Controllers Council recently held a webinar on the subject of AP Internal Control Issues and How to Prevent Them, sponsored by

The expert panelist for this webinar was Mary Schaeffer. Mary is founder of AP Now and host of the AP Now podcast and YouTube channel. She’s the recipient of Lifetime Achievement Award and top influencer awards from the AP Association. And she’s author of more than 20 business books, including 127 Best Practices for Accounts Payable. She writes Ezine twice a week and is a frequent speaker on both online and live events. She holds a BS in math and an MBA in finance.

Following are key highlights to this discussion. If you are interested in learning more, view the full webinar archive video here.

9 Frequently Overlooked AP Internal Control Issues

  1. Segregation of Duties Oversights
  2. Expense Reporting Issues
  3. Rush (ASAP) Checks
  4. Payments Made Outside AP
  5. Employee Separation Omissions
  6. Recurring Payments
  7. Other Repetitive Payments
  8. The Simple Test Few Do
  9. Petty Cash Boxes

Controls to Plug the Weaknesses

The basics include appropriate separation of duties across the spectrum and want to use best practices and controls across the spectrum. And remember, employees know where your control weaknesses are. And, from the Association of Certified Financial Examiners, when they talk about occupational fraud. The most likely person who is committing the fraud is a long-term trusted employee. So, no exceptions, appropriate segregation of duties, best practices, internal controls everywhere.

The expense reporting includes receiving receipts for everything. And remember, you don’t have to check them all, you can spot check.

The process includes standardizing your processes so that everybody does things the same, and this way you have less of a chance of a problem. And if there is a discrepancy, it will show up quickly. You don’t want to add unnecessary risk.

Poor processes to avoid are petty cash boxes, rush checks, and returning checks to requisitioners. As you start to make more and more electronic payments, some of this should go away. And if you have that petty cash box, please, you want to work on it. You want to work on minimizing it.

Best Practice: Fraud Prevention

Fraud happens everywhere. It happens to big companies. It happens to small companies. There’s no avoiding it. There’s no such thing as too big or too small. And this is not only regarding the size of the company, but the size of the fraud. If they can find an easy way to get their hands on $100, they will.

  • Stay on top of the issue and new practices to help prevent fraud.
  • Don’t forget your expense reporting. Many times, the company has gone to investigate and expense reporting fraud.
  • Your policies and procedures should be written out. They should be detailed. They should be reviewed periodically. Because they represent how your employees should be doing the work. And not only that, but you should also periodically check that they’re doing what’s in the policies and procedures, no excuses.
  • Evaluate your employees to make sure they’re still following the standard procedures that you’ve set up.
  • Don’t forget about surprise audits. This is especially true with a petty cash box, which hopefully you don’t have. But if you do have them, you want to do the surprise audit. You want to have them in balance and no IOUs in there.

To learn more about AP Internal Control Issues and how to prevent them, view the full video archive here.

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