Controls Over Accounts Payable

To reduce the risk of losses in the company’s accounts payable, business owners may use some accounts payable controls. Accounts payable refers to the amount of money that a company owes to its suppliers, and that amount will appear on the balance sheet as a liability (Also see Understanding Current Liabilities). Thus, correctly recording them and paying for them is crucial for every business since this can be one of the significant cash outflows for a company. However, tracking it is an impossible mission if the business has not done its accounting records properly. Hence, if you are one of the business owners who do not know how to deal with the accounts payable, do not hesitate to contact the professionals in a bookkeeping firm Singapore and let them help you.

Listed below are some of the controls that the business owners can create over their accounts payable:

–       Purchase order approval

The purchase department is responsible for issuing a purchase order for every purchase that it has made. Hence, in short, this means that the purchasing staff need to approve all the expenses before they make a purchase, and this may avoid some expenses (Also see How Do Provisions and Accrued Expenses Differ from Each Other?) from occurring. As this control will increase the workload of the staff in the purchasing department, they will most probably ask the employees to fill up a purchase requisition form to request for the items that they want to purchase.

–       Invoice approval

The staff who is responsible for authorising the payment means that he approves a supplier invoice. Nevertheless, if the approver only looks at the invoices, the control is relatively weak as he would not know whether the company has received the goods or services. Also, he would not know whether the prices charged were what the company had agreed to before that. He may be interested in knowing which general ledger account (Also see Which Ledger Accounts Will Normally Have Debit Balances?) the accountants will charge too. As a result, a better solution to this problem is to let the staff who are responsible for the accounts payable to collect the supplier invoices, authorise the purchase orders and pack it together with the receiving documentation. Then, they need to stamp the invoices with a signature block which consists of the account number which will be charged before submitting it to the approver and let him review it. By doing so, the approver will be able to obtain a comprehensive set of information.

–       Recording the purchase after getting approval

This control indicates that the purchasing staff must verify the approval for all the invoices before they key them into the accounting system.

–       Matching the purchase with the budget in the financial statements

If an accountant has accidentally charged a supplier invoice to the incorrect department, the manager of that department may detect a discrepancy between the budget and the amount charged if he studies the financial statements carefully. Then, he may bring this issue to the accountant’s or the accounting department’s attention.

–       Assign different staff to prepare and sign the cheques

The business owner should let a staff prepare the cheques, and let another staff sign them. This ensures a cross-check when the company spends cash.

–       Store the cheques in a safe place

Business owners or the related department should always make sure that they have kept unused cheques in a locked place. If not, there is a possibility where the staff may steal the cheques, fill them up fraudulently and cash them. This also means that business owners should make sure that he has kept all the stamps and signature plates in a safe place.