Accounts Payable Review

An Accounts Payable (AP) Review refers to the process of examining and analyzing a company's accounts payable records to ensure accuracy, compliance, and efficiency. It's an important aspect of financial management and internal control, designed to identify potential risks and areas for improvement in the AP function. The main objectives of an AP review include:

  1. Accuracy: Ensuring that the amounts recorded in the AP ledger are correct and reflect the actual amounts owed to suppliers and vendors.

  2. Compliance: Ensuring that the company's AP processes adhere to relevant accounting standards, company policies, and any regulatory requirements.

  3. Efficiency: Identifying inefficiencies in the AP process and suggesting improvements to streamline operations, which can result in cost savings.

  4. Fraud Detection: Identifying suspicious or irregular transactions that could indicate fraudulent activity. This could involve reviewing large or round-number transactions, reviewing transactions with new or infrequent suppliers, or examining other unusual patterns.

  5. Verification of Documentation: Ensuring that all AP transactions are supported by appropriate documentation, such as purchase orders, invoices, and receipts.

  6. Reconciliation: Ensuring that AP balances match with other relevant financial records, such as bank statements and supplier statements.

  7. Timeliness: Checking to make sure that all bills are being paid on time to avoid late fees or penalties, and to take advantage of early payment discounts if available.

  8. Internal Controls: Reviewing the company's internal controls around the AP process to ensure that they are robust and effective. This includes assessing segregation of duties, approval processes, and access controls.

The process might involve a combination of data analytics, sampling of transactions, interviews with AP staff, and other audit techniques. The findings from an AP review are usually documented in a report that outlines any identified issues, risks, or areas for improvement, along with recommended actions or changes.

Companies might conduct AP reviews periodically as part of their internal audit function, or they might be prompted by specific events, such as suspected fraud, regulatory changes, or a desire to improve operational efficiency.

Accounts Payable Review

Who Conducts an Accounts Payable Review?

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An Accounts Payable (AP) review can be conducted by several entities or individuals, depending on the purpose and scope of the review:

  1. Internal Audit Team: Many larger organizations have an internal audit department that regularly reviews various company processes, including AP, to ensure compliance, accuracy, and efficiency. Their main objective is to provide assurance to management and other stakeholders that internal controls are functioning effectively and to suggest areas for improvement.

  2. External Auditors: As part of their annual audit process, external auditors might review a company's AP records to verify the accuracy and completeness of financial statements. This is usually a part of the overall audit and is focused on ensuring that financial statements are fairly presented.

  3. Consultants or Specialist Firms: Some companies hire external consultants or specialist firms to review their AP processes. These entities offer expertise in process optimization, technology, and best practices and can provide insights into how the company's processes compare to industry standards.

  4. Management: In smaller companies without a dedicated internal audit team, management or the finance team may periodically review the AP processes and records to ensure accuracy and compliance.

  5. Regulatory Bodies: In some industries, regulatory bodies may conduct or mandate reviews of financial processes, including AP, to ensure compliance with industry-specific regulations.

  6. Forensic Accountants: If there's a suspicion of fraud or malfeasance related to accounts payable, forensic accountants might be engaged to conduct a detailed review of AP transactions and processes.

Regardless of who conducts the review, the primary goal is to ensure that the AP function operates accurately, efficiently, and in compliance with all relevant regulations, policies, and standards. Proper documentation, transparency, and collaboration between the reviewer and the company are crucial for a successful AP review.

Accounts Payable Reviewer

Under What Circumstances Should We Conduct an Accounts Payable Review?

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Conducting an Accounts Payable (AP) review can be beneficial in a variety of circumstances. Here are some common situations in which an AP review might be warranted:

  1. Regular Internal Audits: Large organizations often include AP as part of their regular internal audit schedule to ensure ongoing compliance, accuracy, and efficiency.

  2. Suspected Fraud or Irregularities: If there are suspicions or signs of fraudulent activities, discrepancies, or any irregularities in the AP process, a review should be conducted immediately to identify and address the issue.

  3. Operational Inefficiencies: If the AP process seems slow, outdated, or cumbersome, a review can help identify bottlenecks and areas for streamlining and automation.

  4. External Audit Preparation: Before an external audit, companies might conduct a review of their AP processes to identify and correct any potential issues in advance.

