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In the News Sarbanes-Oxley and Small Businesses .........2 AP Answers Faxed Invoices .................3 TAPN Tools Project Proposal Report ...........................3 Did You Know? TAPN Resources ..............4 Continuing Education Opportunities........................4
Does your company use Evaluated Receipt Settlement to pay any of your suppliers? Yes ................................... 20% No .................................... 48% What is evaluated receipt settlement? ............... 32%
TAPN Poll
Speech is conveniently located midway between thought and action, where it often substitutes for both.. John Andrew Holmes
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The shipping departments primary function is to ship the order along with an accurate packing slip...
be allowed if you are paying that supplier via ERS. Your purchase orders must have firm pricing that cannot be affected by unexpected charges. All miscellaneous charges should be accounted for in the price stated on the PO. It is the purchasing departments responsibility to negotiate these firm prices and payment terms with the vendor, and to make sure that information is included on the PO. Because ERS can only work if there is a PO, it is best suited for inventory purchases.
supplier misses a discrepancy, then he is subject to eat the difference. While this policy may seem unfair to the supplier, the benefits of ERS are worth the risk. Besides, it makes the suppliers records better and ensures fewer discrepancies later in the process, Evanoff adds. Suppliers will make sure that everything is accurate upfront, rather than waiting until downstream to fix errors. Shipping The shipping departments primary function is to ship the order along with an accurate packing slip (some vendors will send a bill of lading or advanced shipping notice). ERS depends on a packing slip that states the purchase order number, a unique packing slip number, a full item description (including part numbers and units of measure), the quantity shipped and the same price per unit listed on the PO. In an ERS agreement, suppliers understand that not including a packing slip will likely impact their payment. Receiving Your organizations receiving department is the last line of
defense against inaccurate information making its way to accounts payable. Each day, the receiving department will review the packing slips on the previous days deliveries and make sure the orders are correct. If there are any issuessuch as an incorrect item shippedreceiving will contact the supplier. Shipping will then extend the price on the purchase order by the quantity of goods received, which becomes the final price. They will then enter the packing slip information into their accounting system. This information becomes the self-invoice that is forwarded to AP for payment. Accounts Payable By the time the self-invoice reaches AP, all thats left to do is perform a two-way match between it and the purchase order. Rare discrepancies can be solved by contacting the purchasing or receiving departments. There is no need to contact the requestor or other approvers. Because most financial systems require an invoice number, many departments use the packing slip number. Payment due date is based on terms established in the PO,
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In an ERS agreement, suppliers understand that not including a packing slip will likely impact their payment.
Supplier Customer Service Once the supplier receives the PO, their customer service department is responsible for ensuring the price, terms, and conditions stated on the PO are accurate. If there is a discrepancy, they should contact the purchasing department immediately via email or telephone to resolve the issue. Once customer service forwards the PO to receiving, the price cannot be altered. Under ERS, the message to the supplier is that there is only one price. The price on the PO, Evanoff says. This is the price that will be used to generate payment. If the
AP Monthly is a publication of The Accounts Payable Network, the complete resource for executives and managers responsible for accounts payable. TAPN provides deep and comprehensive resources to help you meet your accounts payable objectives and challenges. Annual Subscription: U.S. - $129.00 Canada - $159.00 All others - $229.00 VP & Managing Editor: Rob Rogers Editor: Patrick Harbin Production Editor: Mary Arnold
In the News
Sarbanes-Oxley and Small Businesses Sarbanes-Oxley may not find its way to small businesses. On Dec. 11, 2009, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009. Included in the bill is a provision to permanently exempt small businesses from complying with Sarbanes-Oxley Section 404(b). The focus of the bill is to establish a new consumer agency to regulate mortgages, car loans, and credit cards. However, Reps. Scott Garrett and John Adler added a provision to the bill that would exclude businesses with market capitalizations of $75 million or less from SOX. After passing in the House, the bill was forwarded to the Senate on Jan. 20, 2010. As of April 2010, the bill is still considered a piece of active legislation, but has not been voted on by the Senate. For now, small businesses are still expected to comply with SOX beginning June 15, 2010.
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with the clock starting on the receipt date. Other Benefits In addition to eliminating invoice exception routing, ERS can also cut down processing costs, streamline your pricing system, and speed up your time to payment. ERS reduces your processing time and cost by cutting out the traditional invoice approval process. Rather than routing invoices around the company for approval, you are making payments directly from receipts that accompany the goods. This also means fewer employees are needed for manual tasks like data entry and mail filing. According to Evanoff, one of the most significant benefits of ERS is discount capture. In most organizations, lost discounts are the result of slow invoice processing times. Because there is no exception routing in ERS, suppliers can be paid within days of the customer receiving the goods. Under ERS, there is no such thing as a lost discount, Evanoff says. Every purchase order that has discount terms will be paid upon receipt of goods.
ERS allows you to streamline your prices on inventory goods. Because ERS requires firm, predictable prices, you will no longer have miscellaneous charges on invoices that you didnt plan for. All extra charges are negotiated up front and included in the purchase order. Also, your suppliers may be willing to offer lower prices due to your ability to guarantee that all payments will be made within terms. Thanks to the efficiency of ERS, both the supplier and the buyer stand to benefit. Its one of the few processes that truly is a win-win, Evanoff says. When you look at the total savings, typically for every $5 you save, your suppliers save $1. Change is Needed Despite the benefits of using ERS, there are significant challenges organizations need to overcome. For example, receiving should be equipped to input the packing slip data into their receiving system, which must be fully integrated with your financial system, and generate a self-invoice. Meanwhile AP needs to be able to process the self-invoice.
Many organizations implementing ERS struggle with accounting for sales tax without an invoice. Evanoff recommends either registering to direct pay sales tax to the state (48 states offer this) or calculating the sales tax at the front end and including the amount on the purchase order. However, he adds its often a moot point since ERS is best suited for raw material inventory purchases, which are usually tax exempt. ERS requires little change on the suppliers side. The biggest changes involve configuring their billing systems to not generate invoices and instructing accounts receivable on how to process a payment that does not have a corresponding invoice. Evanoff says that if organizations are willing to change, then ERS can help them eliminate most of their incoming inventory invoices. It doesnt matter how big of small your company is, he says. The question is can you make payments to suppliers based on your existing records? If yes, then all you need to do is ensure that those records are 100 percent accurate.
TAPN Tools
Project Proposal Report Is there a process improvement that youd like to propose? Perhaps you want to implement accounts payable automation technology or change how your department is organized. Whatever your goal is, one of the hardest parts about a new project is getting started. Before approaching management, you need to gather information about the potential benefits and challenges surrounding implementation. This is where the project proposal report is useful. You can use this tool to make the case for your proposal to management. Find this tool in the Request For Proposal and Project Plan Templates section of AP Tools or at www.tapn.com/ RFPTemplates. For a detailed description of this tool, check out Start Your Improvement Project Right - Project Proposal Report on TAPN at www.tapn. com/ProjectProposal.
AP Answers
Q: What are your recommendations about faxed invoices? Are they acceptable or frowned upon? A: Generally it is not a sound practice to pay from faxes because it increases a companys risk of duplicate payments. Some companies do not allow payment from a fax copy at all, while some only allow it under certain circumstances. A good business practice is to pay only from original invoices, not from copies or faxes, nor from statements. This is not always possible, but policies should encourage this, and controls should be put in place for the exceptions. For example, if you are paying from a fax, require high-level approval and careful search of the vendor record by invoice number, amount and date. If payment from faxes or copies is allowed at all, also be sure to increase the control requirements on all invoices.
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