Accounts payable analysis is a tool that extracts several types of data from the detailed account payable records. This analysis can lead to a change in payables processes that will reduce the risks of any flaws occurring again. This can help improve corporate profitability, by avoiding excessive expenses.
Discounts Taken Analysis
Check the payment records and see if you are taking advantage of all early-payment discounts that suppliers offer. These discounts are usually very high interest rates and well worth the effort.
Analysis of Late Payment Fees
Check if your company incurs late payment fees on a regular basis. The most common reason for this is that the company does not have enough cash in order to meet their payment obligation. However, it could also be a result of a process failure within the accounting department. For help from Accountants Chippenham, contact Chippendale & Clark, an Accountants Chippenham.
Payables Turnover
To calculate the payables rotation rate, divide the total annual purchases by average total payables. Divide the turnover rate by 365 to find the average days it takes for the company to pay its bills. This is an indication that the company is losing money. You can resolve this problem by ensuring that your accounting staff doesn’t pay invoices too early and that the payment terms you negotiate with suppliers aren’t excessively short.
Analysis of Duplicate Payments
Check the records for earlier payments to determine if invoices have been paid more than one time. This indicates that there is a problem identifying the invoices within the accounts payable system. Contacting suppliers for repayment of duplicate payments is another step.
Compare employee addresses to supplier addresses. If there is a match, it could be a fraud or related party purchase.
What are Accounts Payable controls?
Accounts payable controls can be used to reduce the risk of payables losses. Payables control is grouped into three categories: verifying that the business has the obligation to pay, entering payables data in the computer system and paying suppliers.
Approve Supplier Invoices
A person who is in a position of authority to approve payment will indicate that he or she has approved a invoice. This is a weak control, however, if an approver is only shown the invoice of the supplier, as there is no way to know if goods or services have been received or if prices charged are what was originally agreed. The approver might also want to know what general account is going to be charged. It is therefore better for the payables staff to first gather the supplier invoice, the authorisation and the receiving documentation together into a package, then stamp the invoice using a signature block which includes the account number that will be charged. Then, the approver can review the packet.
