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1、Best Practice Financial Processes:Accounts Payable,Accounts PayableObjectives,Organisation,People,Processes,Controls,Measures,Information Systems,To maximise processing efficiencyTo ensure invoices are processed to agreed termsTo ensure payments made only when due and payableTo ensure liabilities ar
2、e fully recorded and distributed correctlyTo achieve effective balance between extending credit and maintaining good relations with suppliersTo take full advantage of opportunities to recover VAT,Centralised processingOutsourcing potential,Maintaining supplier detailsProcess vouchersProcess payments
3、Period end processing and reporting,Authorisation rulesSystem access controlsUser proceduresValidation and matching rules,Speed of processing supplier amendments Invoices processedInvoice processing timeNumber of payments Period end closure time,Interface between Accounts Payable and other related p
4、rocessesShared employee and supplier detailsSystem validation and approval checks,Supplier relationsCreditor control,Accounts Payable-Best Practice Objectives,Accounts Payable-Best practice features,Authorise and set up new suppliers payment detailsMaintain supplier payment detailsSegregation of dut
5、ies between supplier set up,voucher processing and payment processing,Accounts payable process vouchers:invoices,expense claims,credit notes,debit memos and prepayment requestsSuppliers required to use PO number on all documents and three way match wherever possibleConsolidated periodic invoicing fo
6、r high frequency suppliers,Process Features,Maintain supplier details,Process vouchers,Optimisation of early payment discounts Payment runs properly authorised,Process payments,All transactions completed before period closedReconciliation of Accounts Payable activity and reconciliation with General
7、Ledger control accountManagement reports run once period is finally closed,Period end processing and reporting,Accounts Payable-Best practice features,Single supplier databaseSingle employee databaseAudit trail of changes to supplier payment details,Purchase invoices transacted via EDI with major su
8、ppliers wherever possibleElectronic validation and approval of invoicesAutomatic matching of invoice to order and goods received note(GRN)Interface with General Ledger,Purchasing,Fixed Assets and Project AccountingUse of workflow software to resolve queries and monitor process,System Features,Mainta
9、in supplier details,Process vouchers,Electronic paymentsDefault payment terms held on supplier file with manual override at P.O.and invoice Production of forward payment entry schedules to aid cash flow managementInterface with General Ledger,Fixed Assets,Project Accounting and Cash ManagementFacili
10、ty to suspend payments,Process payments,Integration with General Ledger minimises reconciliation adjustmentsTransaction processing prevented for closed periods,Period end processing and reporting,Accounts Payable-Measures/Cost drivers,Number of invoices received per monthNumber of suppliersNumber of
11、 different terms and conditionsComplexity of authorisation processProportion of invoices automatically matched with POsNumber of supplier queries Proportion of invoices received electronically Proportion of payments made electronically,Median,16 days,90 percentile,49 days,90 percentile,Median,10 per
12、centile,Number of purchase invoices per FTE per annum,15,000,7,000,3,000 or less,Cost per purchase invoice processed,10 percentile,Median,90 percentile,2,6,17,10 percentile,6 days,Invoice processing time in days,Cost drivers,Source:statistics taken from Benchmarking database 21 January 1997,Accounts
13、 Payable-Trends,From,To,Separate AP modulePayment by chequeManual matchingPerformed by finance department,Integrated systemsElectronic paymentOn-line matchingShared Service Centres or outsourced services,Accounts Payable-Critical Success Factors,These are a summary of the key business requirements,w
14、hich must be met to achieve the objectives.,Single supplier databaseStaff trained in AP process and have clear roles and responsibilitiesPayment terms defined and agreed with supplierEffective communication and feedback mechanisms in place to handle queriesEstablish and maintain good supplier relati
15、onsProcess in place for monitoring the status of invoices and payment schedulesAP calendar in place and communicated to staffAuthorisation levels and payment terms held on the systemAutomated workflow to route documents to relevant personnel when problems need to be resolvedForward payment schedule
16、to cashflow managementFlexible matching criteria,Accounts Payable-Appendix 1:IDEF Process Flow,The diagram below provides a key to the process diagrams used in this document.,Process/activity,Controls,(i.e.,ProceduresStandardsRequirements for rework),Output,(i.e.,InformationMaterial),Resources,(i.e.
