Accounts Payable Checklist: Everything You Need to Know

Effective management of accounts payable is crucial for maintaining financial stability within a company. A well-organized accounts payable process involves prompt and accurate invoice processing, expense tracking, and timely payments. While overseeing accounts payable can present challenges, employing a comprehensive checklist can simplify your workflows and enhance overall efficiency.

The following checklist can be divided into three major categories:

Obligation to Pay Control: 

Before making a payment, it is vital to ensure that you are paying for goods and services received by your company, thereby avoiding unnecessary expenses, purchases and payments. The obligation to pay control encompasses the following steps:

Invoice Approval: 

After the delivery of goods or services, an invoice is generated. For non-PO processes, it is essential to obtain invoice approval prior to payment. The relevant business approver verifies the rendered services and cross-checks the invoice against vendor contracts for enhanced accuracy.

Purchase Order (PO) Approval: 

Generate a purchase order to request goods or services from a vendor. Implementing a robust PO approval workflow not only improves the payables process but also aids in budgeting and procurement functions. It ensures that your purchase aligns with the budget and offers value for money.

2-Way or 3-Way Matching: 

For PO-based invoices, conducting 2-way or 3-way matching is necessary to ensure invoice accuracy and validity. A 2-way match involves comparing the PO with the PO-based invoice, while a 3-way match involves matching the PO and invoice to the packing slip or receipts. A 2-way match ensures you pay the agreed upon rate for the goods or serviced received, and performing a 3-way match guarantees that you are paying for only the goods or services you have received the correct goods.

Duplicate Payments: 

Due to the high volume of invoices processed weekly, it is possible to make duplicate payments. Duplicate vendors in your vendor master, invoices being mistakenly accounted for multiple times all can cause duplicate payments to occur. Implement a duplicate payment check to prevent or rectify instances where the same invoice is at a risk of being paid multiple times.

Data Entry: 

Data entry of invoices is prone to errors and demands meticulous attention. Double-check critical values such as invoice and PO numbers, invoice amount, due date, and payment terms, particularly for non-PO invoices. Accurate assignment of General Ledger (GL) codes is crucial to prevent expenses being incorrectly accounted for and assigned to the wrong cost heads. 

Consider utilizing accounts payable automation systems, like ClearTech, to streamline data entry. ClearTech employs robust machine learning technology in combination with a human-led service layer to guarantee 100% accuracy of  OCR to extract line item level details. ClearTech also eliminates the need to categorize cost heads by auto-populating GL account details and posts the bill to your accounting system. 

Payment Process:

The payment process is the final step in the accounts payable cycle and requires careful consideration and structure to minimize errors. Follow these steps to ensure a smooth and foolproof payment process:

Segregating Duties: 

Involve multiple individuals in the check preparation process to prevent last-minute errors and deter fraud. Segregate duties based on check preparation, data entry of checks, and check signing and mailing. For ACH payments, segregate the duties to have one person input the payment details and another person to approve it. Cross-verify the details of all individuals involved to mitigate the risk of internal fraud. 

Verify account information and track ACH payments

To ensure accuracy in payments, it is important to verify and confirm vendor payment information before initiating ACH payments. Keep vendor payment details up to date to have the most current information readily available. Additionally, regularly review your ACH payment remittance receipts and payee lists to promptly address any errors and request a reversal if necessary.

Entering and Tracking Check Information: 

While preparing the check, duly note important details such as the sequence number, amount, and payee. Assign this task to someone other than the person responsible for preparing the check to avoid errors. Tracking the sequence number enables you to monitor payment progress and notifies you when the vendor deposits the payment. This facilitates error or fraud detection and allows for easy check storage tracking.

Additional or Double Check Signers: 

Implement a policy of double signers for checks above a certain amount. Prefer manual signing for higher-value checks rather than relying solely on digital signatures.

Consider electronic fund transfers (EFTs) as a preferable option when dealing with significant amounts. EFTs are easier to track and mitigate the risks associated with checks being lost or stolen during transit.

Careful storage of checks and information: 

To maintain the security of checks, store them safely in a designated secure location overseen by a verified and trusted employee. Regularly monitor the stored checks to promptly identify and resolve any issues before stolen checks are fraudulently cashed. When it comes to ACH payments, restrict access to your banking information, ensuring that only a select few individuals are aware of and authorized to make changes. Safeguard payment-related sensitive materials by securely encrypting them when shared or stored. By implementing these practices, you can prevent unauthorized payments and internal fraud within your company.

Following an accounts payable checklist for payables processing can be a challenging task. This is where accounts payable automation systems, like ClearTech, prove invaluable. ClearTech offers a secure and streamlined approval process, automates data entry using Optical Character Recognition (OCR) technology, identifies potential errors and duplicates, and securely manages the entire payments process. With visibility into all your payments, you won’t lose control over any of your spend. Adopting reliable end-to-end automation provided by ClearTech will ensure efficiency and accuracy in your accounts payable operations.