If you are to improve efficiency in your accounting department or the system as a whole, then the first thing you need to address is the number of non-value adding activities currently existing in it.. This is where the idea of the “lean concept” comes into play, as it focuses on just this by making the whole system leaner and fitter, metaphorically, by eradicating the non-valuable processes.
Having a robust and efficient accounts payable/disbursement process is the first step to achieve what you are aiming for. For that, you need to make some changes in the existing process. In this article, we take you through the steps you need to take to improve the efficiency of your accounts payable system.
Efficiencies of the Accounts Payable/Disbursement Process
- Automate expense reporting – One of the most important things to do in today’s time is to install an expense reporting system in your accounting system to save the time of the accounts payable/disbursement team. Now, you no longer have to run behind employees or the department managers to get a hold of receipts to curate the expense report manually. Automating this step will have a direct positive effect on improving efficiency of the system.
- Reduce the number of Company credit cards issued – You first need to have a clear idea about who all in your company actually needs a credit card and then cancel the cards of the rest of the employees. When the employees will be forced to make those expenses on their personal cards and then show the receipts for reimbursements, it will result in prudent spending on their part. Furthermore, it will reduce company’s exposure to cyber-attacks and thefts.
- You must automate payments and approvals for repetitive invoices – Invoices like rent, utilities and regular accommodation charges occur on a monthly basis without any changes in them. Therefore, automating the approval and payment process of such invoices improves the efficiency of the disbursement system by manifold.
- Try to eliminate manual checks as much as possible – Gone are the days when accountants used to manually check the ledger and expense reporting books to see if there are any discrepancies in them before creating that final expense report. In fact, manual checks pose an even greater threat in terms of reports being fraudulent and getting delayed in the end. You can easily tackle this issue by having an efficient expense management system or disbursement system like Clearcycle, which can completely automate the process and do the needful on a continuous basis.
- Release a standard account code list – Correcting the miscodings is one of the most tedious jobs in the accounts payable/disbursement process, which results in delays in the month-end closing process. Therefore, you must consider implementing a standard code list, and then restrict the employees to access them by a functional area as well to get the desired results.
Accounts Payable/Disbursement Process Controls
- Vendor Setup Controls – One of the most common frauds in the accounts payable/disbursement process is the expenditure done under the name of an unauthorised vendor. Therefore, controlling the new vendor setup and the current vendor maintenance is crucial to the overall efficiency of the system. To mitigate the risk of unauthorised vendor spend, you can apply the following steps.
- You must maintain a clean master vendor list with only the authorised vendors in it.
- Bring in a new vendor setup process that can only be completed if there are documents to support the move. The accounting forms, justification for vendor selection and a secondary approval of a professional outside the accounts department to back the decision are the major documents that should be made mandatory in this process.
- Make sure that you get the system approval by an additional user before setting up the new vendor in the list.
- You must segregate the check printing authority from the vendor setup authority to improve transparency.
- You need to thoroughly examine the vendors with addresses to PO boxes.
- Monitor the new additions of vendors on a monthly basis and the vendor spend on a weekly basis.
- Control over individuals with check-signing authority – You need to have an accurate count of the number of professionals in the company that have check-signing authority. You can consider implementing a system where there is a requirement for two signatures on the check before it can be passed. Furthermore, you should make sure that these professionals do not have the access to directly print checks from the accounting system. Such control measures improve the efficiency of the accounts payable/disbursement process by limiting the expenditure.
- Hold monthly meetings to discuss budget to actual results – Large or unexpected variances in the expenditure is one of the common ways of fraud in an accounts payable system. Therefore, to avoid such instances, you must host regular meetings where you discuss the actual results with respect to the allotted budget in the first place. Such investigations and consistent reporting will help you keep the frauds under check.
You can improve the efficiency of your accounts payable/disbursement process by following the above points and by adopting automatic solutions like ClearCycle. Such an efficient disbursement system will make not only deliver faster results but also improve productivity.