7. What Do We Mean by Control ‘Issues’
The processes that ensure:
Efficient and effective operations
Reliable and accurate reporting
Fraud resistant operation
Internal
External
Regulatory compliant
(c) 2013 Mary S. Schaeffer7
8. Financial Impact
Duplicate pays – often not huge amounts of $$
individually
What’s the big deal?
1)They add up!
2)Impact on sales
3)Impact on EPS
4)Fraud and the honest mistake
(c) 2013 Mary S. Schaeffer8
9. Impact on Sales
$1000 – right off the bottom line
1% margin = $100,000 in sales
5% margin = $20,000 in sales
$1,000,000
1% margin = $100,000,000 in sales
5% margin = $20,000,000 in sales
(c) 2013 Mary S. Schaeffer9
10. Earnings Per Share (EPS)
A= Total amount of duplicate and erroneous payments
B = Total number of shares of stock
A/B
Number should be small – like half a cent
Hypothetical example, a big company with a $10
million excess might have a hit on EPS of half a cent
(c) 2013 Mary S. Schaeffer10
11. Issue #1: Duplicate Payments – Two invoices
Late payments
Payment stretching
Discrepant invoices
Unresolved
Poor processes
Invoices to AP late
(c) 2013 Mary S. Schaeffer11
12. Issue #2: Duplicate Payments – Two Payment
Vehicles
Most Common
Invoice and p-cards
Expense report and petty cash
Statements
Best Practice Takeaways
Never pay invoices on expense reports
Get rid of petty cash
Limit payments to one vehicle per vendor
(c) 2013 Mary S. Schaeffer12
13. Issue #3: Erroneous Charges on Invoices
Who pays freight, insurance etc.
Complete POs
Special deals
(c) 2013 Mary S. Schaeffer13
14. Issue #4: Paying before Due Date
The clean desk syndrome
Due date setting in system
Real Life Example
Companies with problems who automate and forget they have
due date set to pay on receipt
When was the last time you checked the due date settings in
your ERP system?
(c) 2013 Mary S. Schaeffer14
15. Issue #5: Late fees
“We never pay late fees”
Open vendor credits
Best Practice Takeaways
Avoid the issue completely
Pay on time
(c) 2013 Mary S. Schaeffer15
16. Issue #6: Duplicate Vendors in Master Vendor File
Potential duplicate payments
Correspondence issues
Internal control issue
If processors enter data
Segregation of duties concern
Rigid coding standards/naming convention
(c) 2013 Mary S. Schaeffer16
19. Issue #8: Not Earning all Early Pay Discounts
Best financial return for any company
2/10 net 30 36%
Efficient processing
Best Practice Takeaways
Track discounts lost
Investigate why
Fix root causes wherever possible
(c) 2013 Mary S. Schaeffer19
20. Tracking Discrepant Invoices, Lost Early Pay
Discounts etc.
Why
Duplicates etc.
Fraud
In Excel or system
Regular Follow up and reporting
The list no one wants to be on
Analyze
(c) 2013 Mary S. Schaeffer20
21. Issue #9: Tax Errors: Sales and Use Tax, VAT
Wrong amounts
Proper jurisdiction
Proper documentation
VAT Reclaim
(c) 2013 Mary S. Schaeffer21
22. Issue #10:Purchase Order (PO) Problems
Split POs
Blanket POs
After-the-fact POs
Real Life Example
Is anyone really monitoring ?
Does the PO ever get extinguished?
POs necessary to ensure proper payment
Best bet: All POs done before the fact
(c) 2013 Mary S. Schaeffer22