Connections for Success

 

10.28.19

Key Considerations When Adopting Digital Technology for the Cash Disbursement Process
Alison Fetzer

Fewer and fewer businesses are relying on paper checks as their primary form of vendor payment. Whether these payments are switching to credit card, ACH, wire, bill pay software or others, one thing is for sure—the days of presenting a stack of paper invoices with a stack of paper checks for review and approval are numbered. With the rising popularity of alternative forms of payment and new technologies, it is critical that organizations take a moment to ensure that they have sound controls over the review and approval process of cash disbursements. 

Here are some key considerations when reviewing your expenditure process:

  • Who Should Review and Approve the Expenditure?
    • This individual should have knowledge of the expense and the ability to determine the reasonableness and appropriateness of the charge.
    • This individual should have seniority over the individual submitting the request. For senior management expense reimbursements and credit card charges, the review and approval should be done at the board of director level – Treasurer, Chair of the Finance or Audit committee or the Board President.
    • To the extent possible, there should be a segregation of duties: No one person should be involved in every facet of initiating, approving and recording disbursements.
  • How is the Review and Approval Documented?
    • Bill pay or expense management software typically has the documentation of approval built into the process. Invoices and corresponding support are uploaded to the program and routed to the predefined individual(s) for approval. An electronic log is kept with date and time stamps showing when the various approvals were made.
    • Banks also typically have built-in approvals for wires, but controls will vary among financial institutions.
    • Not all electronic payments have a built-in approval process. If one does not exist, then it is up to you to create one.  Remember, if it is not written down (digitally or other), then it did not happen.
    • Once approved, the policy should become a permanent part of your accounting manual.
  • How are Employees and Volunteers Made Aware of the Changes?
    • Rolling out a new bill pay system or expense management software will affect more than just the accounting department. Make sure that once the organization has taken time to come up with a thoughtful new process that the appropriate people are trained to use it.
    • Use this roll-out to remind employees and volunteers of the following: 
      • How to code expenses to appropriate budget lines;
      • What is, and is not, considered an allowable expense;
      • The importance of reviewing the support provided and thinking critically: Does this expense make sense, do I recognize the vendor, is the amount reasonable?; and
      • What individuals should do if they suspect fraud.

Related Read: “Beyond Checks: Alternative Methods of Payment are Gaining Ground

Benefits of Using Technology in the Cash Disbursement Process

Utilizing technology in the expenditure process can result in less time involved, less paper usage and increased efficiency.  If your organization chooses to eliminate paper entirely, make sure that invoices and other support are being retained digitally in a secure and restricted access manner.  Remember to revisit your organization’s document and destruction policy to make sure that it reflects digital files as well as paper.

Be Sure to Exercise Proper Caution

Whether your organization has been using alternative forms of payment for awhile, or you are considering making the switch, it is important that you regularly revisit the controls over disbursements. New technology means new opportunities for fraud. Timely bank reconciliations, expense fluctuation analysis, budget-to-actual comparisons and the good old-fashioned “smell test” should all continue to be part of your organization’s control environment. 

For more information, contact Alison Fetzer at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.

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