  5. Change in Key Personnel: When there's a significant turnover in the finance or AP department, especially at a managerial level, a review can help ensure that processes remain consistent and compliant.

  6. System Implementations or Upgrades: When introducing or upgrading an Enterprise Resource Planning (ERP) system or AP software, it's a good time to review processes to ensure they are correctly mapped and integrated into the new system.

  7. Regulatory or Compliance Changes: If there have been changes in relevant accounting standards, tax regulations, or industry-specific requirements, an AP review can help ensure the organization remains compliant.

  8. High Volume of Errors: If there's a noticeable increase in payment errors, duplicate payments, missed discounts, or disputes with vendors, it's a sign that the AP process may need a review.

  9. Vendor or Supplier Concerns: If vendors frequently raise concerns about late payments, discrepancies in payments, or other issues, it could indicate a need for an AP review.

  10. Cash Flow Concerns: If a company is experiencing unexpected cash flow issues, a review of AP (among other areas) can provide insights into payment terms, potential cash flow optimization opportunities, and areas where expenses might be reduced.

  11. Business Mergers or Acquisitions: After a merger or acquisition, it's beneficial to review and harmonize the AP processes of the combined entities.

  12. Seeking Operational Best Practices: Companies aiming for best-in-class operations might conduct an AP review to benchmark against industry standards and adopt best practices.

While the circumstances listed above are some of the more common reasons, any time there are questions about the accuracy, efficiency, or compliance of the AP function, a review can be beneficial. Regularly scheduled reviews, even in the absence of obvious issues, can also be a proactive approach to maintaining a well-functioning AP department.

Surviving an Accounts Payable Review

How Should I Prepare my AP Team for an Accounts Payable Review?

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Preparing your AP (Accounts Payable) team for a review is essential for a smooth and effective audit process. Proper preparation can minimize disruptions, reduce stress, and lead to more accurate results. Here's a step-by-step guide on how to prepare your AP team for an AP review:

  1. Communicate the Objective:

    • Clearly convey to the team why the review is being conducted. This could be for regular internal audits, suspected discrepancies, external audit preparation, etc.
    • Assure the team that the review is a standard procedure and not necessarily a reflection of their performance.
  2. Select a Point Person:

    • Designate a person (e.g., AP Manager) as the primary contact for the review. This person will liaise between the reviewers and the AP team.
    • This point person should be well-versed in the AP processes and have a comprehensive understanding of the systems in use.
  3. Gather Necessary Documentation:

    • Prepare a checklist of all documents the reviewers might need. This could include invoices, purchase orders, payment records, vendor contracts, and reconciliation statements.
    • Ensure that digital records are accessible and that any hard copies are organized.
  4. Review Processes and Procedures:

    • Re-familiarize the team with the company's AP policies and procedures. This can help in answering any queries the reviewers might have.
    • Identify any known discrepancies or issues in advance, and have explanations or action plans ready.
  5. Ensure System Access:

    • If your AP records are digital, make sure that the reviewers will have the necessary access to the AP software or system.
    • Provide any needed training or overview of the software to the reviewers to facilitate efficient navigation.
  6. Schedule Logistics:

    • Coordinate with the reviewers to set up a schedule, especially if they need to interact with team members.
    • Determine if any meetings or interviews will be part of the review and schedule them in advance to minimize disruptions.
  7. Set Up a Workspace:

    • If external consultants or auditors are conducting the review, provide them with a suitable workspace, including computer access, if needed.
  8. Encourage Open Communication:

    • Ask your team to be open and transparent during the review. Address any concerns they might have.
    • Encourage them to ask questions if they're unsure about any review-related requests.
  9. Conduct a Pre-Review Meeting:

    • Meet with your AP team before the review starts. Outline the process, address concerns, and discuss any areas that might need special attention.
    • This meeting can also serve as a refresher on the AP processes and expectations during the review.
  10. Stay Available:

  • Ensure that either the point person or a knowledgeable team member is available to answer questions or provide clarification during the review process.
  1. Feedback Session:
  • Once the review is complete, gather feedback from your team about the process. This can provide insights for future reviews.

Remember, the goal of the review is to ensure accuracy, compliance, and efficiency in the AP process. Approaching it as a collaborative effort between the AP team and the reviewers will yield the best results.

Accounts Payable Review Recovery

What is a Good Way for My AP Team to Think About an Accounts Payable Review?

