Stop the Paper Check Nightmare
Six strategies show you how.March 4, 2010
by Mary Schaeffer
Producing paper checks today is an expensive waste of time. While once a necessary part of the procure-to-pay function, this is no longer the case. There are a number of best practices that can be introduced into any accounts payable function that will result in a reduction in the number of checks that need to be written. Best of all, by making these changes, your organization may, in some cases, also reduce the number of invoices it handles. That’s a double win for it gets more of the paper out of accounts payable.
Here’s a look at six tactics that will reduce the number of these productivity sappers.
1. Use purchasing cards (p-cards) for all small-dollar transactions. Gradually increase the dollar threshold in which cards can be used. While this may seem like an obvious solution, many organizations still resist the idea of giving employees credit cards. Someone in accounts payable should have a card and use it to pay small-dollar invoices.
2. Begin or expand an automated clearing house (ACH) payment program. In many cases you won’t get much of an argument from your suppliers. In fact, some have probably already approached you about paying them electronically. When starting a program, be careful about the number of vendors you first solicit for inclusion in your electronic payment program. More than one company has been surprised by the enthusiastic response from the vendor community.
3. Rush checks continue to be a thorn in the side of most accounts payable departments. Not only does the process impact the productivity of the department, rush checks frequently result in duplicate payments and worse, fraud. Insist on electronic payments via the ACH whenever a rush checks are requested.
4. Outsource the printing and mailing of checks to your bank. While this won’t technically reduce the number of checks you produce, it will get them out of your accounts payable department.
5. Require employees who purchase small-dollar items to request reimbursement in their T&E report. This can be done if your company does not use p-cards. Have employees do this rather than submit invoice for payment.
6. Pay from the statement once a week or month rather than from individual invoices if you have many small-dollar purchases from the same vendor. This is especially true for office supplies, overnight mailing services and temporary workers. If you take this approach, make sure your system is updated so it will not accept invoices for these vendors.
While all these techniques may not work for your firm, you should be able to use several of them. Note that these techniques are only recommended if you can introduce the appropriate internal controls to ensure that items will not be paid more than once using different payment vehicles.
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Mary S. Schaeffer is the author of over a dozen business books including The Controller & CFO’s Guide to Accounts Payable (John Wiley & Sons) and Fraud in Accounts Payable: How to Prevent It (John Wiley & Sons). She is the publisher of the CFO & Controllers Accounts Payable Management Journal, a quarterly electronic journal for senior executives concerned about internal controls and cost control in their payment function, and directs the organization’s consulting practice. Her free weekly ezine, e-AP News, is read by thousands of professionals concerned about accounts payable issues.