Preface xxi
Acknowledgments xxiii
Part One Processing 1
1 Invoice Handling 3
1.1 Introduction 3
1.2 The Invoice 4
1.3 Purchase Orders 5
1.4 Receiving Documents 6
1.5 Proper Invoice Handling 7
1.6 When Accounts Payable Receives Invoices Last 8
1.7 Entry by Month-End 9
1.8 Timely Approvals 10
1.9 Unidentified Invoices Sent to Accounts Payable 10
1.10 Use Best of Terms 11
1.11 Strategies to Use When Short-Paying Invoices 12
1.12 Goods Improperly Ordered Outside Purchasing 12
1.13 Nonpurchase Order Buying 13
1.14 Encouraging Others to Follow Accounts Payable’s Guidelines 14
1.15 Invoices without Invoice Numbers 14
1.16 Invoice Amnesty Day 14
1.17 Keeping Difficult Invoices from Disappearing 15
1.18 Using Vendor Statements: Theory 16
1.19 Using Statements: Reality 17
1.20 Filing: Batch versus Alpha Filing 18
1.21 Reducing the Number of Invoices 18
1.22 Handling Bills with Remittance Advices 21
2 Alternatives to the Three-Way Match 23
2.1 Introduction 23
2.2 Assumed Receipt 23
2.3 Evaluated Receipt Settlement 25
3 Check Preparation Printing and Filing 33
3.1 Introduction 33
3.2 A More Common Approach 33
3.3 Manual Signatures 33
3.4 Authorized Signers 34
3.5 Proper Check-Signing Procedures and Control 35
3.6 Limiting Time Spent Getting Checks Signed 37
3.7 Mailing versus Picking Up Checks 39
3.8 Check Filing 40
3.9 Time-Saving Techniques in the Check Production Cycle 41
3.10 Canceled Checks and Irate Vendors 43
4 Automated Clearinghouse and Direct Deposit 47
4.1 Introduction 47
4.2 Direct Deposit 47
4.3 Other Common Examples 47
4.4 Combining Electronic Billing And Payments 48
4.5 Terminology 48
4.6 Check Truncation and Check Conversion 49
4.7 What Companies Are Doing Today 49
4.8 Case Study: How One Company Gets Suppliers to Accept ACH Payments 49
4.9 The Future 50
5 Making International Payments 52
5.1 Introduction 52
5.2 Foreign Exchange 53
5.3 Bank Account Issues 53
5.4 Payment Mechanisms 53
5.5 International Payment Service 54
5.6 Benefits of International Payment Services 54
5.7 Payments to NAFTA Partners 55
Part Two Controls 57
6 Exception and Rush Processing 59
6.1 Introduction 59
6.2 Dealing with the Issue 60
6.3 Hard-Line Approach 62
6.4 Identify Rush-Check Troublemakers 62
6.5 Modify Systems and Procedures to Reduce the Need for Rush Checks 63
6.6 Publish a Newsletter 64
7 Errors and Duplicate Payments 67
7.1 Introduction 67
7.2 Statistics 67
7.3 Types of Erroneous Payments 68
7.4 Low-Tech Solutions 68
7.5 High-Tech Solutions 69
7.6 Employees: Your Most Important Resource 69
7.7 Tolerance Levels 70
7.8 Handling Discrepancies 70
7.9 Accuracy and Timeliness 71
7.10 Timing Issues 74
7.11 Eliminating Duplicate Payments without an Auditor 74
7.12 Duplicate Pay Audits: The Future of Accounts Payable and AP Audits 75
8 Paying When the Original Invoice Is Not Available 79
8.1 Introduction 79
8.2 Who Pays from Copies 79
8.3 Controls When Using Copies 80
8.4 Common Techniques to Ensure a Second Payment Will not Be Made 81
8.5 Controls When Paying from Copies 81
9 Master Vendor Files 84
9.1 Introduction 84
9.2 The Data 84
9.3 Cleanup Policies 85
9.4 When to Set Up a New File 85
9.5 Maintenance Policies 86
9.6 Good Master Vendor Policies 86
9.7 Establishing Vendor Naming Conventions 87
9.8 Tips on Setting Up the Master Vendor File 88
9.9 New Vendor Setup 89
9.10 Adjustments, Corrections, and Additions 91
9.11 Maintaining the Master Vendor File 91
Part Three Cash Management 93
10 Terms and Taking Discounts 95
10.1 Introduction 95
10.2 Should the Discount be Taken? 95
10.3 An Ongoing Process 98