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When it comes to an Accounts Payable (AP) review, it's crucial for your AP team to approach it with the right mindset to maximize its benefits. Here's a constructive way for your AP team to think about the process:

  1. Opportunity for Improvement:

    • View the review as a chance to identify areas of improvement, rather than as a critique of current performance. It's a proactive measure to enhance processes and efficiency.
  2. Learning Experience:

    • Think of the review as a learning experience. External reviewers or auditors often have insights into best practices from other companies and industries, which can be valuable knowledge for your team.
  3. Validation of Good Practices:

    • The review isn't just about finding issues. It's also an opportunity to confirm what the team is doing right and to get recognition for adhering to best practices and company policies.
  4. Collaborative Process:

    • Instead of viewing the reviewers as adversaries, see them as partners in the common goal of ensuring accuracy, compliance, and efficiency in the AP process.
  5. Internal Controls are Everyone's Responsibility:

    • Strong internal controls not only protect the company but also protect employees from potential accusations of wrongdoing. A review helps ensure these controls are working as they should.
  6. Chance to Address Concerns:

    • If team members have noticed issues or have suggestions for improvement, the review is an excellent time to bring these to light and discuss potential solutions.
  7. Transparency Builds Trust:

    • Being open and transparent during the review process can build trust with stakeholders, both internal and external, affirming that the company has nothing to hide and takes its financial responsibilities seriously.
  8. Risk Mitigation:

    • Remember that the review is a tool to mitigate risks, such as fraud, errors, or non-compliance. It's in the best interest of the company and its employees to identify and address these risks promptly.
  9. Professional Development:

    • Interacting with reviewers or auditors can be a form of professional development. It provides exposure to different perspectives and expertise in the field.
  10. Perspective:

  • Every process can be improved. Even if the review identifies areas of concern, it's important to remember that the objective is to move forward and continuously refine the AP process.

Encouraging a positive and constructive perspective can make the review process smoother and more productive. It's also helpful for management and team leaders to provide support and guidance to the AP team, emphasizing the benefits and opportunities that the review presents.

Accounts Payable Reviewers

How Should We Deal with Blame of Mistakes Discovered in an Accounts Payable Review?

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Dealing with mistakes discovered during an Accounts Payable (AP) review can be challenging, especially when there's potential for blame. A constructive approach that focuses on solutions rather than blame is crucial for team morale and continuous improvement. Here's a guide on how to deal with mistakes and blame:

  1. Foster a No-Blame Culture:

    • Promote a workplace culture where mistakes are viewed as learning opportunities. This creates an environment where team members are more likely to admit to errors and collaborate on solutions.
    • Emphasize the value of transparency and honesty.
  2. Focus on the Process, Not the Person:

    • When mistakes are discovered, start by reviewing the processes and systems in place. Often, it's the process or lack of clear guidelines that leads to errors, rather than individual negligence.
    • Addressing systematic issues will prevent the same mistakes from happening in the future.
  3. Open Communication:

    • Discuss the findings of the review openly with the team. Encourage an open dialogue where team members can provide insights into why the mistake might have occurred.
    • Address concerns without finger-pointing, fostering a problem-solving mindset.
  4. Fact-Based Approach:

    • Ensure that any discussions about mistakes are based on facts and data. Avoid jumping to conclusions or making assumptions without complete information.
    • This helps keep the conversation objective and prevents undue blame.
  5. Accountability:

    • While fostering a no-blame culture is essential, it's also important to have accountability. If someone consistently makes errors due to carelessness or lack of training, address the issue individually and provide necessary support or training.
    • Accountability doesn't mean punishment; it means recognizing areas for personal improvement and taking steps to address them.
  6. Continuous Training:

    • Use the findings from the AP review as an opportunity to provide additional training to the team. This can help address knowledge gaps and reduce future errors.
  7. Preventive Measures:

    • Once mistakes are identified and understood, work on implementing preventive measures. This could involve updating processes, improving software systems, or introducing additional checks and balances.
  8. Feedback Loop:

    • Encourage team members to provide feedback on the AP process regularly. A continuous feedback loop can help catch and address potential issues before they become significant problems.
  9. Recognize and Reward:

    • It's essential to recognize and reward team members for their good work. If the review identifies areas of excellence, celebrate those achievements. Positive reinforcement encourages adherence to best practices.
  10. Document and Review:

  • Ensure that the findings from the AP review, including mistakes and their causes, are documented. Review these findings periodically to ensure that corrective actions are implemented and effective.