17、,PeopleFunctionsIT systemsMachines),Input,(i.e.,InformationMaterial),Accounts Payable-Level 0 Context Diagram,Accounts Payable-Level 1 Overview,Accounts Payable-Notes Maintain Supplier Details,Best Practice FeaturesShared supplier database with Purchasing.Purchasing responsible for approving supplie
18、rs(having made the required checks),agreeing terms and conditions and maintaining general and purchasing related supplier details on the database,including payment terms.Accounts Payable responsible for maintaining all payment related supplier data,such as bank details,payment method,payee name and
19、address,payment contacts.Shared employee database with Human Resources.Employee details are maintained by Human Resources,but sufficient details must be held and maintained by Accounts Payable,to allow payment of expenses.Employee details required include payment method,bank details,remittance addre
20、ss,payee name and employee cost centre.Accounts Payable should not have access to other confidential employee data.One payment address for each vendor.Where a vendor provides goods or services from a number of locations,the consolidation of the payment process not only reduces the number of payments
21、 necessary but also removes the potential need to reconcile a number of individual accounts.Centralise the vendor set-up capability in order to minimise the risk of unauthorised or duplicate vendors being set up more than once.From an audit point of view,the control over vendor set up is also viewed
22、 as a critical activity which needs to be tightly controlled.Changes to supplier details are processed expeditiously.If,the vendor is also a customer,details are consistent in both databases.,Accounts Payable-Notes Maintain Supplier Details,Internal Control requirementsNew suppliers must be checked
23、and approved by Purchasing in accordance with company policy.Similarly,Purchasing are responsible for processing any mergers,acquisitions or deletions.To enable efficient invoice payment processing and ensure segregation of duties,Accounts Payable are responsible for the maintenance of all payment r
24、elated supplier data.In addition,authorisation for payments within Accounts Payable should be separate from the responsibility of maintaining supplier payment data and processing vouchers.Audit of changes to supplier payment details must be possible.Key Performance IndicatorsTime taken to process su
25、pplier amendments.,Accounts Payable-Notes Process Payments,Best Practice FeaturesUse of electronic banking systems for payments,thus minimising the need for manual intervention in the process.Centralisation of the payment processing in order to minimise the risk of making duplicate payments.Payments
26、 made no sooner than the due date in order to maximise cash flow benefits.Facility to suspend individual payments.The withholding of payment can be a powerful tool in ensuring that the vendor complies with any requirements asked of it.Avoid payments in cash.Apart from being costly to administer,the
27、potential for fraud is greatly increased.,Accounts Payable-Notes Process Payments,Internal Control requirementsPayment processing needs to be tightly controlled and totally segregated from vendor set-up and invoice processing activities.Key Performance IndicatorsNumber of payments per FTE.Number of
28、overdue payments.Number of payments made too early.,Accounts Payable-Notes Process Payments,Cost DriversThe following generate the costs for the processing of payments:-Number of payment runs.Number of manually prepared payments.Number of payment media(cheques,vouchers,diskettes,etc.).Number of fore
29、ign payments.Varied payment terms.ReportsSummary of payments per run.Payments on hold.Reports on Key Performance Indicators.Overdue unpaid invoices,Accounts Payable-Notes Period end processing and reporting,Best Practice FeaturesAutomatic process requiring little or no manual intervention.Posting to
30、 GL should be daily.This ensures GL data is up to date and also reduces the time taken for the period end posting as fewer records are being processed.Internal Control requirementsThe basic requirement is to ensure that the data transmitted to the general ledger is complete and on time.There is a re
31、quirement to ensure that the information recorded in the general ledger agrees with the output from accounts payable.Key Performance IndicatorsDelivery of information to general ledger on timeTimely delivery of end of period reportsCost DriversVolume of transactionsTime to close periodsDegree of aut
32、omation in the interface with general ledger,Best Practice Financial Processes:Accounts Receivable,Account Receivable-Best Practice Objectives,Accounts Receivable Objectives,Organisation,People,Processes,Controls,Measures,Information Systems,To ensure customer payments are received efficiently and e
33、ffectively for goods/services delivered,within the agreed terms and conditionsTo manage credit risk efficiently without creating unnecessary delays in the sales cycleTo maintain a complete and accurate statement of outstanding debtorsTo provide complete forecast information to assist the management