10.4 Possible Problems When Paying Late 99
10.5 Are All Possible Discounts Being Taken? 100
10.6 Should You? 101
11 Cash Management 104
11.1 Introduction 104
11.2 Why Discuss Cash Management in Accounts Payable? 104
11.3 Payment Timing 105
11.4 Maximize Float 106
11.5 Purchasing Cards 107
11.6 Bank Fees 107
11.7 ACH Background 107
11.8 ACH: Types of Corporate Payments 108
11.9 Clean-Desk Syndrome 109
11.10 Games Companies Play 110
12 Petty Cash 111
12.1 Introduction 111
12.2 Petty Cash No-Nos 111
12.3 Recommended Procedures 112
12.4 Other Recommended Procedures 113
13 Payment Timing 114
13.1 Introduction 114
13.2 Can Another Day be Squeezed out of Payables? 114
13.3 Timing Payments in Difficult Times 114
13.4 Stretching Vendor Payments 115
13.5 Place Smaller Orders 115
13.6 Talk to Vendors 115
13.7 A Formalized Approach 116
14 Audits and the Outside Accountant’s Management Letter 119
14.1 Introduction 119
14.2 Most Notable Payables Issues 119
14.3 Using This Information 122
14.4 Sarbanes-Oxley Effect 123
Part Four Travel and Entertainment 125
15 Handling Travel and Entertainment Reports 127
15.1 Introduction 127
15.2 The Problem 127
15.3 Solutions 128
15.4 How Much Checking Is Enough? 131
15.5 T&E Manual 134
15.6 Policy and Procedures Changes 135
15.7 What About Electronic Receipts? 136
15.8 Faster Employee Reimbursements 137
15.9 E-Tickets 138
16 Handling Electronic T&E Reports 139
16.1 Introduction 139
16.2 Advantages 139
16.3 Homegrown Systems 140
16.4 Third-Party Electronic Software 142
16.5 E-Tickets 142
17 Automating the T&E Report Process 146
17.1 Introduction 146
17.2 Making the Most of Direct Deposit 146
17.3 Spreadsheet Approach 147
17.4 One-Card Intranet-Based Solution 148
17.5 In-House versus Third Party 148
18 Value-Added Tax Refunds 150
18.1 Introduction 150
18.2 What is Vat? 150
18.3 Assistance Available 151
18.4 Vat Reclaim Companies 151
18.5 Time Limitations: Deadlines 151
18.6 Focus on Vat-Friendly Countries 152
18.7 Focus on Vat-Valuable Expenses 152
Part Five Technology 155
19 Electronic Data Interchange 157
19.1 Introduction 157
19.2 What Is EDI? 157
19.3 TECHNICAL Basics: introduction 157
19.4 Why EDI? 158
19.5 Getting Started 160
19.6 Business Infrastructure Requirements 161
19.7 Managing Accounts Payable EDI 162
19.8 Accounts Payable EDI Opportunities 162
19.9 Accounts Payable EDI Success Factors 163
19.10 Systems Requirements 163
19.11 Trading Partner Directory 166
19.12 EDI Standards 166
19.13 Effect on Supplier Partnerships 167
19.14 Convincing Management 167
19.15 FEDI Applications 168
19.16 Cost-Justifying FEDI 168
19.17 Getting Up the EDI Learning Curve 168
19.18 Internet EDI 170
19.19 Web EDI: An Idea Whose Time Has Come 171
19.20 Security and Standards Issues 171
19.21 Why the Internet? 171
19.22 Special Application: ACH Debits for Tax Payments 172
20 Imaging 175
20.1 Introduction 175
20.2 Poor Man’s Imaging 175
20.3 Planning for Full-Scale Imaging 176
20.4 Using Full-Scale Imaging with E-Mail 176
20.5 Imaging on a Smaller Scale 176
20.6 Overview 177
20.7 Imaging in Practice: Growing Pains 179
20.8 Legal Acceptance 180
20.9 Disaster Recovery 180
20.10 Frequently Asked Questions about Imaging 181
20.11 Preparing Documents for Imaging 182
21 The Internet, E-Mail, and E-Invoicing 184
21.1 Introduction 184
21.2 E-Mail 184
21.3 The Internet 185
21.4 Case Study: An Accounts Payable Department Web Site 187
21.5 What to Include on an Accounts Payable Web Page 191
21.6 Electronic Invoicing 191
21.7 Everyday AP uses for the Internet 194
21.8 Case Study: Putting the Web to Work for Accounts Payable 196