Remember, everyone makes mistakes. The goal is not to assign blame but to understand the root causes of those mistakes and make necessary improvements. Approaching the review findings with empathy, open-mindedness, and a focus on solutions will lead to a stronger and more efficient AP process in the future.

Accounts Payable Reviewer at Work

How Can I Encourage my AP Team to Treat Mistakes Discovered as Positive?

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Encouraging your AP team to view mistakes as learning opportunities rather than negatives is essential for fostering a positive and growth-oriented work environment. Here's how you can shift the perception of mistakes in a constructive direction:

  1. Promote a Growth Mindset:

    • Encourage a culture where learning and growth are valued. When people adopt a growth mindset, they see challenges and mistakes as opportunities to grow, rather than as indications of failure.
  2. Lead by Example:

    • As a leader, your reaction to mistakes sets the tone for the entire team. If you approach errors with understanding and a focus on solutions rather than blame, your team is more likely to adopt a similar attitude.
  3. Open Communication:

    • Encourage team members to discuss mistakes openly, without fear of punishment. Make sure they understand that their value in the team isn't diminished by admitting to an error.
  4. Focus on the Process:

    • Emphasize that often, mistakes arise due to gaps or inefficiencies in processes rather than individual incompetence. By addressing these process issues, the team can reduce the likelihood of future errors.
  5. Reframe the Conversation:

    • Instead of discussing "what went wrong," steer conversations towards "what we can do better next time" or "how we can prevent this in the future."
  6. Provide Continuous Training:

    • Use mistakes as an opportunity for targeted training. This not only equips team members with the skills and knowledge they need but also shows them that the organization is invested in their development.
  7. Celebrate Wins and Learnings:

    • While it's essential to recognize and celebrate successes, also consider recognizing moments where the team learned valuable lessons from mistakes. This can be done in team meetings or periodic reviews.
  8. Implement Feedback Loops:

    • Create mechanisms where team members can regularly provide feedback and suggest improvements. This proactive approach can prevent mistakes and fosters a culture of continuous improvement.
  9. Avoid a Punitive Approach:

    • Avoid punishing team members for mistakes, especially if they're honest about them and are willing to learn. A punitive approach can create a culture of fear where errors are hidden, which can be detrimental in the long run.
  10. Share Stories:

  • Share stories of famous mistakes and their positive outcomes, whether from within the company or from well-known figures or companies in the wider world. This can provide perspective and show that everyone, regardless of their level or status, makes mistakes and can learn from them.
  1. Collaborative Problem-Solving:
  • When a mistake is discovered, involve the team in problem-solving. This collaborative approach can turn a negative situation into a team-building exercise.

By fostering a positive environment where mistakes are viewed as part of the learning process, you not only help reduce the fear and stigma associated with errors but also empower your AP team to continuously improve and innovate.

Accounts Payable Review


By What Means Can I Prevent a Single AP Team Member from Being Victimised for Making more Errors?

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Protecting individual team members from undue blame or victimization is crucial for maintaining team morale, trust, and a healthy work environment. Here are some strategies to ensure that no single AP team member is victimized for making more errors:

  1. Promote a Team-Centric Approach:

    • Emphasize collective responsibility. While individuals may make mistakes, the team as a whole should work together to identify root causes and implement solutions.
  2. Anonymous Reporting:

    • If team members are worried about repercussions for admitting to mistakes, consider implementing an anonymous reporting or feedback mechanism.
  3. Rotate Tasks and Responsibilities:

    • Ensure that all team members periodically rotate through different responsibilities. This way, everyone gains experience and understanding of various roles, reducing the chance of one person being repeatedly blamed for errors in a particular area.
  4. Emphasize Process Over Individuals:

    • When discussing errors, focus on the processes that might have led to the mistake rather than singling out individuals. It’s often the system, workflow, or lack of resources that contribute to errors.
  5. Encourage Open Communication:

    • Foster an environment where team members feel safe discussing their mistakes. Regular team meetings where everyone is encouraged to share their challenges and learnings can be beneficial.
  6. Provide Adequate Training:

