Accounts Payable: Essential Strategies to Getting Organized

As an accounts payable professional, you shoulder a lot of responsibility. If payments are not recorded correctly, vendor relationships could suffer. And if reports are inaccurate, it could affect the bottom line.

Every day you strive to protect, control, and maintain your organization’s financial health while doing everything you can think of to increase your levels of security and accountability. You understand that a solid internal control system is essential for sound financial management. You also realize that if there are holes in your internal control structure, you and your organization could face damaging consequences — from a breach in security to severe regulatory violations.

Getting organized is key to protecting yourself and your company. Try these tips and techniques to not only make your job safer, but easier as well.

Manage Your Invoices

  • ThinkstockPhotos-533365057Encourage departments to have bills sent directly to you. If possible, make this a company policy.
  • If bills must go to the department first, emphasize the importance of having the department send the approved bill to you promptly for payment.
  • Insist that all items sent for payment include a valid general ledger account code.
  • Make sure your staff understands the chart of accounts and can easily determine if invoices are coded properly.
  • Require a check request form for all invoices that do not have a matching purchase order.

Streamline Your Payment Process

  • Enter invoices from the same supplier one at a time, not in batches. This will make it easier to track down problems or errors.
  • ThinkstockPhotos-139247069Enter data into the computer directly from the invoice, not from worksheets or data entry forms. Since information is only transferred once, this reduces the chance of data entry errors.
  • Have suppliers who mail frequent small invoices send you one monthly summary statement instead of separate invoices. Pay off that statement.
  • Reduce check runs to once a week. Make sure everyone knows the day, as well as when you need the check request or invoice in order to include the check in the next run.
  • Have employee expense payments included with the payroll check or done as a direct deposit to the employee’s bank.
  • Consider having employees pay for dues, subscriptions and expenses under $300 (or some similar amount) and request reimbursement on an expense report. This eliminates the need for purchase orders on low cost items and still provides for management approval of the purchase. If the item is put on a credit card, the employee will be reimbursed before he or she must pay the bill.

Set Up Vendor Files the Easy Way!

  1. Set up a new file for each supplier’s invoices each year.
  2. Before setting up a new file, check against the master vendor list to ensure that two files are not set up for the same supplier (for example, IBM and International Business Machines).
  3. Organize files by year first, then supplier. This makes sending old files to storage easier.
  4. ThinkstockPhotos-497350411For 1,000 or less vendors, file alphabetically. If over 1,000 vendors, file by supplier number.
  5. If you file alphabetically, be sure to follow a standardized system of alphabetization.
  6. File by word or unit. Thus, J. P. Rivers Co. goes before Jacksonville Moving and Storage. Punctuation, including hyphens, is ignored. Thus, Smith-Jones Legal Services is filed as SmithJones Legal Services.
  7. Numbers go before letters. Thus, 1A Machine Shop and 3M go before Acme Metals.
  8. File as the name is written. Thus, South West Sanitation goes before Southeast Builders.
  9. Acronyms such as WLS or IBM are treated as one word. Use the most common way of referring to the firm. Thus, it’s IBM, not International Business Machines. It is a good idea to put a cross-reference card under the other name or old name (for firms that have changed them). This will prevent two files from being created.
  10. Using open-shelf filing equipment will expedite filing and retrieval.
  11. Consider filing invoices by batches (i.e., check run) instead of placing them in the vendor file. Within each batch, file documents alphabetically by vendor name, vendor number or check number. (Note: You’ll need a good online index to be able to retrieve documents quickly.)
  12. Don’t create a file until there are documents to go in it.
  13. Within a file, organize by date with the latest document on top.
  14. Don’t keep over two years of payable files in the office. Older files should go to storage until they are no longer needed for tax purposes — then they should be destroyed.
  15. Don’t allow a filing backlog to accumulate. Make sure invoices are filed within one day of processing.
  16. Setting up sorting bins by alphabetical or vendor number range makes filing faster, easier and less prone to errors. For example, there might be an A-C bin, a D-F bin, etc.

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