Boost the bottom line with accounts payable best practices

Follow these tips to stop bleeding profits.
By Helen Tueffel

Boost the bottom line with accounts payable best practices
Image by Shivendu Jauhari/iStock

In accounts payable (AP) departments around the world, mistakes are happening day after day. Suppliers are onboarded without proper vetting. Duplicate payments are made. Fraud occurs in the disbursement process. These mistakes often happen not despite, but because of, the very systems that were designed and put in place to automate and perfect the AP process. Reliance on automated invoice and payment processes often reduces the number and effectiveness of process controls.

Best practices can significantly reduce the risk and exposure that come from not having a methodology in place to alert AP professionals to recovery available from duplicates, overpayments, and fraud. Surprisingly, even many of the largest companies in the world don't have these best practices in place.

Best practices include:

  • Establishing and maintaining a clean vendor master file.
  • Having more transparent disbursement systems.
  • Implementing continuous monitoring of vendors and disbursements for potential fraud.
  • Conducting regular audits on all transactions to identify and recover overpayments due to duplicates, returns, rebates, pricing errors, contract noncompliance, sales tax errors, and more.


When only a basic supplier registration system is in place, companies place themselves at risk each time AP adds vendors and creates new records. Adding new companies to your vendor master list without proper vetting can expose an organization to compliance risks. Manual forms, validation, and entry processes substantially increase the risk of incomplete, fraudulent, or duplicate vendors being entered into the master list. Internal audits catch some discrepancies, but without robust and continuous monitoring controls in place, your master list is only clean as of the date of the last audit. The day after, new suppliers will be added, changes will be made, and, in no time, your master list is once again infected.

A well-rounded approach to vendor management can be broken down into three steps. First, it begins with a thorough scrubbing of an organization's master list. Second, a robust registration process should guard against potential fraud. Third, continuous monitoring should automatically check the master list to ensure it contains accurate information.

Technology helps automate much of this process by continually vetting vendors at a data-field level and pushing flagged changes to you for review.


Companies often lose money because of the very systems put in place to automate their AP process. Many AP, treasury, and internal audit personnel operate under a misimpression of the strength of their monitoring controls. Yes, your enterprise resource planning (ERP) vendor may tell you it has configurable controls to avoid paying twice. But employees—in an effort to push an invoice through or soothe an upset supplier—will often add a character or a leading zero to an invoice number when it is keyed into the system to bypass the duplicate alert. When e-invoicing solutions are in place, it's common for the e-invoice to carry the incorrect invoice date, so a duplicate e-invoice or paper invoice will pass normal duplicate controls. ERP systems can't catch duplicate payments made from multiple ERP systems or situations where five invoices were paid in dollars but a sixth was paid in euros—something that should trigger a red flag.

In addition, when overpayment errors occur, your ERP system won't analyze the root causes—whether human error, fraud, or duplicate records—and give you the information to fix them for good.

Disbursement errors from duplicate payments, fraud, paid credit memos, sales tax errors, pricing errors, and more form a steady flow of outgoing cash.

These errors are often preventable, and addressing them can save companies thousands, if not millions, of dollars while opening the door to transformative business decisions.


It is extremely important to achieve a single, consolidated view of your operations—accessible at any time and from anywhere in the world. Creating visibility into your disbursement systems is especially beneficial when it comes to cash management opportunities in procure-to-pay.

Every day companies lose money in the form of lost discount-capture opportunities. That doesn't have to happen. The best of today's portals enable you to analyze payment terms, discounts taken, and new discount opportunities. Treasury can partner with AP to fold new standardization and dynamic discounting into its working capital optimization effort.

Money can also be gained by driving supplier behavior to maximize discount capture. For example, by converting purchase orders into electronic invoices and streamlining invoice processing for your suppliers, you put them in a better position to accept early payments in exchange for discounted services or products. Going a step further, you can allow vendors to proactively offer discounts, negotiate acceptable terms, and compete for your early-payment dollars. (See the sidebar, "Case Study: Flying Higher," about the success an airline's AP department has had in capturing cash discounts.)

All of these actions reflect positively on your company's bottom line. One report from Ardent Partners shows that paying a net 30 invoice, one in which the outstanding balance is paid in full within 30 days, on day 10 at a 2% discount can produce a risk-free, annualized return on investment of 37%. As the chart, "Standard vs. Dynamic Discounting," shows, dynamic discounting allows a company to increase discount returns by offering early payments at any time before the payment is due, based on a sliding discount scale.

Standard vs. dynamic discounting


According to the 2016 Association of Certified Financial Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse, organizations that lack anti-fraud controls suffer greater median losses than those that have such controls in place—by twice as much. And, in 7.5% of asset misappropriation cases resulting in fines, organizations are punished for having inadequate controls or otherwise allowing the fraud to occur.

