Q. (cont.) In the process of working with one vendor, we realized the check signing control had somehow been overlooked. That is, the vendor's system assumed that when we sent a payment file, it was approved for payment. But on our side, the payment file would be uploaded by one person and no second person would even be aware. Now we are looking at another vendor whose system does include separate electronic (online) approvals by different parties in order to take the process from PO through invoice to payment. We've been working with the first vendor for awhile and feel bad about potentially telling them "never mind," but we're surprised that their system didn't have a control built in. They are telling us that they just implemented a second approval that can be put in place, but this would effectively require the "check signer" or signers (for large checks) have another file or paper stack in front of them to be able to review what they are "signing".
Are we looking at this the wrong way? What are we missing in our thinking?
A. I have a first response from Judy Bicking, our resident practitioner expert. Here's what she says:
First it is critical that you purchase a new system that has all your requirements. It is not personal. This vendor should know you are working with other companies. This is why they added the second approval. However, if this is a new feature, I would caution that it may not have been tested and implemented with other users yet. I don't recommend being a beta for such an important function.
What I do recommend is to create a document that:
1. Lists your requirements
2. Rates each requirement as:
a. Must have
b. Nice to have
3. Rates each requirement based on supplier's offering:
a. Has exactly as needed
b. Has, but not exactly as needed
c. Doesn't have
Example: 10 requirements, rating 1-10 Total possible score = 100
I. A pre-approved payment file which can be routed electronically based on dollars
2. Rating is a 10, "must have"
3. Supplier rating:
a. If they have exactly, it would be a 10
b. If they have but not exactly, maybe a 5
c. If they don't have, it would be 0
This way the facts guide you in your decision instead of "relationships."
Also, make sure to ask for references and set up phone calls to ask them very specific questions. For example:
- Can you explain how you use the pre-approval of the payments?
- Does it work exactly the way you expected it to?
- Have you had to create any work-arounds?
- What do you wish you knew before implementing?
- What would you do differently?
Q. (cont.) This answer is a helpful thought process. We are also asking about others’ experience with the approval process. We were surprised that the first system didn’t have a separate “check signing” approval in addition to the invoice approval. Is this normal? Our segregation of duties requires a separate approval of the invoice from the “approval” of signing the check, i.e., approving the payment.
A. I followed up with Judy Bicking to get her thoughts on whether the problem you experienced--your potential solution vendor not providing a process for final check payment approval--is unusual. This is what she said:
There are actually quite a few software companies that eliminate payment because they believe the ERP system will handle the approvals of the payment batch and processing the payments. This is why I recommended you make a list of all your requirements and choose the software that is the best fit. Too many times, people buy the wrong software due to assumptions, personal relationships, price (you get what you pay for!), etc.
Personally, I feel those AP software suppliers are short-sighted, and those who purchase from them find themselves adding procedures because the interface is not perfect (although they never are). But if it were me, I'd find the software that does it all--I don't want to work in multiple systems, even if the ERP system does handle the payment.