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How Can a Business Control Accounts Payable to Prevent Fraud or Overpayment?
Home » Accounting » Accounts Payable » How Can a Business Control Accounts Payable to Prevent Fraud or Overpayment?As a business grows, the need for more checks and balances in accounts payable grows. There are many ways that corporations protect themselves from costly accounts payable mistakes and fraud. Some of them are:
• Match invoices with appropriate purchase orders to avoid mistaken payments for fraudulent invoices.
• Keep accurate records of all purchase orders and invoices to avoid overpayment or duplicate payments for a single invoice.
• Match invoices to make sure billed quantities match the quantities of goods delivered.
• Check invoices for correct prices on individual items and for the accuracy of all totals.
• Notations are made to show that each document was reviewed for accuracy, and by whom.
• Regular reports are made which show the balancing of all ledger accounts.
• Duties are separated appropriately, such as having one person write checks and another one or two persons sign them.
• Employ a manager to approve all payments before they are made.
• Regular audits are scheduled as a final check of the entire system.
When safeguards are in place and trustworthy employees are hired, management can rest assured that all is well in accounts payable, however, it is always safest to employ practical checks and balances in every financial system so that mistakes, which are inevitable, are kept to a minimum. When accounts payable are handled well, you can be sure the entire company is handled well, but if accounts payable are sloppy and mismanaged, the entire company will suffer for it in the end.
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