Yet the majority of companies that fall victim to fraud have yet to adopt proactive data monitoring and analysis, according to the ACFE report. The median time of detection for fraud schemes is 18 months, and the longer a fraud lasts, the greater the financial damage it causes. The majority of organizations that fall victim to fraud fail to recover their losses. Those that do screen for risk factors and early warning signs uncover fraud cases more quickly and significantly reduce losses.

When it comes to preventing fraud, limited, random-sample audits and reviews aren't a deterrent. Those committing internal collusion easily circumvent annual or announced audits, and external audits are not designed specifically to isolate vendor fraud or prevent losses.

Daily monitoring in the form of risk scoring for all vendors goes a long way toward combating fraud. Proactively uncovering red flags such as employee-vendor matches, invoice anomalies, or prohibited entities found in your master list can keep your company profitable and out of the headlines.


A concerted effort to conduct recovery audits on all transactions to identify and address incidents where overpayments have been made due to duplicates, returns, rebates, pricing errors, contract noncompliance, use-tax errors, and more can be a salve for your company, returning money and preventing future losses. Typically, recovery audits are the responsibility of AP and should be conducted annually or on a rolling, quarterly basis, depending on the company's industry.

Pricing compliance, for example, can be a costly issue that silently erodes your company's profits. One pricing compliance review conducted for a global auto manufacturer uncovered almost $20 million in pricing discrepancies annually. In fact, a single, misplaced decimal point in the price of a high-volume part was found to have triggered a $250,000 loss. Common sources of pricing errors include incorrect keying of data, the wrong units of measure, currency issues, unapplied reductions, and more.

The bottom line is that a recovery audit—whether for pricing compliance, rebates, or other issues—helps to identify trends and anomalies that can signal lurking problems.

It's incumbent upon AP professionals to aggressively analyze payments and processes to fully understand how mistakes combine to squeeze the financial health out of a company. Putting vetted processes in place for vendor onboarding, establishing and maintaining a clean vendor master list, preventing duplicate and disbursement errors, and capturing cash discounts are the building blocks upon which a healthy company is built.

Case study: Flying higher

Case study: Flying higher
Photo by Patrick T. Fallon/Bloomberg via Getty Images

Joni Geurts is the accounts payable (AP) manager for JetBlue Airways, the nation's fifth largest airline by total passengers. Her 14-person team oversees 7,500 active suppliers and more than 5,000 inactive or seasonal suppliers. The company averages 15,000 invoices paid each month, or approximately 180,000 per year.

JetBlue's AP department provides a prime example of how the AP function can help stop money from being lost and even make a significant contribution to the company's bottom line.


When Geurts joined the AP department in 2009, JetBlue had realized less than $50,000 in discounts from suppliers in the previous year. In the next three years, the AP department prevented more than $7.5 million in duplicate payments while identifying $2.7 million available for recovery from duplicates, overpayments, and fraud.

Initially, Geurts focused on preventing overpayments, realizing rapid return on investment in the first 30 days through untapped cash discounts. Most of JetBlue's supplier contract terms were 2/10 net 30, but the company wasn't taking full advantage. Geurts's first step was to form a close relationship with JetBlue's treasury and supply-chain-finance (SCF) departments.

"We drove them crazy until, finally, they just agreed to give my team access to look at the contracts ourselves," Geurts said.

The SCF department agreed to send Geurts a weekly summary of all new suppliers and terms. In turn, Geurts's team worked with finance, supply chain, and treasury to extend those terms past a net 30. In the first year, her team hit $650,000 in cash discounts. The following year it realized $1.2 million in savings.


Geurts said that introducing analytics gave her the control and insight to know what was going on at JetBlue and how to turn it around.

For example, JetBlue now captures 100% of discounts from known vendors and identifies cash discount opportunities in its vendor base thanks to insights from discount reporting.

Cash discounts were just the beginning. Even as her team experienced success, Geurts knew they were missing potential leakage in procure-to-pay, namely from supplier risk and fraud. She added advanced analytics to existing vendor vetting to identify risks.

"Having the right analytics at hand, in a timely manner, has made all the difference," said Geurts, who plans to capture more than $2.5 million in discounts this year. She also plans to prevent millions in potential duplicate payments and identify potential risk and fraud among suppliers. "Without analytics, insight, and continuous monitoring technology, your company is just flying blind."

About the author

Helen Tueffel ( is vice president, Global Solutions, Retail at APEX Analytix.

To comment on this article or to suggest an idea for another article, contact Neil Amato, senior editor, at or 919-402-2187.

AICPA resources


CPE self-study

  • Fraud Update: Detecting and Preventing the Top Ten Fraud Schemes (#741203, text; #158012, one-year online access)
  • Purchasing, Inventory, and Cash Disbursements: Common Frauds and Internal Controls (#163871, one-year online access)

For more information or to make a purchase, go to or call the Institute at 888-777-7077.

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