Practices for Accounts Payable

Practices for Accounts Payable

  1. Develop a written accounts payable policy and procedures document. A written policy: (a) facilitates employee training, (b) helps to establish a consistent response to routine situations and, (c) may create a framework for appropriate delegation of responsibilities.
  2. Identify incompatible duties and implement appropriate segregation of these duties. For example, employees who authorize invoices for payment should not have the ability to edit vendor master files, so too, employees who can edit vendor master files should not be allowed to process vendor invoices. Where possible appoint someone, not otherwise involved in the accounts payable process, to monitor changes to vendor master files.
  3. Where possible make purchases from pre-approved vendors only. This could help negotiate more favorable terms.
  4. When new vendors are added to the system, be sure to send a new vendor welcome letter. The letter should detail where invoices must be sent and any information necessary to process vendor invoices such as the completed w-9 forms, which are needed for the annual preparation of form 1099. There are hefty fines for non-compliance with 1099 reporting.
  5. Have all vendor invoices sent to the accounts payable department, where they should be logged, before they are sent for approvals. This procedure reduces the incidence of lost and missing invoices.
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