Electronic payments have many benefits: they are faster and cheaper than checks, they can’t get “lost in the mail,” and they can be processed remotely – a crucial part of the pandemic working environment. But switching from paper checks to ACH payments can sometimes cause a breakdown in an organization’s internal controls. The systems that you have in place to prevent check fraud may need to be adjusted for electronic transactions.
The best way to reduce fraud risk (and prevent simple mistakes) is to split up the parts of a transaction between two or more people. This means that you need at least two different people involved in payments - one person to approve or authorize the expense, and a different person to record it within in your accounting system. Two sets of eyes are always better than one!
For check payments, this segregation of duties is very clear. A bookkeeper can enter payments into the accounting system, but cannot sign checks. An Executive Director can sign checks, but cannot make entries in the accounting system. This prevents any one person from having total control over the payment process.
With electronic payments, there is no check to sign. So how do you keep these duties separated? An all-in-one electronic approval and payment system like Bill.com can help. In this kind of system, one person enters the bill information and second person approves the release of funds. The person entering the bill cannot approve payment, and the person approving the bill cannot make changes to the amount or recipient of the payment. The approver can view an electronic image of the original bill or invoice, and compare it to the information that was entered into the accounting system. This is a great way to catch honest mistakes, as well as prevent potential fraud.
The best electronic bill payment systems will automatically sync to your accounting system, reducing the time spent on data-entry. All supporting documentation and transaction information is right at your fingertips – you’ll never have to dig through a dusty box of files again! But most importantly, the ability to set clear roles for approval, payment, and record-keeping allows you to retain the same level of control and efficiency on electronic payments.
Moving from checks to electronic payments can save your organization time and money. By implementing a strict approval process with the help of an electronic bill payment system, you can rest easy about your internal controls, no matter what new challenges lie ahead.