22 Encryption and Digital Signatures 200
22.1 Introduction 200
22.2 Basics 200
22.3 Case Study 203
23 E-Marketplaces and XML 206
23.1 Introduction 206
23.2 E-Marketplaces 206
23.3 XML 208
23.4 How Accounts Payable Professionals Can Prepare Themselves 208
23.5 How to Participate in the E-Commerce Revolution 209
Part Six Specialty Topics 211
24 Purchasing Cards 213
24.1 Introduction 213
24.2 What Is a Purchasing Card? 214
24.3 How a Purchasing Card Differs from a Consumer or Corporate Card 214
24.4 Why Use a Purchasing Card? 215
24.5 How Does the Purchasing Card Work within the Company? 215
24.6 Plan Administrator 215
24.7 User Feedback 215
24.8 Vendor Feedback 216
24.9 Control Features 217
24.10 Maximizing Cost Savings 219
24.11 Considering a Program 221
25 Post Audit Firms 223
25.1 Introduction 223
25.2 Why Are Accounts Payable Audit Firms Necessary? 224
25.3 How Post Audit Firms Work 224
25.4 Accounts Payable Benefits 225
25.5 Costs 225
25.6 Getting Money Back 226
25.7 Selecting the Best Profit Recovery Firm 226
25.8 Other Considerations 228
25.9 Reaction to Profit Recovery Firms 228
25.10 Self-Auditing 228
25.11 Self-Auditing for Duplicate Payments 229
25.12 Current State of Duplicate Payment Audit Industry 229
26 Benchmarking 230
26.1 Introduction 230
26.2 What is Benchmarking? 230
26.3 Sources of Benchmarking Data 232
26.4 Benchmarking Applications 232
26.5 Case Study: How to Start or Improve a Benchmarking Program 234
Part Seven Regulatory Issues 239
27 Form 1099 and Form 1042-S 241
27.1 Introduction 241
27.2 Background 241
27.3 Best 1099 Practice 242
27.4 What if the 1099 Is Not Filed? 242
27.5 Who Should Receive a 1099? 243
27.6 Letters Instead of W-9s 244
27.7 B-Notices 244
27.8 Types of Payments Reflected on 1099S 246
27.9 More Help from the IRS 246
27.10 It’s 1099 Time: Changes Implemented in 2002 246
27.11 1042-S 249
28 Sales and Use Tax 250
28.1 Introduction 250
28.2 Defining Sales and Use Tax 250
28.3 Education 251
28.4 Policies and Procedures 252
28.5 Sales and Use Tax Audits 252
28.6 Sales and Use Tax Terminology 254
28.7 Types of Sales and Use Tax 254
28.8 Keeping Up To Date 254
28.9 Use Tax and Nexus 255
28.10 Specialized Software 255
28.11 Additional Learning Opportunities 256
28.12 Help Others Help Accounts Payable 256
28.13 Industry-Specific Sales and Use Tax Advice 259
28.14 Avoiding a Sales and Use Tax Disaster 262
28.15 Conclusion 263
29 Escheatment 264
29.1 Introduction 264
29.2 What Is Escheatment? 264
29.3 What If You Do Not Escheat? 265
29.4 Dilemma 265
29.5 What Can Be Done? 266
29.6 Necessary Documentation 266
29.7 Software Solutions 266
29.8 What Can Accounts Payable Professionals Do? 267
29.9 What If You Have Not Been Escheating? 268
29.10 Professional Organizations for Unclaimed Property Owners 268
29.11 Typical Unclaimed Property Experience 268
29.12 An Unclaimed Property Game Plan 270
Part Eight Management Issues 273
30 Ethics 275
30.1 Introduction 275
30.2 Sections of Sarbanes-Oxley Act Pertinent to Accounts Payable 275
30.3 Cascading Certifications 276
30.4 Sarbanes-Oxley Act: A Case Study 276
30.5 Foreign Payments 278
30.6 Office of Foreign Assets Control 279
30.7 What This Means to Accounts Payable 279
31 Disaster Recovery 281
31.1 Introduction 281
31.2 Personnel Travel Policies 281
31.3 Telephone Trees 282
31.4 Computer Backups 283
31.5 Protecting Paper 283
32 Outsourcing 284
32.1 Introduction 284
32.2 Why Companies Do Not Outsource Accounts Payable 284
32.3 When Outsourcing Makes Sense 284
32.4 Hiring an Outsourcer 285
32.5 Outsourcing: A Case Study 286
