Whether you’re creating a manual from scratch or using a template, there are some topics that you’ll want to include in your AP Policy Manual.
The overview should always outline the department structure and provide a detailed list of positions and what each position is responsible for.
AP responsibilities vary from company to company. It’s helpful for auditing purposes as well as for AP team members to know exactly what the department is responsible for.
If your business uses a purchasing or procurement system, you should also clearly spell out exactly what procurement is responsible for. Also, what are the policies related to issuing purchase orders.
For example, if your procurement department is responsible for vendor selection and vetting, that should be spelled out in the policy. Likewise, if your AP department typically handles this instead.
Approval Process for Purchase Orders
If you use purchase order software, you’ll need to spell out the approval process for purchase orders.
Is it based on dollar amounts, or are there specific employees designated for purchase order approval? And if a purchase order is approved, does the invoice still need to be approved?
Approval Process for Invoices
Specify which employees are responsible for approving invoices, and the process for ensuring that invoices are routed promptly.
Invoice processing should include details on when an invoice is entered (before or after approval), when it’s sent for approval, and what needs to be in place before routing the invoice for approval.
Invoice processing should also include details on three-way matching, and steps for invoice processing without a purchase order.
Handling Disputed Invoices
Policy should always include who is responsible for investigation and follow-up if an invoice is incorrect or pricing or product receipt is disputed.
Establishing payment policies is essential for any AP department, with a clear delineation of responsibilities outlined.
Early Payment Discount
If your vendors regularly offer you early payment discounts, determine a timeline for ensuring that the discount can be utilized.
Handling Lost and Uncashed Checks
All businesses should have a policy in place to handle lost or uncashed checks.
These policies can include establishing a minimum time frame before a stop payment is issued on lost checks.
Collecting and Managing Vendor Data
Specify who is responsible for locating and managing vendor relationships.
This includes requesting W-9s, the payment process for independent contractors, and the issuance of year-end 1099s.
Record Retention Policy
Create and maintain a policy for record retention. Do you keep two years of vendor information in the office and place older years in storage? Whatever your policy is, be sure to spell it out.
AP accounts should be regularly reconciled for accuracy. Determine whether the process should be monthly, quarterly, or yearly and assign personnel to complete the job.