Period end processing and reporting
➢ Single supplier database
➢ Single employee database
➢ Audit trail of changes to supplier payment details
System Features
Measures
➢ Speed of processing supplier amendments
➢ Invoices processed ➢ Invoice processing
time ➢ Number of payments ➢ Period end closure
time
3
Accounts Payable - Best practice features
➢ 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 mechanisms 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 to relevant personnel when problems need to be
➢ Use of workflow software to resolve queries and monitor process
➢ Production of forward payment entry schedules to aid cash flow management
➢ Interface with General Ledger, Fixed Assets, Project Accounting and Cash Management
➢ Consolidated periodic invoicing for high frequency suppliers
➢ All transactions completed before period closed
➢ Reconciliation of Accounts Payable activity and reconciliation with General Ledger control account
resolved ➢ Forward payment schedule to cashflow management ➢ Flexible matching criteria
PwC175b(1)
8
Accounts Payable - Appendix 1 : IDEF Process Flow
The diagram below provides a key to the process diagrams used in this document.
Invoice processing 49 days
10 percentile
Median
90 percentile
PwC175b(1)
5
Cost per purchase invoice processed £6
£2
10 percentile Median
➢ Automatic matching of invoice to order and goods received note (GRN)
➢ Interface with General Ledger, Purchasing, Fixed Assets and Project Accounting
Best Practice Financial Processes: Accounts Payable
Accounts Payable - Best Practice Objectives
Organisation
2
People
➢ Centralised processing ➢ Outsourcing potential
➢ Purchase invoices transacted via EDI with major suppliers wherever possible
➢ Electronic validation and approval of invoices
➢ Electronic payments
➢ Default payment terms held on supplier file with manual override at P.O. and invoice
Input
(i.e. ➢ Information ➢ Material)
Controls (i.e. ➢ Procedures ➢ Standards ➢ Requirements for rework)
Process / activity
➢ Suppliers required to use PO number on all documents and three way match wherever possible
➢ Optimisation of early payment discounts
➢ Payment runs properly authorised
£17 90 percentile
Cost drivers
➢ Number of invoices received per month ➢ Number of suppliers ➢ Number of different terms and conditions ➢ Complexity of authorisation process ➢ Proportion of invoices automatically matched with PO's ➢ Number of supplier queries ➢ Proportion of invoices received electronically ➢ Proportion of payments made electronically
PwC175b(1)
Accounts Payable - Measures/Cost drivers
Number of purchase invoices per FTE per annum
15,000
7,000
3,000 or less
90 percentile
Median
10 percentile
Maintain supplier details
Process vouchers
Process payments
Period end processing and reporting
➢ Authorise and set up new suppliers payment details
➢ Maintain supplier payment details
➢ Supplier relations ➢ Creditor control
Information Systems
➢ Interface between Accounts Payable and other related processes
➢ Shared employee and supplier details
➢ System validation and approval checks
PwC175b(1)
Controls
➢ Authorisation rules ➢ System access controls ➢ User procedures ➢ Validation and matching
rules
Processes
➢ Maintaining supplier details
➢ Process vouchers ➢ Process payments ➢ Period end processing
and reporting
Accounts Payable
Objectives
➢ To maximise processing efficiency ➢ To ensure invoices are processed to agreed terms ➢ To ensure payments made only when due and
Source: statistics taken from Benchmarking database 21 January 2019
Accounts Payable - Trends
From
➢ Separate AP module ➢ Payment by cheque ➢ Manual matching ➢ Performed by finance department
➢ Facility to suspend payments
➢ Integration with General Ledger minimises reconciliation adjustments