34、of short-term cash requirements,Centralised processingEconomies of scaleCustomer focus,Establish credit levelsIssue sales orderIssue invoiceMonitor creditCollect cash,Procedures manualAuthorisationValidation/matchingCredit control,Cost per invoiceCredit notes percentageCost per payment receivedDays
35、debt outstanding,Integrated with sales systemAutomatic matchingElectronic receipts,Customer relationsLegal framework awarenessCredit management,Accounts Receivable-Best Practice Features,Process Features,Formal credit checks applied to all new customers within 24 hours using credit bureau Monitor cr
36、edit status/terms on regular basis Customer account managers provided with up to date credit statusTreasury policy set on late and prompt paymentsAuthority levels clearly definedCredit policies defined and agreedTerms and conditions agreed with customers,Consolidated periodic invoicing for high freq
37、uency shipmentsBank remittance notices issued with sales invoices to facilitate reconciliationSelf billing invoices by high volume customersConsider outsourcing regular invoice/payment eg utilitiesRegular review of invoice queries and credit notesReconciliation of AR balances to GL control accounts
38、on a regular basis,Credit insurance arrangements evaluated periodically Customer account managers responsible for sales and cash collectionConstant monitoring of debtor days,daily collection,ageing of debtCustomer contact records maintainedOutsource cash collection where appropriateDetermine and rep
39、ort on credit targetsMonitor overdue debts and take action within agreed policy,Establish credit levels,Issue sales order,Issue invoice,Monitor credit/collect cash,Sales orders prepared using pricing database with pricing profiles for products and customers No order processed without valid customer
40、PO referenceDelivery note acts as invoice for low-frequency shippings,Accounts Receivable-Best Practice Features,Establish credit levels,Issue sales order,Issue invoice,Monitor credit/collect cash,System Features,Consolidated credit position for group of customersSystem provides on-line customer pay
41、ment history and termsUse of workflow software to monitor process and help resolve queriesStandard credit control reports,Common SOP and AR customer databaseInvoices automatically generated from SOP and shipment dataSelf billing invoices automatically matched to customer ordersMulti currency invoice
42、sAutomatic commitment and accrualsAutomatic reconciliation facilities between integrated SOP AR and GL systems,SOP linked to debtors ledger to ensure customer credit limits not exceededSales documents sent via EDI for all major customersIntegrated order&billing systems available on line&hard copy,Pa
43、yments received electronically where possibleAutomatic matching of payments to invoicesOn-line diary facility to monitor callsAutomatic flagging and reporting of high risk accountsAutomatic dunning letters issued within agreed trading termsIntegrated systems to facilitate customer query handlingFore
44、cast cash receipts available for treasury purposes,Accounts Receivable-Trends,From,To,Separate AR modulePayment by chequeComplex/variable trading termsManual matchingPerformed by Finance department,Integrated systemsElectronic paymentCommon trading terms for all customersAutomatic matchingShared or
45、outsourced services,Accounts Receivable-Measures/Cost Drivers,90 percentile,Median,10 percentile,Number of customer payment received per accounts receivable,FTE per annum,40,300,5,500,700 or less,Accounts receivable cost per sales invoice processed,10 percentile,Median,90 percentile,1,3,18,Median,1
46、day,90 percentile,4 days,10 percentile,1 day,Days to process invoice/credit note(ie,time between receipt of invoice/credit note and entry into the accounting system),Cost drivers,Number of AR receiptsLevel of multiple receiptsUse of direct debiting/standing ordersUse of electric funds transferLevel
47、of credit risk associated with customer baseVariety in payment termsDegree of foreign currency receiptsLevel of credit notes,Billing-Measures/Cost Drivers,90 percentile,Median,10 percentile,Number of sales invoices generated per billing FTE per annum,90,000,11,100,1,600,Billing cost per sales invoic
48、e and credit note processed,10 percentile,Median,90 percentile,1,2,22,Median,2 days,90 percentile,15 days,10 percentile,1 day,Days from despatch of goods to preparation of sales invoice,Cost drivers,Number of invoicesNumber of customersUse of EDIComplexity of service/goods suppliedVariety in terms a
49、nd conditionsComplexity of discountsDegree of foreign currency invoicingNumber of complaintsAccuracy/level of credit notes,Accounts Receivable-Level 0 Context Diagram,Accounts Receivable-Level 1 Overview,Accounts Receivable Notes Maintain customer data,Best Practice FeaturesSend bill to one address
50、only.Where a customer is provided with goods or services at a number of locations,the consolidation in the billing process not only reduces the number of bills to be verified or created but also decreases the potential need to reconcile a number of receivables on individual accounts.Centralise the c
