Commonly referred to as ‘best practices’ in the accounting and finance world, they are a set of procedures that are considered standard within an organization or particular industry. They are generally considered the correct way of doing something. Over the next several months we’ll be splitting up the various transaction cycles in accounting and giving suggestions to the best practices.
We’ll start with accounts payable and bill pay. Read through the suggestions below and see if your organization follows any of the recommended practices for the accounts payable transaction cycle. Are there any you are missing and need to implement with your team?
New vendor and invoice entry
- It’s best to require each new vendor submit a W-9 to avoid the end of year hassle of collecting them for 1099 purposes.
- Next, review the invoice submitted to ensure it has been approved by a department manager and is ready to be paid. Also, make sure that you are paying from an original invoice that’s not a duplicate of a prior invoice to confirm a vendor isn’t getting paid for the same invoice twice.
- The employee responsible for entering the invoice should be different from the person approving the invoices and signing checks. It can be a challenge sometimes, in smaller organizations, so it may be best to utilize other departments for approval and check signing.
Paying the bill
- It is best to keep checks in a locked file and have someone other than the AP clerk who can pull the checks based off a vendor check report or a cash requirements report.
- Another good practice is to keep a log of check numbers as a check out system each time checks are printed.
Final review, check signature and upload or entry of the ACH payments
- You should have the AP clerk print off a check register to be reviewed by management. The review could include asking questions about any new vendors and making sure the check amounts align within the organizations budget.
- Checks to be signed that are over a certain dollar amount can be set up for dual signatures if necessary.
- If paying bills via ACH works best for your organization, you can set up dual controls on the banking website to make sure the person entering the payments is different from the approver who sends the payments.
- Using dual controls as part of the best practice for either live checks or ACH payments can prevent someone from paying themselves.
That’s all for this round of Accounting Best Practices. Stay tuned for next month when we look at another accounting cycle.
Nonprofit Accounting and Finance Consultant