1、Best Practice Financial Processes: Accounts Payable,Accounts Payable Objectives,Organisation,People,Processes,Controls,Measures,Information Systems,To maximise processing efficiency To ensure invoices are processed to agreed terms To ensure payments made only when due and payable To ensure liabiliti

2、es are fully recorded and distributed correctly To achieve effective balance between extending credit and maintaining good relations with suppliers To take full advantage of opportunities to recover VAT,Centralised processing Outsourcing potential,Maintaining supplier details Process vouchers Proces

3、s payments Period end processing and reporting,Authorisation rules System access controls User procedures Validation and matching rules,Speed of processing supplier amendments Invoices processed Invoice processing time Number of payments Period end closure time,Interface between Accounts Payable and

4、 other related processes Shared employee and supplier details System validation and approval checks,Supplier relations Creditor control,Accounts Payable - Best Practice Objectives,Accounts Payable - Best practice features,Authorise and set up new suppliers payment details Maintain supplier payment d

5、etails Segregation of duties between supplier set up, voucher processing and payment processing,Accounts payable process vouchers: invoices, expense claims, credit notes, debit memos and prepayment requests Suppliers required to use PO number on all documents and three way match wherever possible Co

6、nsolidated periodic invoicing for 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 closed Reconciliation of Accounts Payable activity

7、 and reconciliation with General Ledger control account Management reports run once period is finally closed,Period end processing and reporting,Accounts Payable - Best practice features,Single supplier database Single employee database Audit trail of changes to supplier payment details,Purchase inv

8、oices transacted via EDI with major suppliers wherever possible Electronic validation and approval of invoices Automatic matching of invoice to order and goods received note (GRN) Interface with General Ledger, Purchasing, Fixed Assets and Project Accounting Use of workflow software to resolve queri

9、es and monitor process,System Features,Maintain supplier details,Process vouchers,Electronic payments Default payment terms held on supplier file with manual override at P.O. and invoice Production of forward payment entry schedules to aid cash flow management Interface with General Ledger, Fixed As

10、sets, Project Accounting and Cash Management Facility to suspend payments,Process payments,Integration with General Ledger minimises reconciliation adjustments Transaction processing prevented for closed periods,Period end processing and reporting,Accounts Payable - Measures/Cost drivers,Number of i

11、nvoices received per month Number of suppliers Number of different terms and conditions Complexity of authorisation process Proportion of invoices automatically matched with POs Number of supplier queries Proportion of invoices received electronically Proportion of payments made electronically,Media

12、n,16 days,90 percentile,49 days,90 percentile,Median,10 percentile,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: statisti

13、cs taken from Benchmarking database 21 January 1997,Accounts Payable - Trends,From,To,Separate AP module Payment by cheque Manual matching Performed by finance department,Integrated systems Electronic payment On-line matching Shared Service Centres or outsourced services,Accounts Payable - Critical

14、Success Factors,These are a summary of the key business requirements, which must be met to achieve the objectives.,Single supplier database Staff trained in AP process and have clear roles and responsibilities Payment terms defined and agreed with supplier Effective communication and feedback mechan

15、isms in place to handle queries Establish and maintain good supplier relations Process in place for monitoring the status of invoices and payment schedules AP calendar in place and communicated to staff Authorisation levels and payment terms held on the system Automated workflow to route documents t

16、o relevant personnel when problems need to be resolved Forward payment schedule to cashflow management Flexible 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.,Proced

17、ures Standards Requirements for rework),Output,(i.e.,Information Material),Resources,(i.e.,People Functions IT systems Machines),Input,(i.e.,Information Material),Accounts Payable - Level 0 Context Diagram,Accounts Payable - Level 1 Overview,Accounts Payable - Notes Maintain Supplier Details,Best Pr

18、actice Features Shared supplier database with Purchasing. Purchasing responsible for approving suppliers (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 respons

19、ible for maintaining all payment related supplier data, such as bank details, payment method, payee name and 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 Pa

20、yable, to allow payment of expenses. Employee details required include payment method, bank details, remittance address, 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 good

21、s or services from a number of locations, the consolidation of the payment process not only reduces the number of payments 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

22、 or duplicate vendors being set up more than once. From an audit point of view, the control over vendor set up is also viewed 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 consisten

