What Keeps You Up at Night? Accounts Payable

Early in my consulting career, an Accounts Payable (AP) Supervisor set me straight.  She told me that AP is all about routine.  Expense reimbursements go out on Monday.  Domestic vendors on Tuesday.  International on Wednesday.  If this new system that I was training them on was going to work, it had to make it easier for them to keep on track.   That changed my view about AP.  It’s not just AR with the credits and debits reversed.  If there’s one thing that keeps an AP Supervisor up at night, it’s the sudden question that forces them to drop everything and go searching through the files, because vendors get cranky when their payments don’t come through.

So, what questions can cause AP to go scurrying to the files?  Well, anything that the computer system doesn’t capture, like:

• Who authorized this payment?  Someone may have exceeded their limit.  Someone may have authorized a payment without knowing all the facts.  There might have been a dispute with the vendor AP was unaware of at the time.
• Why did we do this?  Sometimes the simplest questions can be the hardest to answer.  Staff have to look at the invoice.  Maybe there’s a comment there.  Or maybe the Purchase Order has more detail.  Wasn’t there an email discussion about this, maybe six months ago?  You get the picture.
• Tax (or anything to do with the government).  Governments have an annoying habit of changing their minds.  What used to work has suddenly changed.  And guess what?  The change is retroactive to this time last year.  You have to pull all of the affected invoices and rework them using the new rules.  Good luck!
• Litigation.  Lawyers like to go fishing, hoping to catch something to their advantage.  When a requirement to produce documentation is received, not only do you have to pull and make copies of all of the documentation, but you also need to review it yourself to determine the impact of what you find.  I hope nobody had plans for the weekend.

You get the idea.  You need a central repository that will capture electronically everything at the time the transaction is done, including email exchanges, purchasing documentation, contracts and, of course, the approved invoice itself.  And for those people who can’t remember if they submitted this or that expense, wouldn’t it be cool to send them a link and say, “Feel free to browse the transactions yourself.”  Then your AP department will get a good night’s sleep and all your vendors will get paid on time.

Reposted with the kind permission of iDatix:  http://www.idatix.com/insider-perspective-what-keeps-you-up-at-night-in-accounts-payable/

Changing Accounting Standards

What are some of the biggest headaches in accounting?  I’m sure you have your favorites, but let me tell you about Doug.  I called him last week to see if he wanted to go for a drink, but he was still in the office late on a Friday evening.  It turns out his company adopted some of the new International Financial Reporting Standards, so he has to go back and restate the numbers, right back to his opening balance sheet at the end of 2009, and then carry the results forward using the new rules.

“As if that wasn’t enough,” he said.  “We’ve got a bunch of contracts that go back ten years or more.  The auditors now want proof of existence.  They never asked for that before and they don’t accept the fact that we get payments each month.  They want to see the actual paper.  I mean, I know we have them.  They’re piled up on skids at the back of the plant.  But it’s really dirty back there and it’s going to take days to find all the ones the auditors want to see.”

When rules change, they never get simpler.  So often you have to go back to the original transaction and interpret it in light of the new rules.  And it’s not like you can plan for the change.  I can’t tell you the number of times I have wished I had had the original documentation about a transaction so I could see who signed it and ask them what they were thinking at the time.  Or, better yet, if I could have the emails or memos that led up to the deal, so I could understand the intentions of the parties.

Wouldn’t it be nice if you could click a button and see the documentation?  Or what if charities and universities could track the trust documents and bequests in their endowments.  I know a church that wanted to consolidate its endowments because many of them were tiny.  The $5,000 that was a significant gift in 1960 was now almost more trouble than it was worth.  It would have been helpful to have all the original documentation, so that they could approach the surviving families and/or the public trustee.

Honestly, I don’t know which is Doug’s biggest headache, the changing rules or auditors’ demands, but I’ll let you know after we finally go for that drink.  What is your biggest accounting headache?  I’d be happy to feature some in future blogs.

Reposted with the kind permission of iDatix:  http://www.idatix.com/insider-perspective-changing-accounting-standards/

My Banker, My Friend

When I first read an article warning that banks are changing standard mortgage wording to allow them to apply mortgage payments to other forms of debt, I was skeptical.  After all, a mortgage payment is a mortgage payment and a credit card payment is a credit card payment.  There is no ambiguity.

Then I received a letter from my credit card provider (see below) that says:

"In any of the above categories (a) to (d), those amounts with the lowest rate(s) of interest will be paid first before those amounts with the higher rate(s) of interest."

Now that's just mean.  Basic financial advice is that you pay down the debt with the highest rate of interest first.  It only makes sense.  And in troubled financial times, we all have to pay attention to basic financial advice.  Is it really in the bank's best long term interest to treat customers this way?  Here's what MNBA says:  http://www.mbna.ca/about_company_conductcommitment.html  I'll let you be the judge of whether this practice is "top quality customer service."

Codes of Conduct and Public Commitment

MBNA, a division of The Toronto-Dominion Bank and Canada's largest MasterCard issuer, is committed to providing top quality customer service. What sets us apart is our commitment to finding the right customers and keeping them.

Voluntary Codes of Conduct and Public Commitments are non-legislated commitments, voluntarily made by companies, that ensure a high level of service while helping them remain competitive. At MBNA we adhere to the following voluntary codes and public commitment designed to protect our customers.

Code of Conduct for the Credit and Debit Card Industry in Canada
Promotes fair business practices and ensures that merchants and consumers understand the costs and benefits associated with credit and debit cards.

Call to Action

I'm not going to rant about unfairness or counsel you to complain to the authorities, the ombudsman or the courts.  Yes, class action lawsuits and government intervention have happened over this kind of issue, but it's a long road.  My simple advice is to keep all of your eggs in different baskets.  The old advice was to have a relationship with your banker.  Keep all your services under one roof so they could get to know you and offer you the best deal.  Those days are gone.  Now you can have your mortgage with one company, your credit cards with two other companies and your retirement savings with yet another firm.  Divide and survive!

Sound, Practical Financial Advice From a Bank??

A round of applause to the bank president who wants the Federal Government to reduce the maximum mortgage limit from 30 years back to 25. (I guess he doesn't realize that he could order his own people to do just that.)

Without getting into a bunch of financial mumbo jumbo, I look at it this way: you get the big mortgage when you need the space for a growing family. With the cost of university education being as high as it is, you need the mortgage paid off by the time the kids go there. A 30 year mortgage leaves you caught in a financial squeeze.

Unfortunately, bank employees don't talk in those terms when you sit down to negotiate your finances. They tell you that you can afford a bigger house with a 30 year mortgage. While not technically a lie, it is hardly a responsible practice either.

So, Mr. Clark, put your bank where your mouth is and give your young customers solid, practical financial advice. You don't need Federal Government approval for that.

http://www.theglobeandmail.com/globe-investor/mortgage-rules-should-be-stricter-td-chief-says/article2271588/