Controllers Council recently held a panel discussion on Top AP Internal Controls to Safeguard Your Business, sponsored by BILL.
BILL is a leading financial operations platform for small and midsize businesses (SMBs). As a champion of SMBs, BILL automates the future of finance so businesses can thrive. BILL’s integrated platform helps businesses to be more efficiently, control payables, receivables spend, and expense management.
Our expert panelists were Ali Tayeb and Joe Fleischer. Ali Tayeb is a first -generation immigrant from Pakistan that grew up in the San Francisco Bay Area. Ali studied finance at San Diego State. He is an account executive with BILL, and since he joined Bill more than five years ago, he’s worked closely with Bill’s customers to help start them on their journey to automate their financial processes. Joe Fleischer is webinar content marketing manager for BILL with more than 16 years experience, including CFO.com.
Following are key takeaways to this discussion. If you are interested in learning more, view the full webinar archive video here.
Internal controls refer to a set of policies, procedures, and practices an organization implements to safeguard its assets, ensure the accuracy and reliability of financial information, promote operational efficiency, and ensure compliance with laws and regulations.
Which internal controls in particular concern accounts payable teams?
The first and most important one in my opinion is the segregation of duties, especially for smaller growing businesses that don’t necessarily have a full accounting structure or team, right? Where there is a CFO and a controller or VP of finance in place with an accounting team, you know, underneath that. A lot of the people that wear the same hats in the business are doing, a lot of the payables end to end. And so, you’ll find that in a lot of organizations, the people creating the invoices, or the bills are the same people paying them, which is often a pretty common accounting rule to have a separation of duties there.
There is a procurement aspect to internal control. Having the appropriate process in place for authorization for purchases prior to them happening is important, especially as your organization scales and you have larger purchases, potentially inventory or, you know, other items that are involved in the accounting process. Having a purchase order process where the spend is approved prior to engaging with the vendor is an important piece of that. Tying that kind of same concept into your bill payment process. So, having the ability to approve bills that are entered by your accounting team by the right people.
Accounting isn’t necessarily involved in every single purchase that the company makes across the organization. It could be related to a different department, a different project, a different, you know, someone within the organization that has the knowledge to say, yes, this is the correct information. You know, we were being billed for the right goods and services is super important, both from an historical perspective, to be able to go back and say, yes, this was properly, you know, approved, and purchased. But also, for making sure that things are accurate.
Some of the internal controls around purchase order, some of its straightforward. The first thing that you need to do is make sure that the PO itself is approved internally by the right people. And so typically, functionality like that is best automated through your ERP or your enterprise resource planning system. There are plenty of tools out there, software that are focused specifically on the purchase order creation, management, and inventory tie in. And so, there’s always options to consider, right? Whether that’s within the system you’re already using or something externally. But I would highlight the fact that you don’t want to move to a PO process unless it is necessary for the functions that you’re utilizing within accounting.
What are some of the challenges that AP teams encounter about maintaining internal controls upon implementing them? And what can AP teams do to address each of these challenges?
The biggest challenge is always managing the change. How can your team, the people that are stakeholders in this situation, adapt and adopt the new process and workflows? Making sure that those people are involved understand where they’re having challenges, either operationally or completely missing in terms of internal controls. Then providing them with a clear, attainable way to address those challenges and put those controls in place is really the biggest challenge because it requires commitment and conversation and a willingness and open-mindedness to some of the change for things that people have been doing the same way for a long time.
Also, making sure that if there’s costs involved with what you’re doing, that it is planned appropriately in budget, so you can utilize efficiently. Then, making sure that your team is committed to making whatever change you implement work; that comes with the right support and training, not only from the vendor that you may be working with, but also a commitment from your team. Then, oftentimes there is a process in place that requires communication with your vendors, specifically when it comes to accounts payable.
What are the risks of not automating internal controls in accounts payable?
The biggest and easiest risk to point out is just your business failing. If you are constantly dealing with fraud, whether it’s from an internal or external perspective, you’re going to have a tough time operating your business. There are other things that can happen when you don’t have the right internal compliance or controls in place to manage your accounts payable workflow. Some of those are more so a headache, which can create lots of operational inefficiency and frustration for your employees, which often leads to turnover. But also, the financial risk of not having your assets protected, not having the right financial reporting can lead to a lack of interest from outside investors, outside partners, and a loss of trust among your direct business networks.
To view the complete webcast, download full webinar here.
ABOUT THE SPONSOR:
BILL (NYSE: BILL) is a leading financial operations platform for small and midsize businesses (SMBs). As a champion of SMBs, we are automating the future of finance so businesses can thrive. Our integrated platform helps businesses to more efficiently control payables, receivables and spend and expense management. Hundreds of thousands of businesses rely on BILL’s proprietary member network of millions to pay or get paid faster. Headquartered in San Jose, California, BILL is a trusted partner of leading U.S. financial institutions, accounting firms, and accounting software providers. For more information, visit bill.com.