33 Management Techniques 289
33.1 Introduction 289
33.2 Six Sigma 289
33.3 Balanced Scorecard 290
Part Nine Department Management 291
34 Making Your Accounts Payable Department First-Rate 293
34.1 Introduction 293
34.2 Typical Accounts Payable Department 293
34.3 Who Runs the Department? 294
34.4 Hiring Practices 294
34.5 How to Assemble an Accounts Payable Dream Team 296
34.6 Procedures Manual 299
34.7 The Impact of Technology on Accounts Payable Departments 301
34.8 Outsourcing 303
35 Managing the Staff 307
35.1 Introduction 307
35.2 Training 307
35.3 Finding Challenging Work for the Staff 310
35.4 Listening Skills 310
35.5 Hiring Staff 312
35.6 Overtime: A Serious Issue 313
35.7 Managing a Unionized Staff 314
36 Staff Motivation and Morale 319
36.1 Introduction 319
36.2 Motivation Techniques 319
36.3 Evaluating Your Motivation Skills 321
36.4 Motivating the Seemingly Unmotivatable 324
36.5 Using the Staff Knowledge as Company Resource 325
36.6 Dealing with Poor-Attitude Problems 325
36.7 Getting the Accounts Payable Staff to Take on More Work 327
36.8 A Realistic Approach to Motivating Accounts Payable Staff 327
36.9 Improving the Image of Accounts Payable 330
37 Working with and for Purchasing and Other Departments 332
37.1 Introduction 332
37.2 Why Interdepartmental Cooperation Is Important 333
37.3 Basic Approaches 333
37.4 Handling the Big Issues 336
37.5 Getting a Customer Service Mentality in Accounts Payable 338
37.6 Quick Answers to Common Problems 341
Part Ten Fraud 345
38 Check Fraud 347
38.1 Introduction 347
38.2 Check Fraud as Growth Industry 347
38.3 Legal Issue of Reasonable Care 348
38.4 Corporate Responsibility 348
38.5 Controls 348
38.6 If Preprinted Check Stock Is Used 349
38.7 Check Security Features 349
38.8 Short-Circuiting the Forger 350
38.9 Taking Reasonable Care 351
38.10 Positive Pay 353
38.11 Reverse Positive Pay 353
38.12 Ongoing Fraud Problems 353
38.13 A Total Fraud Protection Program 354
38.14 Identifying Fraudulent Checks Quickly 354
38.15 Segregation of Duties 355
38.16 Account Reconciliation 355
38.17 Accounts Payable Controls 356
38.18 Payment Pitfalls: What Your Banks May Not Tell You 356
38.19 Laws Covering Check Fraud 358
38.20 Positive Pay: The Next Generation 359
39 Employee Fraud 360
39.1 Introduction 360
39.2 Be Aware of Typical Candidates 360
39.3 What Can Go Wrong 360
39.4 Steps to Prevent Cash Fraud 361
39.5 Exercise Patience 362
39.6 Call in the Professionals 362
39.7 When Fraud has been Identified 363
39.8 Dealing with the Aftermath 364
39.9 Preventing Fraud in the Future 364
40 Vendor Fraud 366
40.1 Introduction 366
40.2 Master Vendor File 366
40.3 Con Artist Vendors 369
40.4 Scam Solutions 371
40.5 Vendor Profile Forms 372
Part Eleven Accounts Payable Today and in the Future 375
41 Professionalism in the Field 377
41.1 Introduction 377
41.2 Evaluating the Big Picture 377
41.3 Leadership and Preparation 378
41.4 Technology 378
41.5 Communication 379
41.6 Relevant Trends 380
41.7 Gaining the Attention of Management 380
41.8 How to Win Approvals on Accounts Payable Proposals 381
41.9 Taking Control of Your Own Destiny 383
41.10 Certification 383
41.11 Conferences 383
41.12 Accounts Payable in the Twenty-First Century 384
42 Salaries and Titles in Accounts Payable Today 386
42.1 Introduction 386
42.2 Basic Data 386
42.3 Bonuses 388
42.4 Education 390
42.5 Effects of Industry and Company Size 390
42.6 Trends 392
42.7 Reevaluating AP Positions for Grade-Level Changes 392
42.8 Titles 393
Appendix Accounts Payable Resources 397
Index 399
