Accounting Best Practices, Fifth Edition

3–2. Reduce Required Approvals

The accounts payable process is typically a long one. Part of the problem is that many accounting systems require a manager’s signature (or those of several managers!) on a supplier invoice before it can be paid. Though it is reasonable to have such a requirement if there is no purchase order for the invoice, many systems require the signature even if there is already a purchase order (which is, in effect, a form of prior approval). Also, most accounting systems require a manager’s signature on unapproved invoices, no matter how small the invoice may be. The result of these common approval procedures is that the accounts payable staff delivers invoices to managers for signatures and then waits until the documents are returned before proceeding further with the payment process. If the manager is not available to sign an invoice, then it sits; if the manager loses the invoice (a common occurrence), the invoice is never paid, resulting in an angry supplier who must send a fresh copy of the invoice for a second pass through the dangerous shoals of the company’s approval process. This is a clearly inefficient process, both lengthy and likely to annoy suppliers. What can be done?

A superb best practice for any company to implement is to limit approvals to a single event or document and, wherever possible, to limit this approval to a period prior to the receipt ...