 978-1-119-20195-3

Sep 2015

256 pages

Select type: O-Book


Refreshingly candid and witty in tone, Controller and CFO's Guide to Accounts Payable is required reading for any professional wanting to understand more about their organization's AP operations. It declares that AP is no longer a back-office function and underscores the reality that proper attention must be paid to this crucial department in order to run a leading edge and competitive company.
Preface xv


Chapter 1 Internal Controls in Accounts Payable 3

Ignore Accounts Payable at

Your Own Peril 4

The Fraud Problem 5

State Auditing Groups 6

Sarbanes-Oxley Impact 7

A Marriage Made in Heaven—Not! 7

Ideal Accounts Payable Function 8

“When the Invoice Arrives” 9

Segregation of Duties 11

Control on Payment Types 12

Other Payment Type Control Issues 13

Often-Overlooked Issue: Spreadsheets 14

Spreadsheet Control Plan 15

Policy and Procedures Manual 16

Bad Control Practices 18

Recommended Management Actions 19

Chapter 2: Invoice Handling.

Three-Way Match.

Common Invoice Problems and Solutions.

Alternative to Three-Way Match: Evaluated Receipt Settlement.

Alternative to Three-Way Match: Negative Assurance/Assumed Receipt.


Paying from Statements.

A Word about Credits.

Getting Approvals.

Stamping Mail in Accounts Payable.

Electronic Invoicing.

Bad Practices.

Recommended Management Actions.

Chapter 3: Payment Processing and Alternatives.

Check Stock.

Check Storage.

Check Printing.

Who Should Print Checks.

Monitoring Check Stock Used.

Between Printing and Mailing.

Check Signing.

Distribution of Checks.

Mailing Checks.

Difficulties Caused by Checks.

Why Returning Checks Can Be a Problem.

An End Run around the Returning Check to Requisition Problem.

Check Fraud.

Positive Pay and Its Cousins.


Wire Transfers.

ACH Payments.

What Every Company Needs to Know to Avoid Making Payments to Terrorists.

Chapter 4: Exception Processing.

Check Problems: Exception Processing Heads the List.

Typical Rush Check Scenario.

Background on Rush Checks.

Ways to Minimize the Number of Rush Checks.

Positive Pay Issue.

Why Returning Checks Can Be a Problem.

Need Checks Returned: Here’s a Policy You Can Use.

Audit Point.

Petty Cash Box.

Chapter 5: Duplicate and Erroneous Payments.

The We-Never-Make-a-Duplicate-Payment Myth.

Duplicate-Payment Hypocrisy.


In-house Checking: Before the Payment Is Made.

In-house Checking: After the Payment Is Made.

A Word about Software.

Why Duplicate Payment Audit Firms Are Needed.

Hiring a Postaudit Firm.

Second Postaudit.

Word of Caution.

Overall Action Plan.

Chapter 6: Vendors, Vendor Relations, and Master Vendor File.

Vendor Relations.

What Is the Master Vendor File?

Responsibility for the Master Vendor File.

Who’s In and Who’s Not?

Handling Inactive Vendors.

Cleansing the Master Vendor File.

Fraud Through the Master Vendor File.

Vendor Welcome Letter.

New Vendor Applications.

Access to the Master Vendor File and Making Changes.

Review of Changes.

The Spot-Check Annual Review.

Master Vendor File Standards 99

Coding Standards 99

Coordination with Invoice Coding

Standards 101

Vendor Calls into Accounts Payable 101


Segregation of Duties 103

Contract Compliance 103


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Chapter 7 Discounts and Deductions 105

Lost Early-Payment Discounts 105

The First Problem 106

Another Dirty Secret 107

To Take the Discount or Not 108

Disputes: Effects on Payments and

Relationships 109

Tracking Disputed Invoices 109

Electronic Invoicing Dramatically

Improves Invoice Handling 110

Online Dispute Resolution Programs 110

Invoice Amnesty Day 111

Explaining Deductions 111

Special Deals 112

Late Fees 113


Chapter 8 Travel and Entertainment 117

T&E Policy 117

Equality under the Policy and

Sarbanes-Oxley 118

Reimbursement Issue 119

Issues to Be Addressed in Your T&E Policy 119

Timely Submission of T&E

Reimbursement Requests 121

T&E Practices: Spot-Checking and Cash

Advances 123

T&E Reimbursement Request 123

Advantages of ASP (Online) Models 124


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T&E Fraud: Don’t Let Your Employees

Pull the Wool over Your Eyes with

These T&E Tricks 124

T&E Fraud: The Gift Card Problem 130

Chapter 9 Unclaimed Property/Escheat 135

What’s Required 135

Legal Oversight 136

Timing of Reporting 136

Unclaimed Property: An Unending Process 137

Unclaimed Property Dilemma for Those

Currently Not in Compliance 142

Chapter 10 Use of Purchasing Cards 147

Control Features 147

Payment Terms 149

Rebates 150

Expanding Your Program 150

Issues 151

Payment 153

Departing Employees 154

1099s 154

Chapter 11 Independent Contractors, 1099s,

and 1042s 157

Workable TIN Policy 158

What if the Information Provided

Is Wrong? 158

Independent Contractor versus Employee 159

Keeping Up to Date 161

IRS’s TIN Matching Program 161

Making Payments to Foreign Individuals 164

Payments to Terrorists 166

Chapter 12 VAT Reclaim and Other International Considerations.

Countries Allowing VAT Reclaim.

What Can Be Reclaimed?


Chapter 13 Sales and Use Tax.

Definition of Sales and Use Tax.

Some Terminology.


What to Expect in an Audit.

Tougher Audits.

Help with Your Sales and Use Tax Issues.


Chapter 14 Fraud: Check, Employee, and Vendor.

Check Fraud.

Demand Draft Fraud: The Latest Form of Check Fraud.

Employee Fraud.

Segregation of Duties.

Desktop Computers: Handle with Care.

Phony Vendors.

Upfront Vendor Verification.

Chapter 15 New Technology Initiatives.

Imaging and Workflow.

Electronic Invoicing.

Forward-Thinking Functionality.

Electronic Payments.

B2B ACH Payment Awareness and Usage in the Middle Market.




Chapter 16: Cash Management Initiatives.

Cash Management Initiatives.

Clean Desk Syndrome.

Scheduling Payments.

Payment Timing: Is It Stretching or Timing?


Chapter 17: Sarbanes-Oxley and Certification.

Overview of the Act.

Management Assessment of Internal Controls.

Auditors’ Assessment of Internal Controls.

Audit Trails.

Records Retention.

Policy and Procedures Manual.

Segregation of Duties.

Eliminate Really Bad Accounts Payable Practices.

Monitoring Reports.

Real-World Observations.