1. Positive Pay (aka ‘Safe Pay’) (Fraud Prevention)
Positive pay is the process whereby banks only cash checks if they are matched to an approved list. Any checks presented that are not on the list will not be honored by the bank, preventing fraudulent check cashing. Note however, Positive Pay does not detect unauthorized electronic transfers.
2. Daily Bank Reconciliations (Business Efficiency & Fraud Protection)
Fraudulent cyber transactions (ACH transfers, malware hacking, phishing, etc.) are a problem today. If you wait until month-end to reconcile your accounts, you will likely not catch fraudulent transactions in time (There are no legal protections for cyber fraud in business accounts, only personal accounts.) Also, all bank reconciliations are faster and easier when electronic reconciliation processes are used.
3. Segregate the Vendor creation and management function (Fraud Prevention)
The person that enters the invoices or signs the checks should never also create the vendor. Segregating these duties reduces the risks of unauthorized payments being made to unauthorized vendors.
4. Require vendors to include a requestor or PO number on the invoice (Business Efficiency)
Without a reference, the AP department may have difficulty determining who requested the services or who should approve. Rather than spending time trying to track down the appropriate employee, send a friendly reminder to the vendor to include that information on each invoice.
5. Use a Centralize location for receiving invoices (Business Efficiency)
Don’t use personal email addresses for receiving invoices. Instead, use a generic address such as . For mailed invoices, use a unique PO Box specifically for this purpose. Segregating invoices in this manner will help ensure that invoices are accounted for completely and timely.
6. Don’t use Pre-printed check stock (Fraud Prevention)
Instead, use blank stock and print using MICR ink. Better yet, use ACH to significantly reduce the risks and costs of managing paper checks. Of course, proper electronic approval processes need to be in place to utilize ACH.
7. Require mandatory vacation for AP department employees (Fraud Prevention)
The goal is to have another perform the tasks of the person on vacation to ensure that employees are not covering anything up in their day-to-day jobs.
8. Pay the right person, the right amount, at the right time (Business Efficiency)
This mantra is used at various companies. The idea is that if bills are paid accurately and timely, then less time is spent reconciling and dealing with unhappy vendors. Also, vendors save time and money by not having to chase down past due or partially paid invoices and late fees and interest charges are avoided.
9. Verify any emails requesting vendor bank change information (Fraud Prevention)
Unfortunately, it’s too easy for criminals to send fraudulent emails requesting that funds go to their own bank accounts. Always verify the validity of the change before making it.
10. Pay early to take advantage of a discount (Improve the Bottom Line)
Vendors offer early payment discounts to reduce their collection costs and improve their cash flow. The discount is almost always going to be worth it. For example, if a vendor offers 2% if paid within 10 days, the annualized rate of return is greater than 24%. It is not possible to invest the cash for 20 days to make that return. However, keep in mind that it is unethical (at least) to take early payment discounts, without actually paying early.
*Reference source: 101 Best Practices for Accounts Payable by Mary S. Schaeffer