What Is the Accounts Payable Process?
This control allows multiple members of your team the ability to stop payments that could result in costly errors. The Payment Runs page lists all Check/Payment Runs created along with their details and statuses. Payment fraud attacks are the ‘new normal,’ and advancements in technology have opened the doors for fraudsters. 81% of companies were targets of payments fraud in 2019 alone, while 74% of organizations experienced payment (ACH, wire and check) fraud in 2019–up from 70% in 2018. A company’s short-term debt or money owed to suppliers, vendors and creditors is an Accounts Payable.
Using accounting software to manage, approve, and to review paid and unpaid invoices can help you manage your accounts payable more efficiently, while reducing errors such as incorrect data entry, amounts, and check numbers used to pay vendors. One way to reduce the number of manual checks is to investigate how many of the checks could have been included in the normal check run if there had been more frequently scheduled check runs. For example, if check runs are performed only on Fridays and a check request appears on Monday, could the person demanding the check wait a few days until a midweek check run, or would he still require an immediate payment? In many cases, adding one or two check runs per week will be more cost-effective than issuing a large quantity of manual checks. The correct solution will vary by company, depending on the volume and nature of each manual check request.
Mobile approval applications can increase the productivity your business by substituting paper related workflows with anytime, anywhere remote approvals. A mobile app is also a great way to gather authorized signatures, if paying by check. The accounts payable department of your business will have a set of procedures to follow before making a vendor payment. Set guidelines and processes at a company are essential because of the value and volume of transactions during any period of time. An alternative approach is to shift the date on which check runs are completed, rather than increase their frequency. For example, what if most manual checks are demanded by the sales staff, who return from out-of-state sales trips on Fridays and want to be paid the following Monday?
USE SOFTWARE TO HELP MAKE PAYMENTS AND PROCEDURES EASIER
The Check Run screen is where Users can select Approved AP Invoices, apply AP Credits and create AP Payments.
The drawback to infrequent check runs is that payments are approved and dispatched sometimes weeks before they are due. Ideally, payments should be approved and distributed only when due and after the company is confident that deposits are made. Proper approval by department heads, separation of duties and spot checks will help reduce the risk of fraud at your company. Accounting software can make it easier for your business to run aging reports, so you have a better idea of what’s in your company’s pipeline. The Check Run screen provides a User with a list of Approved AP Invoices, which can be filtered by Vendor, Location Reporting Category, and Invoice Priority. The User can then apply AP Credit Memos & Discounts, create AP Payments, print Checks, and produce ACH and Positive Pay exports for selected invoices.
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Usually, a Chief Financial Officer (CFO) signs the check but doesn’t assemble the check run. The Accounts Payable department should be running the aging, choosing which invoices to pay, assembling the invoices, printing checks and verifying that all invoices are approved before getting them to the CFO to be paid. Check runs are labor and time intensive, therefore they are typically done once a week, or even once every two weeks.
The Accounts Payable Process involves nearly all the company’s payments outside of payroll. The mission of accounts payable is to manage and pay only the company’s bills and invoices that are legitimate and accurate. A Chief Financial Officer (CFO) or Controller typically signs approved checks, but that person shouldn’t be the one assembling the check run.
Usually invoices will come with a payment due date of the next 30 or 60 days. Regardless of the terms given, a company can negotiate terms for unpaid invoices. If a company purchases large volumes on a regular basis, a vendor may offer discounts or special terms. If a company is going to be late with a payment, it is best if they contact the vendor to help maintain the relationship and to see if anything can be negotiated in regards to the late payment.
34. Increase the Frequency of Check Runs
If the vendor invoice is recorded twice, there will be two problems as well the liabilities will be overstated and expense will be overstated. AP Credit Memos that have been entered and Approved can be applied to AP Invoices on the Check Run. Click the ‘Save Check Run’ action on the Check Run screen to save the Check Run.
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- If a company purchases large volumes on a regular basis, a vendor may offer discounts or special terms.
- Pure mobile payment and approval applications (not browser pages), can add convenience and security to check runs.
- A Chief Financial Officer (CFO) or Controller typically signs approved checks, but that person shouldn’t be the one assembling the check run.
- A company’s short-term debt or money owed to suppliers, vendors and creditors is an Accounts Payable.
A “check run” or “cheque run” refers to the most important step of the accounts payable process where payments are approved and executed in order to pay invoices in a timely manner. Check runs can be processed either as a batch of payments, or as individual payments. Historically, they are defined as payments by paper check, however today, the term also applies to electronic payment processes. Payments software should gather payment data directly from the accounting application to reduce errors and fraud.
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Also validate that each outgoing payment is to an authorized vendor or legitimate recipient. Fraudsters often submit illegitimate invoices in the hope of getting paid by mistake. Check/Payment Runs can have one of five statuses to show at what stage in the approval and payment creation process it is located. In instances where a check amount exceeds a certain threshold, require a second person to sign the check.
Payment Dates can be set for all Invoices, or just unchecked invoices. Depending on the Payment Method of the Vendors that will be paid on a Check Run, AP Payments, Checks, Positive Pay Exports, and ACH Stubs can all be created on the Check Run. Dive in for free with a 10-day trial of the O’Reilly learning platform—then explore all the other resources our members count on to build skills and solve problems every day. Take O’Reilly with you and learn anywhere, anytime on your phone and tablet. Get full access to Accounting Best Practices, Fifth Edition and 60K+ other titles, with a free 10-day trial of O’Reilly.
Payments made by check, directly from your checking account will remove the cash flow and time delay restrictions that exist as a result of the pre-funding requirements of using some bill pay services. With the new technology available, it makes sense to put the check back into your check runs. Find out how Checkrun can help improve your accounts payable check run procedures today. Reducing the number of check runs (the process of printing checks to pay invoices and posting them in the General Ledger) to twice a month can help you simplify your accounts payable process. When a check run is prepared, invoices should be backed up in the records and approved by appropriate department heads so that payments can be paid in a timely manner.
An accounts payable department should be aware of ceilings for each check run, so they can select the most important invoices to pay. An Accounts Payable department manages incoming invoices and processes payments of those bills. Implementing business and finance procedures to streamline an accounts payable process can streamline an accounts payable process and prepare a company for future growth. For a company’s financial statements to be accurate and complete the accounts payable process must also be efficient and accurate. Due to double-entry accounting, an omission of a vendor invoice actually causes two accounts to report incorrect amounts.
Implementing procedures and policies can safeguard your business and mitigate risk. Make sure to have a system in place for each payment workflow step within your accounts payable process. Authorized approvers, customized workflows and added security such as positive pay will help reduce the risk of payment fraud.