Techssocial | Every organization, whether it is small or big, undergoes an audit once in a year. Each business has its own protocols that constantly evolve, especially as it grows. Most organizations are facing the age-old problem of reducing the error-prone, manual, paper-based AP process while maintaining a lean team. With an automated system, the audit process becomes much easier and less painful for the entire staff. Accounts Payable (AP) software provides greater visibility into an invoice, payment processing, and audit trail. By integrating with your accounting and financial systems, AP solution is quick and simple to implement and doesn’t break your existing processes. And, the most crucial part, it helps greatly in preparing for and dealing with an audit.
Developing businesses often keep a closer eye on their sales and business plans than on fraud prevention, especially if they were once a small enterprise with a known and trusted team. But fraud can cost an organization a lot of money – and once gone that money is hard to recover.
Generally, there are three key types of fraud related to accounts payable – check, supplier, and employee
Each of which can be eliminated by ensuring that in-house controls are strictly followed. A basic internal control aspect is the separation of duties, it means no employee should be in a position where they can both commit and then hide errors or fraud. The duties that should be separated are authorizing a transaction, processing that transaction, and reporting on that transaction.
With automated AP process, it is more difficult to make fraud and much easier to detect. It impacts the entire invoice-to-pay process, offers superior and secure payment controls, including separation of duties, dual approvals, and two-factor validation. When paying vendors with an automated system, separation of duties enforces that an invoice approver is never the payment approver – eliminating any worry of potential fraud. The solution improves the effectiveness and reduces the possibility of a check, seller, or employee fraud.
When preparing for an audit, it is crucial to check and be ready to provide supporting details for any unusual transaction. Every purchase made must have accurate documentation recorded, such as invoices, contracts, purchase orders, or receipts. These documents exhibit what was purchased, the price agreed to before purchase, including any discounts and the reasons for them, and confirmation that the goods were actually received and that the expenses were classified correctly.
As the company grows, the amount of documentation required increases quickly and handling paper files becomes a major concern. AP Automation eliminates the paper problem. By enabling invoices to be submitted digitally, organizations have all relevant documentation stored in one centralized location.
When preparing for an audit, companies need to ensure that all vendor and supplier transactions are perfect. Internally, they need to make sure that all purchases follow appropriate protocols on approvals and the goods were received as promised. With an AP system, you can automate the approval process following the same protocols that already exist, including dual approvals or hierarchical approvals. By automating the approval process, organizations have a digital record of all approvals related to a specific invoice. This ensures that the invoice has been reviewed and approved, making it simple for anyone to access old records. For high-value purchases that require multiple approvals, it is extremely useful to have the ability to store the associated email chain as well. The systems allow users to save associated emails as PDF documents so that they have a record of all important email conversations.
By automating the invoice approval workflow, the system significantly shortens the approval process while maintaining proper procedures and processes. Beyond the efficiency enhancements, any time an auditor questions an invoice, you can quickly access the required data without searching through hundreds of emails or file cabinets of signed invoices.
Duplicate vendor payments are still a major concern for finance and accounting teams. Payments are often issued twice due to misplaced envelopes, lost mail, and even miscommunication within the finance staff. With automated AP software, executing duplicate payments is nearly impossible. The system instantly identifies a duplicate invoice by its invoice number and vendor name, eliminating the worry of duplicate payment being issued. Upon payment execution, payment is posted and applied to the corresponding invoice within the application and synced back to your accounting system with the appropriate check number. This ensures data is accurate and up-to-date.
Audits can be stressful for auditors with paper-based manual processes. They have to spend 2-3 days with an organization, searching through files spilling over with paper invoices. With an automated system, however, it may only take 2-3 hours for them to complete their task. The system provides read-only access to your online portal, auditors can rapidly search for any invoices they’d like to review and see the audit trail without delay. It is not just a great advantage for the auditors but also it’s an easy day at the office for you during the auditing time.
The AP software provides high visibility into the entire audit process. Users can simply log into the application to see the entire history of any invoice – from receipt through payment. With cloud-based software solution, employees can access all data and applications from anywhere, anytime, using any device. The advanced cloud systems enabling end-to-end AP automation can help you transform AP, turning it into a strategic business switch.
Businesses may not recognize how much time their staff spends verifying payments or making supplier phone calls checking on their payment status. With manual invoice and payment tracking, the data is most likely not easily accessible. Also, paper documents can be easily lost, causing even more wasted time to search for information and possible security issues. Electronic audit trails offer better financial records, so your AP staff doesn’t have to worry about lost data and can provide supplier information instantly.
Payment fraud is a major concern for many organizations. Often it is hard to get a complete view of your organization’s financial situation when you deal with paper documents or wait for your AP staff to track down the necessary receipts. This may lead to payment fraud that could go unnoticed for days, weeks, or even months. Automated audit trails, which AP software provides, can enable you to resolve this problem. Employees who have access can instantly run payment reports to verify the entire life-cycle of an invoice, including the payment amount, date, and reason. Moreover, with check fraud on the rise, your AP staff can frequently monitor your outgoing checks to avoid fraudulent charges.
A sophisticated AP automation system eliminates the stress of an audit by ensuring that you have all the required documentation, there have been no duplicate vendor payments, approvals have been made correctly, and you have implemented the suitable internal controls to eliminate fraud. The software minimizes the demands on your AP staff and keeps them working on important day-to-day tasks.
With a determined AP department in place, businesses need not worry about the audit process. Automation will make auditing faster, easier, and cheaper. Most importantly, staying on top of your game will be a breeze and will offer you more time to practice progressive strategizing – like planning for your organization’s financial future.
Marissa Levin is a marketing consultant, freelance writer at SutiAP, who regularly writes articles on Business, Finance, ERP, and Cloud/SaaS trends