23、t in both databases.,Accounts Payable - Notes Maintain Supplier Details,Internal Control requirements New suppliers must be checked and approved by Purchasing in accordance with company policy. Similarly, Purchasing are responsible for processing any mergers, acquisitions or deletions. To enable eff

24、icient invoice payment processing and ensure segregation of duties, Accounts Payable are responsible for the maintenance of all payment related supplier data. In addition, authorisation for payments within Accounts Payable should be separate from the responsibility of maintaining supplier payment da

25、ta and processing vouchers. Audit of changes to supplier payment details must be possible. Key Performance Indicators Time taken to process supplier amendments.,Accounts Payable - Notes Process Payments,Best Practice Features Use of electronic banking systems for payments, thus minimising the need f

26、or manual intervention in the process. Centralisation of the payment processing in order to minimise the risk of making duplicate payments. Payments 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

27、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 potential for fraud is greatly increased.,Accounts Payable - Notes Process Payments,Internal Control requirements Payment processing needs to be ti

28、ghtly controlled and totally segregated from vendor set-up and invoice processing activities. Key Performance Indicators Number of payments per FTE. Number of overdue payments. Number of payments made too early.,Accounts Payable - Notes Process Payments,Cost Drivers The following generate the costs

29、for the processing of payments:- Number of payment runs. Number of manually prepared payments. Number of payment media (cheques, vouchers, diskettes, etc.). Number of foreign payments. Varied payment terms. Reports Summary of payments per run. Payments on hold. Reports on Key Performance Indicators.

30、 Overdue unpaid invoices,Accounts Payable - Notes Period end processing and reporting,Best Practice Features Automatic process requiring little or no manual intervention. Posting to GL should be daily. This ensures GL data is up to date and also reduces the time taken for the period end posting as f

31、ewer records are being processed. Internal Control requirements The basic requirement is to ensure that the data transmitted to the general ledger is complete and on time. There is a requirement to ensure that the information recorded in the general ledger agrees with the output from accounts payabl

32、e. Key Performance Indicators Delivery of information to general ledger on time Timely delivery of end of period reports Cost Drivers Volume of transactions Time to close periods Degree of automation in the interface with general ledger,Best Practice Financial Processes: Accounts Receivable,Account

33、Receivable - Best Practice Objectives,Accounts Receivable Objectives,Organisation,People,Processes,Controls,Measures,Information Systems,To ensure customer payments are received efficiently and effectively for goods/services delivered, within the agreed terms and conditions To manage credit risk eff

34、iciently without creating unnecessary delays in the sales cycle To maintain a complete and accurate statement of outstanding debtors To provide complete forecast information to assist the management of short-term cash requirements,Centralised processing Economies of scale Customer focus,Establish cr

35、edit levels Issue sales order Issue invoice Monitor credit Collect cash,Procedures manual Authorisation Validation/matching Credit control,Cost per invoice Credit notes percentage Cost per payment received Days debt outstanding,Integrated with sales system Automatic matching Electronic receipts,Cust

36、omer relations Legal framework awareness Credit management,Accounts Receivable - Best Practice Features,Process Features,Formal credit checks applied to all new customers within 24 hours using credit bureau Monitor credit status/terms on regular basis Customer account managers provided with up to da

37、te credit status Treasury policy set on late and prompt payments Authority levels clearly defined Credit policies defined and agreed Terms and conditions agreed with customers,Consolidated periodic invoicing for high frequency shipments Bank remittance notices issued with sales invoices to facilitat

38、e reconciliation Self billing invoices by high volume customers Consider outsourcing regular invoice/payment eg utilities Regular review of invoice queries and credit notes Reconciliation of AR balances to GL control accounts on a regular basis,Credit insurance arrangements evaluated periodically Cu

39、stomer account managers responsible for sales and cash collection Constant monitoring of debtor days, daily collection, ageing of debt Customer contact records maintained Outsource cash collection where appropriate Determine and report on credit targets Monitor overdue debts and take action within a

40、greed 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 PO reference Delivery note acts as invoice for low-frequency shipp

41、ings,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 customers System provides on-line customer payment history and terms Use of workflow software to monitor pr

42、ocess and help resolve queries Standard credit control reports,Common SOP and AR customer database Invoices automatically generated from SOP and shipment data Self billing invoices automatically matched to customer orders Multi currency invoices Automatic commitment and accruals Automatic reconcilia

43、tion facilities between integrated SOP AR and GL systems,SOP linked to debtors ledger to ensure customer credit limits not exceeded Sales documents sent via EDI for all major customers Integrated order Master Data set up on the system to reflect these policies Appropriate coding by asset category es

