Title: The Accounts Payable
1The Accounts Payable/ Cash Disbursement (AP/CD)
Process
2Learning 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
3Process 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
4AP/CD Horizontal Perspective
1. Invoice Received from vendor
5AP/CD Horizontal Perspective
2. Invoice notice sent to general ledger
6AP/CD Horizontal Perspective
3. Approved voucher (payment request) sent to
cashier (3a) and to general ledger (3b).
7AP/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)
8Vertical perspective-AP/CD
9The AP/CD ProcessLevel 0 Diagram
10AP/CD Process Level 1 DFD Validate Invoice
(Assumes non-voucher systema formal voucher
would have space for formal approval and account
distribution)
11AP/CD Process Level 1 DFD Make Payment
(Triggered by due date of invoice)
12Purchase 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
13Processing 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
14Processing Non-Invoiced Disbursements
15Logical 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.
16Entity-Relationship (E-R) Diagram (Partial) for
the AP/CD Process
17Technology 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
18Technology 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
19AP/CD Process Systems Flowchart
20AP/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
21Exposure 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
22Other 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
23AP/CD Control Matrix