Introduction
In a typical accounts payable (AP) process, the three-way match—comparing the purchase order, invoice, and goods receipt—is essential for verifying transaction accuracy. However, situations may arise where a purchase receipt is unavailable, complicating the traditional matching procedure. This guide provides practical steps to effectively complete the AP process using only purchase orders and invoices while ensuring control and accuracy.
Step 1: Review and Confirm the Purchase Order
Begin by thoroughly reviewing the purchase order (PO). This document should include crucial information such as:
- A detailed description of the goods or services procured
- The quantities ordered
- The agreed-upon pricing
- Vendor details
- Terms and conditions
Ensure that the PO is accurate and properly authorized. Validation involves confirming that:
- The PO has received the necessary approvals from the appropriate manager or department.
- The PO number corresponds with the vendor’s invoice.
- The details (items, quantities, and pricing) align with the negotiated terms.
Step 2: Assess and Validate the Vendor Invoice
Next, examine the vendor invoice in detail:
- Confirm the invoice number and date.
- Ensure the billed amount matches the PO precisely regarding pricing and quantities.
- Verify that the vendor’s details (name, address, tax information) are consistent with your records.
Since the receipt is missing, focus on validating the invoice’s alignment with the PO in a two-way match. If you identify any discrepancies, contact the vendor for clarification before proceeding.
Step 3: Gather Additional Supporting Documentation
In the absence of a purchase receipt, it’s vital to collect any other supporting documents that could substantiate the receipt of goods or services. These may include:
- Delivery Emails or Confirmation Notes: Vendors may provide digital confirmations of delivery, serving as evidence that goods were delivered or services rendered.
- Vendor Communication Logs: Emails or messages confirming the completion of services or delivery can help validate the transaction.
- Internal Confirmation: For services rendered, consult the internal team to confirm satisfactory completion. For goods, reach out to the receiving department to verify any records or recollections of delivery.
Step 4: Confirm with Internal Stakeholders
If other documentation is insufficient, it’s crucial to verify the transaction with internal stakeholders:
- Receiving Department: Even in the absence of formal receipts, someone in this department may remember the delivery or possess logs that can act as supplementary evidence.
- Requestor/Department: Contact the individual or department that initiated the purchase. They may be able to confirm whether the delivery occurred or if the service was completed as anticipated.
Document these internal confirmations, as they provide an additional layer of validation, reinforcing the legitimacy of processing the invoice.
Step 5: Approve the Invoice for Payment
Once you have confirmed the invoice’s legitimacy through the previous steps, proceed to approve it for payment. Ensure to:
- Attach all supporting documentation (internal confirmations, emails, etc.) to the invoice.
- Note any exceptions or adjustments made due to the lack of a receipt.
- Secure final approval from a senior manager or finance team to ensure proper oversight.
Step 6: Record and Monitor the Transaction
Enter the invoice into your accounting system, clearly indicating that it was processed using a two-way match. Transparency is vital for future audits or reviews. Additionally, set reminders or flags within the system to monitor the vendor and the transaction:
- Follow Up: If the vendor later provides a receipt, update your records accordingly.
- Flag Unusual Patterns: If missing receipts become a recurring issue with a specific vendor, investigate the cause and determine if further action is necessary.
Step 7: Implement Controls and Procedures for Missing Receipts
To reduce the frequency of missing receipts and standardize your approach when they occur:
- Vendor Agreements: Collaborate with vendors to ensure they provide proper receipts for all deliveries.
- Internal Policies: Establish a policy outlining procedures for handling missing receipts, including acceptable alternative documentation and required approvals.
- Regular Reviews: Conduct periodic assessments of the AP process to identify recurring issues and ensure compliance with internal controls.
Consequences of Neglecting at Least a Two-Way Match
Failing to conduct at least a two-way match in the AP process can lead to significant repercussions:
- Increased Fraud Risk: The Association of Certified Fraud Examiners (ACFE) indicates that weak internal controls, including insufficient invoice verification, can open the door to fraudulent transactions. Without proper matching of invoices to purchase orders or supporting documentation, organizations become vulnerable to vendor fraud, overbilling, or payment for goods/services not received.
- Financial Losses: The Institute of Internal Auditors (IIA) reports that inadequate matching procedures can result in considerable financial discrepancies, including duplicate payments or payments for unapproved transactions. These issues may adversely affect a company’s profitability.
- Audit and Compliance Risks: Not maintaining a two-way match can lead to complications during audits. Both internal and external auditors require evidence of proper AP controls. A lack of verification can result in compliance violations, potentially leading to fines or penalties, especially for publicly traded companies subject to regulations like the Sarbanes-Oxley Act (SOX).
Completing the accounts payable process without a purchase receipt necessitates diligence, thoroughness, and adherence to a structured approach. By implementing a robust two-way match system and utilizing alternative documentation, you can maintain accuracy and minimize risks. Developing standardized procedures for handling missing receipts will further ensure consistency and compliance, safeguarding the integrity of the accounts payable function.