The Accounts Payable

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The Accounts Payable

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Know definitions and basic functions of the AP/CD process ... costly as, or more costly than those caused by intentional acts of malfeasance ... – PowerPoint PPT presentation

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Title: The Accounts Payable


1
The Accounts Payable/ Cash Disbursement (AP/CD)
Process
2
Learning Objectives
  • Know definitions and basic functions of the AP/CD
    process
  • Understand relationship between the AP/CD process
    and its environment
  • Achieve a reasonable level of understanding of
    the logical and physical characteristics of
    typical AP/CD process
  • Become familiar with various technologies used to
    implement the AP/CD process
  • Know core process goals and the plans used to
    control a typical AP/CD process

AP/CD
3
Process Definitions and Functions
  • The accounts payable/cash disbursements (AP/CD)
    process is an interacting structure of people,
    equipment, methods, and controls that is designed
    to accomplish the following primary functions
  • Handle the repetitive work routines of the
    accounts payable department and the cashier
  • Support the decision needs of those who manage
    the accounts payable department and cashier
  • Assist in the preparation of internal and
    external reports

4
AP/CD Horizontal Perspective
1. Invoice Received from vendor
5
AP/CD Horizontal Perspective
2. Invoice notice sent to general ledger
6
AP/CD Horizontal Perspective
3. Approved voucher (payment request) sent to
cashier (3a) and to general ledger (3b).
7
AP/CD Horizontal Perspective
4. Payment (e.g., check) sent to vendor by
cashier (4a), paid voucher (payment notice)
returned to the accounts payable department (4b),
payment notice to the general ledger (4c)
8
Vertical perspective-AP/CD
9
The AP/CD ProcessLevel 0 Diagram
10
AP/CD Process Level 1 DFD Validate Invoice
(Assumes non-voucher systema formal voucher
would have space for formal approval and account
distribution)
11
AP/CD Process Level 1 DFD Make Payment
(Triggered by due date of invoice)
12
Purchase Returns and Allowances
  • In some cases defective goods may be returned or
    an allowance made for non-conforming items
  • This exception routine usually begins at the
    point of inspecting and counting the goods or at
    the point of validating vendor invoices
  • Purchaser transmits a debit memo to the vendor
    requesting the account adjustment
  • The vendor responds with a credit memo indicating
    the authorized account adjustment

13
Processing Non-Invoiced Disbursements
  • In some cases disbursements are not invoiced,
    e.g., freight bills, rent, payroll, etc.
  • The handling of non-invoiced disbursements
    depends on whether or not a voucher system is
    used
  • A voucher system prepares a voucher for every
    expenditure from payroll to purchases of raw
    materials

14
Processing Non-Invoiced Disbursements
15
Logical Data Descriptions for the AP/CD Process
  • Accounts payable master data. This data store is
    a repository of all unpaid vendor invoices
  • The data design should consider how the data will
    be processed when the cash manager is deciding
    what payments to make
  • For example, the manager may want to merge vendor
    invoices so that the total amount due each vendor
    can be accumulated
  • Alternatively, the manager might want to select
    specific invoices for payment
  • Cash disbursements data. The purpose of this data
    is to show, in chronological sequence, the
    details of each cash payment made.
  • Each record in this data normally shows the date
    the payment is recorded, vendor identification,
    disbursement voucher number (if a voucher process
    is used), vendor invoice number and gross invoice
    amount, cash discount taken on each invoice, net
    invoice amount, check amount, and check number.

16
Entity-Relationship (E-R) Diagram (Partial) for
the AP/CD Process
17
Technology Trends and Developments
  • E-invoicing - the processing of invoices in
    electronic form
  • Scan documents
  • Use purchasing cards (p-cards)
  • Invoices can be submitted electronically
  • E-payments - the electronic submission of
    payments
  • EDI and XML-based technologies
  • Settled through the ACH network, wire transfer,
    or credit card

18
Technology Trends and Developments
  • The AP/CD process is the primary candidate for
    EDI in major organizations (as it is in the OE/S,
    B/AR/CR, and purchasing processes as well)
  • Several major companies have implemented EDI
    systems into the AP/CD process, resulting in
    significant cost savings
  • An increasing trend among some of these major
    companies is to require all vendors to use EDI in
    their transactions with the company
  • If the vendor does not implement EDI
    technologies, the major companies simply find a
    new supplier
  • In the last few years, several alternatives to
    EDI have been deployed
  • These new technologies, based, for example, on
    XML or IP-based EDI (Internet EDI), have not
    replaced EDI
  • Services provided by the value-added networks
    (VANs) and the high degree of EDI standardization
    make EDI attractive for fully digital B2B
    collaboration among trading partners for years to
    come
  • Many organizations are using Web-based payment
    systems

19
AP/CD Process Systems Flowchart
20
AP/CD Fraud
  • AP fraud usually involve fictitious vendors and
    false invoices
  • A dishonest employee who has access to the vendor
    file and authorizes payment
  • May embezzle amounts refunded by vendors
  • Human error is still a leading cause of loss
  • CD fraud is less sophisticated
  • Usually involves check fraud
  • Check fraud takes many forms from stealing and
    passing stolen checks to changing amounts on
    legitimate checks or check forgery
  • CD fraud is becoming easier and more common with
    computer duplication technology

21
Exposure to Loss and Destruction of Resources
  • Although the subject of fraud and embezzlement is
    seductively interesting, resource losses due to
    unintentional mistakes and inadvertent errors are
    as costly as, or more costly than those caused by
    intentional acts of malfeasance
  • Making payments for incorrect or larger amounts
  • Paying the wrong vendor
  • Paying the same invoice twice

22
Other Plans AP/CD Process (Non-EDI systems)
  • Avoid duplicate payment of Invoices
  • Mark paper invoice as paid
  • Set flag on computerized AP record
  • Safeguard Blank Checks
  • Limit time when checks can be cashed
  • Use Check-Protection machine for writing checks

23
AP/CD Control Matrix
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