    • Ensure that all team members receive consistent and ongoing training. If one member seems to be making more mistakes, it could be indicative of a training gap rather than an inherent flaw in their capabilities.
  7. Avoid a Punitive Culture:

    • Discourage any form of punishment or public shaming for errors. Instead, focus on corrective actions and support.
  8. Mentoring and Peer Support:

    • Pair team members who might be struggling with a mentor or peer who can provide guidance and support. This collaborative approach can help reduce errors and prevent feelings of isolation.
  9. Regularly Review Workloads:

    • Overburdened employees are more likely to make mistakes. Regularly review workloads to ensure they are evenly distributed and manageable.
  10. Feedback and Recognition:

  • Recognize and praise team members for their contributions and improvements. Positive feedback can counteract feelings of victimization.
  1. Address Victimizing Behavior Immediately:
  • If you notice or receive reports of a team member being victimized, address the behavior immediately. Make it clear that such behavior is unacceptable and against company values.
  1. Conflict Resolution Mechanisms:
  • Have mechanisms in place to handle conflicts or interpersonal issues within the team. This could involve mediation sessions or bringing in HR to facilitate discussions.
  1. Periodic Team Building Activities:
  • Engage in team-building exercises or workshops. These can help strengthen team bonds, enhance communication, and reduce tendencies for blame or victimization.

Remember, it's essential for leadership and management to set the tone. By modeling empathy, understanding, and a focus on collective growth, you can foster an environment where team members support and uplift each other rather than resorting to blame or victimization.

How can you audit accounts payable for accuracy?

Auditing accounts payable for accuracy involves several key steps to ensure that the recorded liabilities are correct and that all transactions are properly accounted for. Here's a general process to follow:

  1. Verify Invoices: Review a sample of invoices to ensure they are genuine, have been received, and correspond to actual goods or services received. Check the invoice details like date, amount, vendor information, and match them with corresponding purchase orders and delivery receipts.

  2. Check for Duplicate Payments: Review the accounts payable ledger to ensure that payments have not been made multiple times for the same invoice. This involves cross-checking invoice numbers, amounts, and vendor details.

  3. Reconcile with Vendor Statements: Compare the accounts payable ledger with statements received from suppliers. Any discrepancies between these records should be investigated and resolved.

  4. Review Payment Terms and Discounts: Ensure that payment terms and any early payment discounts are correctly applied. This involves verifying that the accounts payable system reflects the actual terms agreed with suppliers.

  5. Analyse Aging Reports: Review the accounts payable aging report to identify overdue payments or any unusual patterns, like long-standing payable amounts. This can indicate issues like disputes with suppliers or cash flow problems.

  6. Confirm Authorizations: Check that all invoices and payments have been appropriately authorized as per the company's internal control procedures. This includes verifying that the right levels of management have approved expenditures.

  7. Examine General Ledger Posting: Ensure that transactions are posted to the correct general ledger accounts and that the amounts are accurate. Misclassifications can lead to incorrect financial reporting.

  8. Internal Controls Assessment: Review the internal controls around accounts payable to identify any weaknesses or risks. This can include controls over invoice processing, payment approvals, and vendor setup.

  9. Sample Testing: Perform sample testing of transactions. This involves selecting a random set of transactions and tracing them through the entire accounts payable process.

  10. Use of Analytical Procedures: Apply analytical procedures, such as ratio analysis or trend analysis, to identify any unusual transactions or patterns that may require further investigation.

  11. Compliance with Policies and Regulations: Check compliance with internal policies and external regulatory requirements, including tax implications and reporting standards.

  12. Consider Use of Technology: Utilize accounting software or audit tools that can automate some of the processes, such as duplicate payment checks or transaction matching, to increase efficiency and accuracy.

  13. Communicate Findings and Recommendations: Document any discrepancies or areas of improvement and communicate them to management. Provide recommendations for addressing any issues found during the audit.

Regular audits of accounts payable are essential for maintaining the accuracy of financial records, ensuring compliance, and identifying areas for improving financial management practices.

A Quality Accounts Payable Review Partner

One partner we have worked with time and time again is Twice2Much who are the fastest growing and one of the longest established specialist accounts payable review partners operating today. Take the time to make contact with Twice2Much to begin planning out your accounts payable reviews and make progress to a tighter, leaner and meaner accounts payable operation.

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