44、tablished Procedures surrounding the Fixed Asset process are documented and communicated to staff including requirements for issuing new codes Asset Register Rules incorporated into Master File, which control issues of new numbers within structured coding scheme Staff trained in Fixed Asset Accounti

45、ng processes and have clear roles and responsibilities. They should have a good understanding of network and engineering areas Supervisory staff understand statutory and tax requirements Internal Control Requirements Once entered, updates should be verified against the original requests Codes will b

46、e received from the Master File and updates will be confirmed against the Master File The system will check that all required data fields are complete There must be supervisory review for Master Data updates Key Performance Indicators Speed of update: time from receipt of request to modification and

47、 verification of records: this should not exceed one day Number of input errors when asset details are validated: this should be zero Cost Drivers Complexity of assets New types of assets Number of changes to physical location coding,Fixed Assets - Level 2 FA1.2 Add Assets,FA 1.21 Input automatic da

48、ta,FA 1.22 Input manual data,FA 1.23 Add additional information,FA 1.24 Post asset details,Sub Processes / Notes,Receive asset addition notifications from AP into FA Register Run interfaces with AP to transfer invoice lines Tag/label asset with unique identifier,Manually enter assets which do not ha

49、ve invoice information Identify assets as ; WIP; Expenses; and Capitalised assets.,Add additional asset datail to lines e.g. assign asset categories; split or merge assets; and add to existing as cost adjustment. Assign asset life Assign asset to departmental manager, location,Post prepared lines to

50、 fixed asset register,Assets from AP or Project Accounting,Asset addition notification,AP lines with Skeleton details,AP lines with additional information,Added Assets,Updated FA Register,FA register structure maintained,FA register structure maintained,GL a/c maintained for additions,System control

51、s Accounting policies,Accounting Policies,System Controls,AP System FA accounting staff System controls bar coding used on relevant assets Direct links to Project Accounting Clear policy established for treatment of assets and guidance on how to classify different types of assets, to reduce the numb

52、er of reclassifications needed System interconnection to MIS (Management Information Systems) for tax and insurance planning Assets identified by “custodian”, i.e. person who controls the asset, rather than a department or the company as a whole Unified transfer pricing in all Business Units for ass

53、et transfers Use of asset transfer strategy to optimise the usage of assets Internal Control Requirements Asset number controls All asset register updates reviewed after entry, to limit period end differences Update details sent periodically to source and asset custodian (or other initiator of the u

54、pdate) for information and coroboration purposes Key Performance Indicators Number of reconciliation at period end: if a reconciliation is needed between Fixed Assets and other accounts, this indicates that one or other of the accounts is not up to date Number of changes processed Number of verifica

55、tion adjustments Cost Drivers Number of assets Average useful life of assets (i.e. rate of asset turnover) Number of changes in Master Data leading to manual adjustments.(e.g. change in organisation codes) Number of revaluations / disposals,Fixed Assets - Level 2 FA1.3 Dispose of Assets,Sales price

56、and buyer confirmed,Sale/Disposal completed,Asset sale or disposal registered with Accounts dept,FA Register updated,Assets identified for disposal,Asset disposal notification,Interface to GL,FA 1.31 Select assets to dispose,FA 1.32 Obtain quote (if applicable),FA 1.33 Sell / Dispose of Asset,FA 1.3

57、4 Notify Accountants,FA 1.36 Reconcile GL accounts,Sub Processes / Notes,Cost Centre managers identify items for disposal,Cost Centre manager to obtain quote for asset, place item in auction, or advertise as appropriate,Asset sold and monies received by Cost Centre managers Cost Centre managers to e

58、nsure monies received for assets as agreed or expected from auction Invoices raised by AR for sale of assets on credit,Cost Centre managers to notify FA staff /accounts of disposals Cost Centre manager to ensure asset payment received and registered.,Ensure FA register reconciles with asset values i

59、n GL GL maintained for Disposals Ensure that all details of profit / loss have been recorded accurately to the correct cost centres in GL,FA accountant to update register with disposals,FA 1.35 Record Transactions in accounts,GL a/cs maintained for disposals,Update FA register,Disposal procedures,Valuation procedures,Authorisation procedures,Disposal procedures,Disposal procedures,Reconciliation procedures,Cost centre managers,Cost