Accounts Payable (or “AP” for short) is an accounting term used to describe the money you owe to vendors or suppliers. The AP process typically begins when your organization receives an invoice. The invoice gets recorded in your accounting system with the appropriate GL code, class code, and description. Then the invoice is approved and authorized for payment, and finally the payment is released.
Because I come from an Accounts Payable background, I have had experience with many different organizations’ AP systems. While some organizations still prefer the “old fashioned” way – paper bills, paper checks, pens and rubber stamps – more and more organizations are switching to a paperless AP system. Paperless systems provide convenience and time savings, as well as additional transparency and security. But even the best paperless AP platforms can run into problems if you’re not following proper fiscal guidelines for Accounts Payable. Here are a few helpful insights to help keep your AP process running smoothly.
Show Me The Receipts
When you request reimbursement for an out-of-pocket expense (such as a meal, parking fees, or lodging) you are often required to show a receipt before being reimbursed. This is known as “supporting documentation” in accounting terms, and proves this was a real, legitimate, reimbursable expense. Some organizations have policies where minor expenses below a certain dollar limit (say, $25) don’t require documentation. But in most situations, if you submit a reimbursement request to your accountant, you should be sure to include your receipts as well. If you don’t include receipts, your accountant will likely need to ask for more supporting documentation, which can slow the whole process down and delay your reimbursement. Apps like Expensify can be a great paperless solution if you have trouble keeping track of receipts.
Trust But Verify
Documentation is important from an accounting perspective because it not only prevents fraud but also helps to catch honest mistakes. Everyone is human, and we’ve all been guilty of an accidental typo or miscommunication. But if your accountant doesn’t catch that extra zero before writing a check, your organization might be in a lot of trouble! The best way for your Accounts Payable department to verify information is by carefully reviewing the supporting documentation. This could be a receipt, an invoice, a contract, or a written agreement – anything that “supports” your request for payment. You’ll generally need to submit this documentation to your accountant (digitally or otherwise) before payment can be processed. We’d love to just take your word for it, but we wouldn’t be doing our jobs if we did!
Stamp of Approval
Whether you’re using paper or going paperless, it’s important for all outgoing payments to be approved. This tells your accountant that you have reviewed the bill and believe it is reasonable, accurate, and okay to pay. At some nonprofit organizations, the Executive Director approves all bills; for larger or more complex organizations, outgoing payments may need to be approved by department heads or multiple authorized individuals. If your staff members work remotely or you have a complicated chain of approval, an electronic approval system can save you a lot of time chasing people down. Electronic approvals are also ideal if you use an outsourced accountant, or anyone who isn’t physically present in the office every day.
At Altruic Advisors, we use Bill.com for Accounts Payable. Bill.com is an all-in-one bill payment and approval platform that syncs to your accounting software. Within Bill.com, you – or other specifically designated approvers – can review a PDF image of each invoice next to its accounting data, then approve bills with a single click. After receiving your digital “stamp” of approval, our accountants will issue payment. Whether you’re literally stamping a piece of paper with a rubber stamp, or digitally “stamping” an invoice in Bill.com, the approval step is critical to the integrity of your Accounts Payable process.
