Procuring is the process of finding vendors, qualifying vendors and buying from vendors. The pay process is the process of invoicing, verifying, and paying vendors. Depending on the size of your company, some or all of this process can be performed in the procurement, purchasing, account payable and business application / IT function.
The Procure to Pay process consist of the following sub-processes:
1. Creating Purchase Requisition
2. Creating Purchase Order
3. Creating Receipt
4. Creating Invoice in AP
5. Paying the Invoice
6. Transfer, Import and Post to GL
Controls:
A.Purchase Requisition Controls – ensure that the purchase is valid and approved prior to the expenditure
- Approval for the purchase requisition
- Purchase requisition is approved for an approved vendor in the vendor master list
- Approver’s signature authorization limit
B. Vendor Master Controls – ensure that the vendor has been validated before set-up on the vendor master.
- Segregation of duties controls are exercised when granting system access to the vendor master.
- All vendors require a W-9 prior to set-up on the vendor master.
- In some cases a vendor profile form is required. (i.e. global vendors)
- Vendors are screened against business unit and other government requirements and watch lists or according to company policy.
- Inactive vendors are flagged or purged on an annual basis at least every 12-18 months
- Changes to the vendor master are accurate and reported for audit purposes.
- Address of vendor is validated as accurate and reported for audit purposes.
- Updates to employees on the vendor master are accurate and complete.
- Electronic Data Interchange (EDI) vendors are properly set up and appropriately validated.
- There are standard vendor naming conventions.
- Duplicate vendor remit to addresses are reviewed with appropriate action taken.
C.Invoice Processing Controls – accounts payable function is responsible for the timely and accurate processing of invoices
- Segregation of duties controls is exercised when granting system access to invoice processing functionality.
- Vendor is paid only once for the goods and services delivered.
- Discounts are taken if appropriately approved.
- Vendor invoice is paid upon validation with goods received and purchase order. Blocked three-way match exceptions are not processed and are monitored by Accounts Payable for clearing.
- Vendor is paid at the appropriate price in accordance with the terms and conditions of the contract.
- Payments to contract labor vendors do not exceed the authorized amount.
- Purchases are authorized and in accordance with the company’s approval levels. Third party support (invoices/contracts) is sent directly to Accounts Payable.
- Interface, EDI, and spreadsheet upload transactions are accurately and completely transmitted to the Enterprise Resource Planning (ERP) system.
- Transaction is accurately reflected in the general ledger; Accounts Payable reconciliations for aging and clearing accounts are promptly performed and reviewed in a timely fashion.
- Invoices are processed according to invoice payment terms.
- EDI transactions are accurate and completely recorded in the organization’s ERP system.
- Disbursement Controls – to detect and prevent fraud within a timely manner.
- Check requests should be routed to the appropriate personnel for review prior to payment release.
- For audit purposes, disbursement activities should be traceable to the general ledger and bank statement.
- Approved purchase orders, receiving transactions, and invoices must support requests for payment.
- Vendor discounts should be taken according to company policy.
D. Disbursements Controls – disbursements must be recorded in the period the payment was made.
- Expenses must be properly and accurately recorded in the accounting records during the period in which the liability was incurred.
- Blank checks should be properly stored and safeguarded in a secure area.
- Ensure proper accounting for void or canceled checks.
- Specific limits of signed authority must be established for bank accounts.
- Banking and disbursement information must be safeguarded from loss or destruction.
- Checking accounts must be provided with a “match pay”, “positive pay”, or “positive payee” control that permit a preview of checks presented to the bank for payment.
- Check requests are used for the proper purpose and are limited in value.
- Ensure that the Automated Clearing House (ACH) network accounts have debit blocking capabilities to ensure that no unauthorized debits can be placed.
Process Optimization:
• Enable end-to-end process ownership from requisition to purchase order to payment. By reducing multiple purchasing groups, the organization can negotiate terms for the company’s strategic play.
• Create an urgent, non-urgent, and small amount spending process and streamline or automate the approval and reconciliation process.
• Optimize complex contract purchasing process with suppliers. Integrate the buying process with suppliers using ERP and EDI systems between companies.
• Bring the procurement process online to integrate and automate the purchasing lifecycle process.
Recommended Application:
1.SAP
2.Oracle
3.Ariba
4.PurchasingNet
5.Computron
Please
email me if you like to add additional application to this list.
Reference:
1.http://www.erpschools.com
2.http://www.businessstrategy.com/
If you’re an expert in this process, I’d love to list your resources here. Please
email me with a link to your site.
